[megabear]

I keep reading that the Real Estate market is rising, but that is not what I see around my neck of the woods. From personal experience I can tell you that here on the Kansas/Mo stateline, just outside of Kansas City, I have one friend who was so confident in the area they lived in that they bought an $800,000 home before putting their $500,000 home up for sale. They stood in my kitchen in August of 2002 and insisted that the worries I was spouting about the Real Estate markets simply did not apply to their coveted neighborhoods. That was over a year ago, and they still have not had a single viable offer on their first home.

Second case: I had lunch yesterday with some friends whom I had not seen in 6 months or so. They proceeded to tell me that they had bought a new home abut 4 or 5 months ago. When they went in to get a remortgage price recently, they were told, much to their dismay, that the value of the house they had just purchased (which was, I'm guessing in the $325,000 - $350,000 range) was DOWN $50,000. They also mentioned that they were told the value of the home they had just sold was down $28,000; and this happened in a matter of a few months.

Lastly, I sold and rented my home several years ago figuring that we were at a real estate market top. I'm still renting; although it's a very nice home and this past year I got the landlord to drop the rent by $1,000.00 per month (by pointing out the weakness in the real estate markets to him). Anyway, when I first went to look for a nice home to rent, there were something like 8 to choose from in my area. Today, there are over 400 homes for rent in the same area. The question is, are these "for lease" homes purchased for investment homes, or do they represent sellers who could not sell and had to put the place up for rent in order to stem the bleeding? I see the same homes up for sale month after month, sometimes year after year; and I live in a very desirable area where homes used to sell in a matter of weeks.

What are you guys seeing "first hand"? Most of the stories are so hyped and full of BS aimed at bolstering the real estate markets that I have a hard time believing that real estate is in such a rosy conditon.

[Pee Brain]

megabear, on Oct 13 2003, 09:12 AM, said:

The question is, are these "for lease" homes purchased for investment homes, or do they represent sellers who could not sell and had to put the place up for rent in order to stem the bleeding?

what may be happening is that homeowners refi, take out equity, buy another house and rent the existing house at a level that services the debt. one advantage is they can get fixed rate fully amort mortgage on what is essentially a rental project - 5+% 30-year fixed is unheard of for apt loans. this is indicative of hot markets (and tops) where greed reigns supreme - people are afraid to sell and trade up because they might miss on future appreciation. so they refi and trade-up anyway - the asset base and debt both increase. few owners allow adequately for vacancies, property management, replacement reserves and extraordinary contingencies. but if the owner allows that r.e. is a long-duration asset, they allow adequately for expenses and are not over-leveraged, then it might work.

the downside is that you can get a glut of rental housing and drive vacancies up and rental rates down - just as you describe. bottom line, is that when the market turns, the owner ends up feeding the property and paying the mortgage on their residence as well as the rental property. this cr*p can get old quickly and with a single unit/residence, you are either 100% vacant or 100% occupied; not to mention its tougher to feed them once the equity has evaporated . you'll notice maintenance levels starting to decline and that will be indicative of potential financial problems (and perhaos opportunity).

[phatbubble]

the market in austin, where we lived before moving overseas, went to the catbox 2 years ago. we sold our place before leaving.

we've been renting overseas for a year. for sale and for rent signs in the high-end neighborhoods have started to sprout like mushrooms, and a local realtor estimated the rental market had dropped 8% YOY for 2 years now. rates are very low, and the market is acting toppy. mainstream media is more honest here, and lately we've heard the first news murmurings about real estate setting up for a fall.

here's the punchline. fixed-rate mortgages are a new financial offering here, and according to another local realtor, the banks only offer ARMs up to 5 years. i figured there must be some provision for an entire populace having floating rates, so i asked her what happens if you have the massive adjustable mortgage which many do, and rates go up a few points.

she said "you're screwed."

[megabear]

jrmfl: funny I never noticed any "twang" in your posts. Anyway the $800,000 home my friends bought is just south of the Plaza at about 55th Street and Ward Parkway. The home they are trying to get rid of is a little further south around 70th and Stateline. Where I live, and where the other folks just bought their losing proposition is in Overland Park. I sold a home in Leawood about three years ago, stashed the cash in the bank and became a renter. I rented a nifty place on 5 acres. The guy had it up for sale for over a year for around $650,000. He gave up and rented it to me instead. The Way I figure it, by the time the market tanks and the price of this house comes down into the $400,000 range; I'll buy it. I may be dreaming, but I don't think so.

[megabear]

Here's inflation for ya, jrmfl, Pemdays about 14,000 or $15,000 a year now. Pricey for a grammar school (well it goes through high school); but, it's still twice the cost of going to the University of Kansas (as an in-state resident anyway).

Richard Russell was saying the other day that when he attended NYU it was around $550.00 per year; now it's $26,000 or so. Does that tell you what has happened to the value of the dollar or what? The education is about the same; it's just that it takes that many thousands more of those crappy little green pieces of paper to pay for it. LOL

[BartTheBear]

You're talking about one of the coldest RE markets in the country - The KC, MO area.

A close friend of mine lives there. They have bought/sold several houses over the last 10 or so years and made squat on them. RE is a regional phenom.

[ThorAss]

... GLOBAL BUBBLE.

[spcwby]

A view from Mr Softie/Nike town territory.........
(btw...just a paid up lurker who learns more...from not speaking....from the esteemed members @ CS), spcwby

http://seattletimes....ortsales07.html

More homeowners selling houses for less than they owe

By Kristina Shevory
Seattle Times Eastside business reporter


After years of borrowing in a sizzling housing market, more homeowners are finding themselves upside down on mortgages.

They borrowed more to buy or fix up homes than they can now afford, and a growing number are turning to short sales — selling homes for less than they owe — to unload high payments and avoid foreclosure or bankruptcy.

No organization tracks short sales, but real-estate agents, housing counselors and mortgage companies say they have been seeing more of them since the economy tanked and employers began laying off workers.

Most are the end result of delinquent mortgages — those not paid for more than 90 days — which have risen dramatically in the Seattle-Tacoma area the past three years. The number of delinquent mortgages rose 50 percent between June 2000 and July 2003, according to Loan Performance, a San Francisco firm that tracks mortgage data monthly.

For GVE, the increase in mortgage trouble is good news. GVE, in Covington, is one of the few companies in the area that brokers short sales, and business is up 70 percent in the past nine months, founder Joanne Anderson said.

She has been working 16-hour days, six or seven days a week, to keep up with demand, she said, and plans to hire 10 employees in the next year.

In the late 1990s, people were encouraged by rising stock portfolios and a robust economy. They took out large mortgages and tacked on home-equity debt with the help of looser loan-qualifying rules.

But low down payments, subprime loans (high-rate home loans aimed at buyers with terrible credit), and predatory mortgages (loans for people who often shouldn't have one), have gotten more people into homes they can't pay for.

"We're seeing tons of short sales and foreclosures because people are in over their heads," said Debra Snoey, branch manager at Windermere's Federal Way office, who works with Anderson on short sales. "It's refreshing when a buyer has equity now."

Although some lenders say buyers should max themselves out for a mortgage, being more practical is safer.

"(People) are buying more expensive homes because they want one bigger, newer and better," Anderson said. "But they don't realize that if they bought a home for $20,000 less and saved up $5,000 for a down payment, they'd be sitting so much better."

FACTS
What is a short sale?


When a homeowner sells a home for less than he owes on it, that is a short sale. Here is some additional information and some tips to help avoid a short sale:

• Alert your lender as soon as possible if you have trouble making mortgage payments. The bank sometimes can arrange a new payment schedule to help you keep the house.

• Find a good real-estate agent who understands your situation if you decide you have to sell the house.

• Remember that a short sale stays on your credit report for seven years and is described as a late mortgage payment. But a foreclosure stays for 10 years.

• Be prepared to pay taxes on the difference between the value of the home and the mortgage balance because the IRS considers that difference taxable income.

• A comprehensive list of county agencies offering mortgage assistance is available from the Crisis Clinic's toll-free, 24-hour hotline, 866-427-4747, or online at www.crisisclinic.org.

• The Fremont Public Association offers a mortgage-counseling service hotline, 206-694-6766, which operates from 10:30 a.m. to 4:30 p.m. Mondays, Wednesdays and Thursdays. More information is available online at www.fremontpublic.org

• Consumer Counseling Northwest is a local nonprofit that provides housing and debt counseling and education services. More information can be found online at www.ccnw.org or from its hotline, 800-244-1183, which is staffed from 8:30 a.m. to 8 p.m. Mondays through Fridays and 10 a.m. to 4 p.m. Saturdays.




Some homeowners find themselves in trouble when they least expect it.

An Issaquah woman who recently sold her house for $30,000 less than she owed on it never thought she'd be in that position.

The woman, who didn't want her name used because she's embarrassed, said she and her husband earned more than $200,000 a year, lived in a 3,200-square-foot custom-built home on an acre, and bought a new car every year.

Then her husband took a pay cut to save his job, and they couldn't keep up with the bills. The couple divorced, and he filed for bankruptcy, leaving her with three kids and two mortgages.

To make it, she put the family's home on the market, reducing the price four times in six months. In May, it finally sold, but at a loss.

"It's awful and embarrassing to do a short sale and admit you're a deadbeat," she said. "(But) people make mistakes. This can happen to anyone."

Sellers lose a lot in a short sale, but buyers can make out because the homes usually are worth more than they cost.

Hal Bancroft and his partner bought a 3,330-square-foot house in Everett last year from a couple who could no longer make their payments. The former owners had taken out a second mortgage to buy a motor home, but the man lost his job at Boeing and his wife broke her back. They sold the home for $205,000 — $30,000 less than they owed.

The deal had strings, though. Short sales can take several months to close because lenders take longer to approve them.

"It took four months to close what should have been a 30-day transaction," Bancroft said. "The byword with short sales is patience."

For real-estate agents, short sales aren't so good. Adnan Othman, with John L. Scott Real Estate in Lynnwood, said he usually receives a reduced commission of 1 to 1.5 percent and sometimes doesn't get one at all — agents typically get 3 percent on a regular sale — but he keeps handling them. Othman is working on four now.

"There's a lot of sadness when you see this," Othman said. "You want to throw a life preserver to them and see if you can help."

[Pee Brain]

ThorAss, on Oct 14 2003, 08:51 AM, said:

... GLOBAL BUBBLE.

im not commenting on a global bubble. i do have to disagree a bit with yobob1 this time, as recessions seem to be evolving to more regional ("rolling recessions") occurences; therefore, the impact on RE has been less "global." make no mistake, socal is still motoring along fairly well, just as it did in 1989 when the rest of the country had already been in recession (1990-1991 was a different story), even as nocal has been buffeted by tech downturn.

a $400,000 loan at 5.25% requires about a $2,200, and add another $400 for taxes and iunsurance bring the monthly PITI to $2,500-$2,600 a month. for a socal working couple, $30,000 is really not that bad, particularly considering the home mortgage interest rate tax deduction... mama's salary pays for the home and dad's cover everything else. the problem comes when mama gets her hours cut, then she gets laid off and fear sets in as others start sell their homes in advance of potential layoffs - this is exactly the early 1990s scenario. the cap gains tax exemption on home sales will excellerate the glut of homes offered for sale as savings-starved homeowners sell rather than see there equity erode.

having said all of the above, in researching RE prices in western US, the disparity between a $500,000 property (shack) in socal and a $500,000 property in WA/ID/OR is striking. BTW, i did the same thing in early 1990s and relatively CA was not a bad deal - my ex-partner did move in 1994 and he just sold an awesome home in so. WA for less than $600,000 - thats a $1.5+M home here.

i continue to focus on income producing investments with almost no leverage, even with low yields, and stepping outta the matrix. the BIGGEST regrets of my life (as i approach 50 yo) are the things i did not do, not the things that didnt workout - so im acting on my analyses and conclusions. i believe that CAs like myself and businesses will be scurrying outta here like cockroaches and the beneficiaries will be less expensive urban areas of western US. areas like sun valley, park city, yes even lake tahoe, will be primary beneficiaries and experience rapid price appreciation as californicators (including myself) cluster in other areas with many of the same people they are trying to escape.

so, i see the socal region taking a hit, but other areas rebounding (on a relative basis) unless rates rise rapidly or we see increases in unemployment/under-employment. exclusive enclaves will benefit the most - so i guess im saying it will be regional.

as an OT aside: what happened to airfares? the last time i flew to portland it was $200 RT from san diego. now its like double, and the airport taxes are unreal. my daughter and i settled on AMTRAK - as a veteran i get 50% off and she travels at 1/2 my fare - really cheap, no wonder AMTRAK loses money.