How naive I was. Cleaning up the computator, I ran across the first guest post I ever contributed here on RRB, Jaded in Wonderland. It is worth another read from June 2007- it is where "Jaded" was born and got me my gig as an un-indicted co-conspirator here on this blog. I thought the pricing needed to drop 25% from the peaks to match the banks’ REO pricing. At this point, the median is down over 40%. Lots of great comments from folks you will recognize (Lindie, come back to the 5 and Dime!) and it is interesting to see how true to their comments then that they remain today. Cute that D wouldn’t let me post actually addresses in those olden days!
I offer this chance to laugh at / with me because I see a sea change starting to happen out there. First it was a couple trashed properties, then it started to grow and spread to decent homes, and now is percolating up to nice properties. The pricing that has been sort of tracking to mid 2003 values for REOs is in free fall, and a lot of 2001-2 comps are showing up, especially on properties that were bought as resales.
So I thought I was the Big Mac – I bought early in the safety zone in 2001. That safety zone is starting to feel a bit less safe these days. And I can’t imagine being in the boots of the Class of 2005.
Corey
“The pricing that has been sort of tracking to mid 2003 values for REOs is in freefall, and a lot of 2001-2 comps are showing up….”
We are indeed back to 2003 values in my neighborhood and 2002 values are clearly on the horizon. And I am not talking about REOs.
BanteringBear
If the market in Reno over corrects, which history has proven is possible when bubble’s burst, we could easily be talking about a median price of $120k- or less. That doesn’t take into account the seemingly unstoppable onslaught of job losses, wage destruction, and general economic malaise.
The financials took an absolute POUNDING today. These guys (the biggies) are completely insolvent, and everybody knows it. Wall St. could be in for another leg down. Of course, I never believed that the DOW had bottomed. I am no stock guru but, from what I’ve read, a fall to 4k doesn’t seem impossible.
I’m seeing some quite disturbing things on the street, main street, and I don’t like it. I’ve never witnessed so many businesses disappear so quickly in my life. And they run the gamut. I know many people who are getting squeezed hard right now. Jobs are vanishing at an astonishing rate. What used to be two incomes for many households is down to one, or, in some cases, none. It’s goodbye house, hello sidewalk.
Move to Reno
One can still make money in the stock market but one has to be very careful. I recently made $40k on s&p 500, russell 5000, and an international etf in about 1.5 months but consider myself very lucky in timing. One day late getting in and 2 days late getting out. In hindsight, I took a lot more risk than I should have. I think DOW 6000 is a real possibility.
BTW, whatever happened to DERRICK? I don’t see him posting here anymore.
DownButNotOut
Do most of you think there will be much more in a RE correction? I agree with about the unprecedented disappearance of businesses, but that runs parallel with the housing bubble – as in ‘I have equity now why work for someone else’?
In that respect many new business’s can be equated to Sommerset (and I might add Montreaux) – the limits were pushed and it didn’t work.
I’ve had multiple business’s for almost 30 years, and there are reasons you reap the rewards when things are going well, and there are reason you pay the price when it doesn’t work.
Home buying is no different. The RE market is correcting. When will those with money feel it’s below correction? I haven’t seen a pro comment on that here.
DonC
BB — I’d say that with the exception of one factor the Reno housing market has already over-corrected.
The one factor is “expected appreciation” or, in this case, “expected depreciation”. All the other factors — interest rates, property taxes, tax deductions, maintenance costs, ownership risk — suggest that property prices are below fair value.
Renting in Reno
Take at look at the data posted on the Office of Federal Housing Oversight website.
Look up any city outside of California compared to Reno in regards to quarterly percent change in prices and it is amazing the ride they had here starting in 2003 and ending in 2006. Based on this data Reno still has a long way to go to correct itself. Jobs are being lost and housing prices continue to drop based on foreclosures and short sales. Hang on for a long ride. I moved here just over a year ago and I will continue to rent until I can comfortably afford a home close to good schools.
CommercialLender
DonC,
Not sure I’m with you on this:
“All the other factors — interest rates, property taxes, tax deductions, maintenance costs, ownership risk — suggest that property prices are below fair value.”
IMO “ownership risk” is very high in a falling market, so whatever value is attributable to property X today is above fair value given a few more weeks/months of a falling market.
“Property tax” – IMO, this tax (and state taxes for those certain states), et.al. are all going up. This would point to today’s RE prices being above fair value given a few more weeks/months/years where more disposable income will be going to the rat hole known as ‘government’. The same is true of “tax deductions” except in reverse – expect them to go away or be reduced to help reduce the massive budget shortfalls in govt spending.
“Maintnenance Costs” – IMO, this analysis was not done on many a property in the past few years by many buyers as they only wanted to buy/flip. Therefore, these buyers are now sellers in many cases, wanting to push off their lack of maintenance and poor business model on a new buyer, and further depressing values. And bank REOs are doing the same – not fixing assets before trying to offload them. So these costs also point to current values being above fair value given a few more weeks/months.
As for interest rates, well, yes, they are mostly below recent historical levels, but far above where the last world economic meltdown, Japan, has been for the past 20 years. (And to little positive avail in their housing market, BTW.) In fact, in the recent few months, we’ve seen the rumor of the goverment trying to ‘push’ down rates to 4.5% from where they are/were, and we actually witnessed many buyers sitting and waiting for 4.5% instead of buying at 5.x%. So, in these past few months, we’ve seen the effect of ‘interest rates’ actually proving values were then above fair value given a few more weeks/months.
But, I may have misread your post, so please do expand on your comments.
BanteringBear
DonC posted:
“BB — I’d say that with the exception of one factor the Reno housing market has already over-corrected.”
I’m going to disagree. Of course, we could even argue over when the bubble started, and what the pre-bubble median was. I choose to believe it’s right in the neighborhood of $150k. In inflation adjusted dollars that would represent a current median of roughly $179k. So, in my opinion, we’ve got a bit more froth to work off, and an over-correction would take us below that number.
DownButNotOut
In that respect are most of us in agreement that the bottom, for our discussion purposes, means that housing prices at the lowest has leveled and isn’t going lower? I’m not addressing if the bottom is a V,L or U, I just mean the bottom for however long. Which admittedly might be awhile.
Martin
No, Down, I don’t think most of us are in agreement that prices have bottomed. In fact, my sense is that most of the commenters here would say prices have NOT bottomed.
GratefulD
So Mr. Don C., I guess this means you are “all in.” If in fact the housing market is “over-corrected” then you would say it is time to buy.
Maybe you and DBNO are the “Oracle of RENOmaha.”
When everyone is running, buy, buy buy! Are you buying? Are you recomending to buy? In Washoe County NV?
Or do you think it may be cheaper next month, the following month. Or even the months after that?
Bottom line that BB always refers to here and why he is always on track to the market is to never EVER overlook the basics…
1.) Supply & Demand [supply is still high]
2.) Regional Median Price to Regional Median Income [ debatable… but definately still high not low, especially with deflation and reported wage cuts]
3.) % of houses with no occupancy (I can’t remember this #, but it is not pretty compared to regular times)
4.) Distressed Sales – The numbers are mind boggling of the defaults to come. – Alt-A, Suisse Mortgage Resets –
5.) Location, Location, Location – This global economy sucks. This local economy blows. The regional outlook is bleak to disasterous. Have you been to the valley or the city and seen the Indian Casino commercials? The next generation will never ever know why they ever drove to Reno to gamble. It is pure nostalgia at this time… and that will end very, very soon.
God, I hope it snows.
With regards to earlier comments that we may never see Arrowcreek / Saddlehorn / Montreux fall? It’s in the works. Just take a look. Once the current comps sell (even if they sell for 100% of the asking price) the value will be devastated and the downfall is already written. The end is hoped for…. but no where in site. If I owned a home… I would close my eyes and not open them for about 5 years….. for a peak… then start looking in about 7 to 8 years…. if all goes well.
Good luck….. I think its time to buy! I could buy today… Unless anybody on this site thinks they can dare disagree with me!
Phil
BB- 4K Ouch! I honestly hope not. There is that word “hope” that some people think will get us out of this mess. You have to think that his is almost a 50% drop, and is unlikely.
Then again given the fact no one in the governemnt seems to know what they want to do except for throwing money at the problem, you may be right. So far I see 350 billion wasted on banks.
Move to Reno – 6K. Sounds more than probable and almost likely.
billddrummer
If you look at the sales activity in the sub $200K market, you could reasonably assume that prices have ‘stabilized’ to a degree. Days’ supply is flat to declining, which is (usually) a harbinger of stabilization.
The problem I see with that assertion is that now formerly higher value homes are entering the sub 200K market, because of foreclosures on move-up homes that are now available in that price band.
It will be interesting to see how long it will take for stabilization to take place at higher price points. But I agree with most of you that over $500K will remain moribund forever.
BanteringBear
“The problem I see with that assertion is that now formerly higher value homes are entering the sub 200K market, because of foreclosures on move-up homes that are now available in that price band.”
I’ve said this all along. As the more expensive properties fall in price, it erodes the value of all properties in the lower price segments. “An ebbing tide lowers all boats”, “It’s turtles all the way down”, pick your cliche. People are grossly overpaying on the lower end.
smarten
No billddrummer, the “over $500K [segment of the Reno/Sparks SFR market] will [NOT] remain moribund forever.” It’s already starting to [finally] react.
Lots that were selling for $575K, are now available for $239K. Montreux Renaissance homes that were selling for $1.1M, are now coming on the market for $600K. When you see Montreux and St. James Village SFRs that were selling for $1.5M and above a couple of years ago, now offered for $750K, you’ll know we’re on our way. And I believe, that’s exactly what is happening as we speak.
SkrapGuy
Billddrummer,
$500k houses will not stay moribund forever. They will sell. Most of them will sell for about $250-300K someday.
The MLS is chuck full of listings by sellers asking $500k for their $275k house. But this is an old story. It takes years and years for the delusion and denial to strip away. That’s an old story also. But it’s why the housing meltdown takes years and years.
DonC
CL – There is an equation which economists use to establish a “fair value” for a home. It determines fair value based on a multiple of the rental value of an equivalent property.
The factors in the equation are pretty much what I laid out. In this regard, risk would be the premium demanded by any investor with relation to a risk free government bond — so more or less the spread. That would be different than the appreciation/depreciation risk, which is more what you’re thinking of (though I see the point they could be lumped together).
Maintenance and property taxes are a percentage of the acquisition cost. The maintenance costs you’re addressing would be wrapped into acquisition costs — what it means is that every year it costs a certain amount to keep the property up.
While all the factors go into the equation, interest rates tend to dominate.
My guess is that the equation would suggest that the buy/rent ratio should be close to 20. Right now the ratio seems far below this — maybe 12 or so? — and the only reasonable explanation is that people think prices are going down indefinitely, just like they thought they were going up indefinitely, so they put a very large percentage on the depreciation factor.
I have a copy of a paper from years ago that even had some examples of different markets and what the buy/rent ratio would be with various interest rates. If I can dig it up I may be able to come up with an internet cite. It’s a fairly standard thing.
smarten
CL states “there is an equation which economists use to establish a ‘fair value’ for a home…based [up]on a multiple of the rental value of an equivalent property.”
There’s an equation astologers use and it’s based upon the alignment of stars.
Then there’s an equation real estate investors use and when it comes to residential real estate, it’s NOT based upon a cap rate. I would submit that the reason it costs so little to rent versus buy has nothing directly to do with peoples’ thoughts that values are going to depreciate.
And BTW, exactly who are these economists? Are they the same people trying to figure out how we got ourselves into the current economic mess?
billddrummer
Thanks for the comments.
By moribund (I should have clarified myself) I meant that the $500K+ market would not stay at $500K. What I should have said is moribund at that price.
The examples listed show the homes (and lots) selling, but for far less than their original asking prices, and even less than what would have been considered a ‘normal’ correction.
No bottom there yet.
DonC
smarten – This is my quote not CL’s. The equation is generally accepted is economics. I wouldn’t make so much fun of it. In economics equations are not really used as predictors, as say they’re used in physics. They’re used to precisely define what the issues and arguments are.
You can find an example here, which is a paper presented by three economists at the Federal Reserve of New York:
http://www.newyorkfed.org/research/staff_reports/sr218.pdf
Once you’ve finished a review I’d be most interested in your criticisms.
Move to Reno
I just want to say that this blog has been a real enabler to me obtaining a better understanding of real estate theory and practice. Many thanks to the RRB insiders and to all that blog here.
DownButNotOut
DonC – I’m only half way through it, but excellent link. Thanks for posting it. Should be required reading.
Sully
And BTW, exactly who are these economists? Are they the same people trying to figure out how we got ourselves into the current economic mess?
Yep! Another companion article published same time in Sep 05:
http://real.wharton.upenn.edu/~sinai/papers/WSJ_Bubble_Trouble.pdf
Sully
update on Aug 08
https://www4.gsb.columbia.edu/null/MrgMktMeltdown-Mayer-08-08-2008?exclusive=filemgr.download&file_id=134278&showthumb=0
SmartMoney
Nice catch Sully. Looks like those two are nothing but clowns. Right at the top of the market they write an article saying that a bubble is not likely – what a joke.
DonC, if you want good advice, listen to some of the people on this board. I myself sold my house in October 2005 because I saw the bubble signs. Of course the realters (and many others) all laughed at me when I calmly explained to them why real-estate was going to crash. Anyway, I have been renting since and do think we are getting close to a bottom, but I would not buy yet, still too early.
smarten
DonC, couldn’t get through all 20 pages – sorry. But I think the conclusion sums things up. “One cannot draw conclusions about house prices [simply] by comparing price-to-income and price-to-rent ratios that would be considered high for one city [because they] may be typical for another.”
My personal opinion [FWIW] is that where there is a plentiful supply of quality rental housing [and if you read today’s RGJ you learned that today’s Reno/Sparks rental housing stock is the highest it has been in 16 years]; and the cost to rent is but a fraction of the cost to own [which is the case in Reno/Sparks]; it makes no economic sense to be an owner UNLESS there’s a high level of price appreciation which can make up for the difference.
Thus until:
Vacancy rates fall from the lofty levels they are today [nearly 10%];
Prices of homes drop or the cost to rent increases [either/both event narrowing the the difference between the cost to rent versus to own];
The cost to own drops [i.e., mortgage rates drop (which will very soon be unlikely as rates can’t drop much further)];
Prices of homes increase [offering the prospect for equity appreciation];
IMO it makes no economic [but it may make some other kind of] sense to be an home owner.
If you buy rental housing with the intent of realizing some return on your investment in the short run, IMO you’re in the wrong business because when you can buy for the cost to rent, why be a renter?
Sorry if this doesn’t answer your question.
DownButNotOut
Holy Crap, you’re right on. Better to get your advice right here on this blog.
Your kidding right? Comparing those two articles to the DonC link? Some jackass’s opinion to a well researched comparison paper?
BanteringBear
“Your kidding right? Comparing those two articles to the DonC link? Some jackass’s opinion to a well researched comparison paper?”
Are you freaking serious, Down? It’s the SAME people. Do yourself a favor and pay attention before spouting off.
BanteringBear
Like Smarten, I couldn’t get through the whole 20 pages. Maybe I’ll read it in it’s entirety at some point, but doubtful.
What it goes to show is that either these so-called “experts” are no more qualified to opine on real estate than your corner mart checkout clerk, or they’re bought and paid for. I’m going with the latter, though some of these hacks make a good case for the former.
None of these guys knows a thing about Reno real estate so, IMO, they’re completely irrelevant.
MikeZ
RE: “…establish a “fair value” for a home. It determines fair value based on a multiple of the rental value of an equivalent property.”
That may hold for stable markets but as prices drop, so do rents; you’re wrongly assuming rents are stable.
DonC
Sully and SmartMoney — When I lived in Nashville years ago there was a protest against teaching evolution in the schools. I vividly remember some guy holding a hand lettered sign that read “The Bibble said it and I belive it”, and thinking to myself: “Yup, that about sums it up.”
I’m having another of those moments here. Not only is the first paper you cite reasonably well done, but, in retrospect, it correctly predicted more or less what happened. To quote the paper that you seem to think was so ridiculous:
“Of course, the same logic that says today’s market price of housing is reasonable also implies that house prices are especially sensitive to real, long-term interest rates. In the absence of an offsetting increase in housing demand, an unanticipated rise in real mortgage rates could cause appreciable declines in house prices. For this reason we don’t think speculation is justified in the housing market — gambling on above-average capital gains is simply an interest-rate bet.”
This is basically what happened. Rates went up. Spreads went up. Housing prices went down.
The second paper simply explains why the housing downturn is as much the product of a broken credit market as the broken credit markets are a product of the housing market. It’s instructive.
BanteringBear
“That may hold for stable markets but as prices drop, so do rents; you’re wrongly assuming rents are stable.”
MikeZ is correct. Apparently, quite a few people are oblivious to this fact. But, as Smarten has pointed out, there is a MAMMOTH overhang of vacant rentals. Prices are falling, though craigslist is a very poor indicator of such. In fact, one might come to the opposite conclusion poring over the sea of overpriced listings which hope to land that one sucker who will pony up some dreamy monthly payment. It’s not going to happen in this environment.
We are in the midst of vicious deflation, with no end in sight. It is absolutely remarkable how many businesses are not only laying off workers, but closing up shop altogether. While the headlines boldly display the desperate actions of large corporations, the small businesses quietly disappear.
Martin
Did y’all see where Toll Bros. is offering a 3.99% fixed rate 30 yr mortgage with no points if you purchase one of its houses. At first, the rate was only good through Sunday. But then they extended it for a 9 month lock if you sign a contract to buy one of their houses.
More and more we are starting to look like Japan from about 1990 to 2008. Mortgage money was available at about 3% and the market declined for 18 consecutive years.
But of course, it’s different here in the USA. They aren’t making any more land here.
Oh wait, Japan is an island isn’t it?
DownButNotOut
BB – actually you went pretty easy on me. Reading the first 1/2 of the DonC link I just assumed- key word here- the latter articles were written by someone else. I’m certainly not above owning up to my mistakes, and I have to agree with the ‘bought and paid for’ notion as in whose paying these people.
As you know I do like scratching beneath the popular notions to see the responses given. Party line is just too easy to agree with. I learned early to watch what different people think as it helps me understand and validate where I come from. Like the references you’ve made to the out of work/ unemployment situation. I’m not so acutely aware of this, and I believe what your seeing is real, so I balance that with future decisions. Good info.
I’m barely invested in SFD’s,I have other interests, but the starter market represents to me the bellwether of the Real Estate market. Like MR2, I appreciate all the comments. Some I don’t agree with, and I don’t mind being called up when I pull the trigger too fast.
Good stuff.
DonC
Smarten – I referred to the paper because there is a lot of talk about “fair value” but no one ever defines it. This paper does. Basically the point would be that fair value has to be defined relative to the alternative of renting and depends on a number of variable factors, the two most important of which are interest rates and expected appreciation (or depreciation).
Note that high interest rates can also encompass the difficulty of obtaining a mortgage, which I think is a point you have been trying to make recently. Namely, that housing prices are facing a headwind of banks not making loans, or, stated alternatively, of qualified buyers not being able to get mortgages. This is a de facto increase in interest rates.
The expected depreciation of housing prices works much like the previous expectation of high appreciation only in the opposite direction.
The final point of note is that, unlike stocks, housing does have a floor, which is the rental value of the property. More specifically, if, as you say, it’s cheaper to buy than to rent, then people will buy. Or, as you put it: “IMO you’re in the wrong business because when you can buy for the cost to rent, why be a renter?”
On a side note, and this is definitely not a popular position here, I don’t view housing as having been such a terrible “investment”. Over the last ten years our house is up 2X or 2.5X, which is a heck of a lot better than our stocks, international stocks, bonds, REIT’s, and just about all other asset classes except Treasurys. If we had a mortgage we’d be still be paying 1.5X more than the mortgage payment. Plus, no small advantage, you don’t get a statement about your house price every quarter laying out the losses, which means the psychic toll is lower!
Move to Reno
Japan’s land size is equal to that of Oklahoma.
Move to Reno
Some houses are good investments and some are not. Just a question of where they are located and when they are bought and sold. In Reno, it seems that the local economy is stalled. What are the prospects for new industry or new businesses moving to town? 5000 new, high paying jobs would definitely help Reno’s housing market.
BanteringBear
DonC posted:
“Over the last ten years our house is up 2X or 2.5X”
Oh, really? Where is your house located, DonC? Where is this “special” place which is unscathed by this meltdown?
Sully
Don, the reason Tenn repealed the Butler Act was to avoid another Scopes Trial – which proved to be an excercise in futility.
The papers written in Sep 05 (both) smacked of Greenspeak. It is no secret that a 10 minute Greenspan speech took an hour or more to figure out what exactly it was he said.
My point was not to criticize the research, but to point out the point of view in which it was written.
“Yet basic economic logic suggests that this apparent evidence of a bubble is anything but.”
In this same time frame Greenspan was trying desperately to keep the party going by suggesting everyone turn in their fixed rate mortgages and replace them with ARM’s.
From my viewpoint, both these papers were nothing more than “proof” that Greenspans low interest rate plan was working.
In the Aug article, these guys came back down to earth and all but reversed themselves. Which only went to prove that hindsight is always 20/20.
SmartMoney
DonC posted:
“Over the last ten years our house is up 2X or 2.5X, which is a heck of a lot better than our stocks, international stocks, bonds, REIT’s, and just about all other asset classes except Treasurys.”
Perhaps, but do you know what the long-term historical return of the stock market is? 10% for large cap stocks per year, 12% for small cap stocks, this is going back 50+ years. I can assure you real-esate will not have those returns over the long-run.
smarten
SM, hate to disagree but…
I don’t understand why ANYONE would EVER AGAIN invest ANYTHING in the stock market – time and time again it has proven to be nothing more than a ponzi scheme and if you stay in the game long enough, just like at your favorite local casino, the house eventually wins. Haven’t you learned enough of a lesson? And please don’t tell us about the last 50 years because depending upon from when you actually calculate; after discounting the rate of inflation over these 50 years; you can make the numbers justify just about anything – just like your economist gurus.
Here are the facts.
DonC states his home is worth 200%-250% what he paid for it ten years ago. For purposes of this exercise, let’s take him at his word.
That equates to a 20%-25% annual return, on average.
DonC seems like a very intelligent person so let’s assume he didn’t pull a DERRICK and pay all cash for his home. Let’s assume he placed 20% down.
If my calculations are correct [and heaven knows that in the past they haven’t been], that means DonC’s real annual return ends up being 80%-100%! And if he only placed 5% down, his real annual return is FOUR TIMES this number!
I’d much rather own an asset I control, even in a down market, than a piece of paper in someone else’s asset which depends upon other people and gives me the right to do nothing except realize a hefty loss or take advantage of some other poor sap.
BanteringBear
I agree with you Smarten, in that the stock market is one big scam. It would appear that most corporations have implemented Enron style accounting, merely cooking the books to satisfy investors. There has been no oversight whatsoever, and stocks are trading on lies and hope, and not much more.
This is why I don’t see any way out of a complete meltdown in the DOW. I’m talking 4k range- maybe worse. The listed companies stocks were ALL bubblicious, pumped up by CNBC talking heads, phony ratings agencies, and the easy money which was sloshing around the system. We are witnessing a meltdown of epic proportions of the worlds largest economy.
smarten
What’s wrong w/us BB?
Six months ago we couldn’t agree on anything other than our friend Derrick. Now it seems we cannot disagree. Maybe it’s the water or lack of snow?
Now just so we don’t go too far w/this, I don’t agree the Reno/Sparks median sales price will drop to $140K. I actually don’t believe it will drop appreciably below $200K. But I guess we’ll soon find out.
And I also don’t agree real property prices are directly related to local median incomes [meaning today’s average Reno/Sparks wage earner(s) can’t afford a home priced at much more than $2??K].
But other than that…
SmartMoney
The greater the volatility, the greater your returns. The stock market is very volatile, and in return, you get good returns over the long-run. A diversified basket of stocks will far out-perform real-estate. After the great depression, it took 26 years for the stock market to make new highs, but even with that, the returns have still average 10% for large stocks, and 12% for small stocks. That’s a fact.
And as far as DonC, he states his house has gone up 2-2.5X, which works out to about 8% per year apprecation. Not bad, but above the average real-estate appreciation of 5-6%, so I wouldn’t expect that to last. Not sure how Smarten came up with 25%. And with leverage, you would have to factor out the cost of interest.
billddrummer
To smarten,
Interesting discussion, and quite civil (you should read some of the posts on the RGJ!).
I conditionally disagree with your assertion that prices and incomes are linked. It seems that they are linked if mortgage rates are low, and financing options are limited. Broader financing options (Option ARMs, I/O mortgages) tend to unlink incomes from prices, as we saw during the bubble years.
I’m thinking that if financing options are limited and rates remain low, then buyers (and prices) are constrained by the mortgage they can qualify for. And now, unlike 3 years ago, income is the primary driver behind the loan a typical buyer can qualify for. As mortgage rates rise, buyers can qualify for proportionately less mortgage money. This tends to depress both sales activity and pricing.
But that’s just me.
BanteringBear
Speaking of the scam- I mean stock market, here’s a piece on former Merrill Lynch CEO John Thain spending $1.2 million to decorate his office which he used for less than a year.
http://cosmos.bcst.yahoo.com/up/player/popup/?rn=4226712&cl=11678020&src=news
This whole meltdown has nothing to do with housing. It’s about greed and corruption. The source of the rot can be traced directly to the politicians, who were supposed to be acting “for the people”, but who acted in direct opposition to societies best interests.
smarten
BB states “this whole meltdown has nothing to do with housing.” Well, I won’t say “nothing,” but certainly almost nothing.
And wasn’t this my statement to you some months ago when all the blame was being placed on sub-prime mortgages? My point then [as now] was that if we were just talking about mortgage defaults [even a lot of them], the market would absorb it. But because what we’re facing is well beyond mortgages or housing for that matter, we’re experiencing something far, far worse.
And since we’re talking about the stock market, if I’m a shareholder in Merrill Lynch, or more pointedly an OWNER, what say so do I have in my employees [i.e., John Thain] wasting what should be a distribution of profits to ME on $1M of office furnishings? Or my favorite: $600M as a severance package to the retiring CEO of Exxon, but ZERO to me the shareholder who owns the company? If you don’t see something wrong in all of this, then keep throwing your money into stocks!
I say don’t blame the politicians [they have no grounds to tell any CEO what to spend money on (unless he’s/she’s a recipient of bail out moneys)]; blame yourselves!
MikeZ
After the great depression, it took 26 years for the stock market to make new highs, but even with that, the returns have still average 10% for large stocks, and 12% for small stocks. That’s a fact.
Here’s another fact: past performance does not guarantee furture returns.
KingBud
smarten said:
” Montreux Renaissance homes that were selling for $1.1M, are now coming on the market for $600K. ”
Is this true, smarten? I don’t see renaissance homes at those prices. Current listings below:
http://www.montreuxgolf.com/homes/homes.html
Am I looking in the wrong place?
smarten
Yes KingBud.
There were two recent foreclosures on Delacroix. One of them was listed for sale as a REO. About 3-4 weeks ago there was a listing for sale on craigslist. The price may have been $625K, but it was definitely in the $600Ks.
I just did a quick search and it’s no longer on craigslist. I think the address was 16865, and title reverted to CitiMortgage on July 26, 2008. I can’t tell you if the home is on the MLS but you might want to contact CitiMortgage.
And yes; you ARE looking on the wrong web site [this is the retail cite maintained by developers (can you imagine them sharing deeply discounted competition?)].