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Correction! :P

 
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chavez
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PostPosted: Jun 13, 2006 1:50 pm    Post subject: Correction! :P Reply with quote

I know I shouldn't laugh when money is lost, but it is all part of the economic cycle and it must happen. We shot over 10% for the year through May, and that ain't right.

Anyhow, I need the Nelson "ha-ha" picture to put up for the "Gold Diggers"

Buy gold, it's safe! AHAHAHAHAHAHA.... -20% ytd Laughing

Platinum and a few other PM's are worse!

I am now going to get behind my blast shield and let you all vent. Cool

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5280HighButter
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PostPosted: Jun 14, 2006 8:55 am    Post subject: Reply with quote

Ya, that isn't very nice. I didn't buy an PMs, but I contemplated it. Anyone investing in something like that should realize that any commodity is very volitile. Those who got out of any position around May 9th did good, I didn't. A major correction was due and I knew it yet did nothing....I suck.
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PostPosted: Jun 15, 2006 5:15 pm    Post subject: Reply with quote

Chavez, don't forget about the people questioning the real estate bubble. Last months Money magazine was dedicated to how the bubble has burst in areas and you can expect little or no return in a lot of places throughout the US.
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PostPosted: Jun 16, 2006 8:22 am    Post subject: Reply with quote

Brew, I read that as well. But it also pointed out that many areas around the country did not experience above average rising property values. So real estate in those sections is still a safe bet, even more so if you hold for the long term. Flippers will feel the worst of it. Denver has been growing at about 4% I believe, so all prospects here are still solid.
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chavez
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PostPosted: Jun 16, 2006 8:39 am    Post subject: Reply with quote

brew, check this: http://sacramentolanding.blogspot.com

Welcome to Nor*Cal, home of the excessively overvalued real estate!

Why do you think I rent! Not because I couldn't afford to buy with these creative financing options, but because I am not a moron!

Rents in our area are roughly 50% of what a (traditional) mortgage would cost for the same home.

We have 2 million or so people in the metro area. There are 15,682 homes on the market as of yesterday. Shocked

Nearly 40% of homes on the market have been "price reduced".

We are just a hair away from complete meltdown. Intel is about to lay off some workers - that may just be the straw that breaks the camel's back. Neutral

Short sale anyone?

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PostPosted: Jun 16, 2006 1:25 pm    Post subject: Reply with quote

chavez,

wouldnt tax savings + equity building still bring you out ahead of renting?

i am sure you crunched the numbers, but do you really think house prices will drop 20-40%?

I have seen prices stabalize in chicago, but i have never seen a person take a hit.... not sure about CA though

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chavez
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PostPosted: Jun 19, 2006 7:38 am    Post subject: Reply with quote

muckmeister, no. Equity is negative (if you were to buy now) and declining, and the tax savings are nowhere near the $18,000 in extra $$$ paid out to own (trad 30yr fix @ current rates for my current residence). Not even close.

People who are foolishly getting in now are taking a hit. Instead of an immediate +10k like we were seeing a year ago, now they are taking an immediate -5k hit, or more. Builders in this area aren't lowering prices for fear of lawsuits from previous buyers (who paid more), so instead they are offering 10's of thousands in incentives. Basically, if you buy a 450k house, and they give you 50k in incentives (not at all uncommon right now), your house really should have sold for 400k (honestly it should have sold for less). So now you have a sweet 42" plasma, and a landscaped backyard, but you got snookered out of 50k (or more), and the previous buyers got foooked even worse than that. The incentive game isn't even working any more, so now they are lowering prices AND giving the incentives.

Oh well, home values never decline right? And when my 0% down interest only loan does hit it's adjustment year, I will be able to afford my monthly payments, right? Fooook it, I will just re-fi to a 50year fixed. Laughing

If the analysts at National City mortgage are correct, that 40% number very possible in some areas. Neutral


So anyhow, the real answer is, (all things equal) would you prefer to sock away an extra 18,000 a year, or do you need a piece of paper that says "you" own a piece of property?

If home prices truly stabilize, I will be the first in line to pick up a home or chunk of land to build on (more likely). Until then, I will be right here paying 50% of what my neighbor is paying for the same spread.

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PostPosted: Jun 19, 2006 7:53 am    Post subject: Reply with quote

chavez,

I knew you crunched the numbers, the CA market is different than Chicago.

People are moving very far from the city, I would be worried there. But anything close (suburbs) to the city is staying solid. Not selling as fast, but no drops, only on new developments and they are far from civilization imo....

I think renting is a better option for a number of reasons. I had seen a model where they compared a renter and average returns, vs. a home owner, cost and appreciation.

The renter came out far ahead after 20 yrs.

Interesting times rightnow in RE.

FYI, I think 35 of 70 over valued markets are in CA according to NAR. But office in Silicon valley is picking up. Which is a good indicator I think.

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chavez
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PostPosted: Jun 19, 2006 10:04 am    Post subject: Reply with quote

muckmeister, it is a good indicator, but it won't help the Bay Area RE market. They are already at a major premium to reality spurned by the dot commers. It is a very difficult place to own if you make less than 150k/year. 600k buys a modest home in most places. By modest, I mean 1200sqft or less. Neutral

600k should equate to about a 4500-5000/mo mortgage. At that rate, you would be right above that magic 1/3 of income number.

Do-able no doubt, but man would it be annoying to write out that mortgage check every month.



And yes, the renter usually wins out in the long term given they do the right thing with the "saved" money. I'd still prefer to own though.

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PostPosted: Jun 19, 2006 12:15 pm    Post subject: Reply with quote

chavez,
Here is the only thing about RE data.

I was at a conference of very well respected economist. Don't ask how I got in.

Either way, they put up their models, and each economist in the group shot holes in the results and the models as a whole. Now I could not understand specifics, these were all Phds.
The result, none of them agreed on the model therefore making the results questionable.

Out of all the presentations, all of them had serious flaws according to the audience. I walked over to one of the most respected economics and asked him, how can anyone believe any of the data thats makes it out to investors or insititutions. "It depends on the author and how they are respected in the market place" was the response in a very short overiew.

Some of this data, I just dont look at the same any longer.

One thing is certain, the job market is very strong right now in CA. Better than rest of the country imo.

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PostPosted: Jun 19, 2006 5:30 pm    Post subject: Reply with quote

muck, economists, especially "doctors", will always disagree. They all know better than the other one.

I find that the more education one has, the more they disconnect from the basics. Neutral

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PostPosted: Jun 20, 2006 6:17 pm    Post subject: Reply with quote

Just looked at N. Forced out by my covered calls - in May Smile . Maybe I'll get back in.

RE - 4 empties. Steel mill strike is killing everyone.

Nice weekend on the lake with about 10 cub scouts. I got up both mornings at 7 am for an adult pull but had no takers - nuts.

The c calls put me 30% in cash the end of may and I never did see a chance to get back in - I'm still looking. I really want to buy some HAL one of these days.

SD2

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PostPosted: Jun 21, 2006 8:11 am    Post subject: Reply with quote

Just hit my inbox

Real estate slowdown isn't expected to cause recession
State's only sector likely to lose jobs is construction
- Carolyn Said, Chronicle Staff Writer
Wednesday, June 21, 2006


There's no question that California's housing market is cooling, with sales volume dropping. But the good news, according to an influential forecasting group, is that the state will manage a soft landing, experiencing only mild economic deceleration.

"The weakness in the real estate sectors will slow everything down a little bit, but not enough to get an actual recession," said Ryan Ratcliff, an economist at the UCLA Anderson Forecast and author of a report on California titled "At the Tipping Point," to be released today. Once-lavish run-ups in home values will slow and even sag, according to Ratcliff's projections. Inflation-adjusted home-price appreciation, which was in double digits from 2002 through 2005, will be 7.5 percent this year, 0.3 percent in 2007 and negative 4.1 percent in 2008, the report forecast. Residential building permits are predicted to decline from 208,900 in 2005 to 179,000 this year to 160,400 in 2007.

The housing slowdown will cause job losses, primarily in the construction and financial sectors, he said. That's not surprising since sectors related to real estate fueled creation of 30 percent of new payroll jobs in 2005.

Jobs such as mortgage lending, mortgage brokering and real estate brokering are expected to take a hit. Slow but steady growth in financial services jobs in such areas as securities, insurance and banking will offset those losses.

"The total impact on the financial activities category will wash out to be basically flat," Ratcliff said. "Finance will lose some of its steam but not actually lose (net) jobs."

That leaves construction as the single sector most likely to feel the impact.

A full-blown recession generally is triggered by job loss in at least two major sectors. But most sectors are chugging away at decent levels. "No other sectors in California employment (in addition to construction) look like they can be the second half of the double whammy," he said.

While California employment has returned to same level as before the 2001 recession, the geographic distribution of jobs has changed. Job growth in the south has been stronger than in the north, the report said.

In 2000, the Bay Area contributed 22 percent of California jobs and Southern California's share was 53 percent. In 2005, the Bay Area had 19 percent and Southern California 54. The Central Valley accounted for most of the remainder.

Ratcliff said that was in part because real estate-related finance jobs were heavily concentrated in Southern California.

The Bay Area is picking up, he said, with big boosts from increases in leisure and hospitality jobs. "The Bay Area economy is finally starting to show an acceleration of job growth for the first four months of the year relative to what we saw last year."

Professional business services and retail and wholesale trade helped tourism boost the Bay Area job count.

"I think the Bay Area economy is finally getting to the point where there are enough other sectors that have started growing again that the slowdown in construction and other real estate related sectors will be softened," Ratcliff said.

Another big division between Northern and Southern California is in personal incomes.

There the Bay Area holds sway, accounting for 24 percent of personal income in 2004, even though it has just 17 percent of the population. Southern California, with 48 percent of the population, has 47 percent of the income, while the Central Valley has 7 percent of income and 10 percent of the population.

The Bay Area's highly educated population accounts for the disparity, Ratcliff said.



--------------------------------------------------------------------------------
Outlook
for California

California's nonfarm payrolls are projected to grow 1.8 percent in 2006 and 1.2 percent in 2007.

Jobs are expected to be lost in construction in 2007, but most other sectors should see slow-to-moderate growth.

Inflation-adjusted home values are expected to rise 7.5 percent in 2006, 0.3 percent in 2007 and to decline 4.1 percent in 2008.

Source: UCLA Anderson Forecast

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PostPosted: Jun 21, 2006 9:21 am    Post subject: Reply with quote

smokedog2, your HAL purchase should have happened in 01 at the bottom.

Anyhow, sorry to hear about your vacancies. Sounds like you are pretty well positioned though.


muckmeister, that is a good overall picture, but I would expect certain areas to get slammed good. Turlock south to Bakersfield in particular is going to get buttraped. Who pays 500k for a house in Madera? (dairy farms aside!)

Sacramento area - about half of the "new jobs" created in the last 4 years were directly related to RE. Intel may lay off a few thousand from their Folsom location. Could be a small "perfect storm" of events. Who knows. The catalysts are all in place, the only question is will something light the match.

I think the match is going to be lit by the RE new jobs problem. RE related companies are already downsizing their staffs.... Neutral

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PostPosted: Jun 21, 2006 10:25 am    Post subject: Reply with quote

Quote:
I think the match is going to be lit by the RE new jobs problem. RE related companies are already downsizing their staffs


Good because there are way too many fricken retard agents now, especially around here. Many were layed off after the bust, and as prices kept going up they jump to RE.

When an unit in our building was listed for 12% below what we sold for we felt the need to inform the seller what we had sold for. We did, she called her agent, and her agent flipped her lid. Called our agent, saying we had no right to talk to her seller, to which she (our agent) replied "what are you talking about, my buyers made their own decision to inform your seller out of respect, it was simply an exchange of information, just because you don't like getting phone calls from your buyer because you didn't do homework and list at a better price is no one's fault but your own, at that price I'm sure you'll be selling very fast though."

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PostPosted: Jun 21, 2006 11:18 am    Post subject: Reply with quote

I think the RE market will completely depend on location. Here in Sac, I don't see a burst. First we have a great unemployment rate (4.9%), second we have relatively low rates that should stay around the current rate or slightly higher for the near future (Along with the ten year note), and third we don't have the construction capacity to handle the influx of bay area and first time home buyers (And move up buyers). We will see an increase in inventory which is natural and a realistic pricing model instead of the speculative model that has been in effect for the last year.
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chavez
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PostPosted: Jun 21, 2006 11:56 am    Post subject: Reply with quote

Quote:
We will see an increase in inventory


J, we are at record breaking levels, and climbing. 15,800 homes on the market in the area. That's well over twice as many as this time last year.

Quote:
First we have a great unemployment rate (4.9%)


Fueled largely by RE related industries. Construction, mortgages, title companies, RE agents and admin staff, etc. etc. etc.

This does not take in to account the consumer spending related industries that are at least somewhat fueled by the "my house is a cash register" mentality.

Quote:
and third we don't have the construction capacity to handle the influx of bay area and first time home buyers (And move up buyers).


We have the highest rate of cancellations in the nation. All of the major players save DR Horton have scrapped plans for new developments and are slowing construction on existing developments.

There are other bad signs: rising costs of borrowing (6.27 and rising), impending rate adjustments, the highest rate of price reductions in the US, one of the highest rent vs. own ratios in the US, etc. etc.


Crash-soft-whatever. Who knows. Signs don't point to a pretty picture. Neutral

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PostPosted: Jun 21, 2006 12:02 pm    Post subject: Reply with quote

and an estimated $1 Trillion in ARMs adjusting next year (nationally), this should be fun, just one more ingredient into the "Pool of Speculation"

Laughing

I'm glad the valleys prices are largely a factor of stock prices, and least I think I'm glad now. Confused

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PostPosted: Jun 21, 2006 1:11 pm    Post subject: Reply with quote

Actually, based on % of homes, we are no where near a record yet. In fact we would have to have an inventory over 19,000.

The RE industry is not that strong in the employment market. I think you are overestimating the impact of housing construction. There is a lot more to the industry than single family homes.

Borrowing costs will stay relatively flat for the foreseeable future due to slackening of demand for products. Foreclosures are a natural thing and happen a lot but only now is it being spotlighted. The rate of price reductions is a media driven story. Any home owner worth their salt knows your house is worth what someone will pay and although we saw a spike, we all know those prices were ridiculous and not trustable data.

I don't know what you mean by highest rent to ownership rate.

It's only a crash if you bought high, right? Twisted Evil

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chavez
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PostPosted: Jun 21, 2006 1:55 pm    Post subject: Reply with quote

J-Ro, at the current rate of listing, the 19,000 mark will be hit by the end of summer. Consider that we were at 7,000 at this time a year ago.

Quote:
The RE industry is not that strong in the employment market.


Umm, have you looked at the marquis as you drive down Douglas. Or any business park for that matter.

Title Title Mortgage Construction Mortgage Mortgage Title Bank Title Mortgage


At last check, 20000 of the 45000 or so jobs that were created from 01 to 04 were RE related. 05 was the busiest year.

So, while the number is small ~ I'd speculate 10-15% of total jobs, it is still quite significant.

The rate of price reductions is not media driven. 39.7% on 6/13 good enough for #1 in the nation. The source? www.ziprealty.com


Quote:
Any home owner worth their salt knows your house is worth what someone will pay and although we saw a spike, we all know those prices were ridiculous and not trustable data.


Who are these people? The bulk of the people that bought during the run up do not understand this. If they did, they would not have used highly risky mortgages to finance their homes. 50 year mortgage? OK Neg Amortization 0 down? OK 5 year int only/ARM 0 down? OK!!!!

These people were largely stupid to most things finance and did not know just how badly these screwed up loans could hurt them in the future. Whatever, at least they own a house! Laughing

When these things come due, have your checkbook ready. Gonna be some sweet foreclosure opportunities out there.




Quote:
I don't know what you mean by highest rent to ownership rate.


Cost of rent vs cost of ownership. (mtg-rent)/mtg

For instance, my place rents for $1395. To buy it using a 30 year fixed (@6.27%), it would be $2375+all the bs so lets just say a conservative $2800 (keep in mind the ass fees in my development are high). So the rent-own ratio for my pad is 50.18% or $1405 a month.

Quote:
It's only a crash if you bought high, right?


Damn straight!!!! Laughing

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PostPosted: Jun 21, 2006 2:09 pm    Post subject: Reply with quote

chavez, Ahh but 7,000 was the lowest it had ever been. 13,000 is a very resonable inventory for this area.

RE includes a lot more than SFH's.

Elk Grove is the fastest growing city in the nation, people are still buying into the city and it has a very high inventory. In fact I bet it has close to 30% of the Sac county inventory. Go figure.

I have been hearing the foreclosure mantra for 4 years now, still haven't seen it happen and those indexed 1 year loans have reset 4 times.

I'll say it again, A house is a home not an investment.

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PostPosted: Jun 21, 2006 2:21 pm    Post subject: Reply with quote

J-Ro, the bulk of the ARMs were 5 and 7 year. Even the IO loans were usually fixed % for 3-5.

The lowest # of inventory in recent history was around 4,000 homes back in 2002.

EG was the fastest growing city. That report covered the time period between 7/1/2004 - 7/1/2005.

Do you think it is still on top? Neutral

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PostPosted: Jun 29, 2006 8:25 pm    Post subject: Reply with quote

Today was the first day in a long time that I finally saw a glimmer of hope...anyone know what happened? I was on the boat all day and checked my phone a couple minutes ago (i gave up looking for a little while) and everything exploded, especially gold, up $19.80!!!
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PostPosted: Jun 30, 2006 5:55 am    Post subject: Reply with quote

The Fed raised rates a quarter point but hinted that they may be finished with the rate hiking. Everything jumped after the announcement. The Dow finished up over 200 points; it's biggest one-day gain since April 2003.
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PostPosted: Jun 30, 2006 7:35 am    Post subject: Reply with quote

Yeah it was an across-the-board boon. Even oil. Neutral

Anyhow, the correction should be done as we became oversold in many markets. It appears this will not be a dead cat bounce as we have seen in the past.

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PostPosted: Jun 30, 2006 7:52 am    Post subject: Reply with quote

The Fed didn't say they were done with increases. Instead they said that they were going to fight inflation but not hard enough to stifle the economy. You have to read the minutes.
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PostPosted: Jun 30, 2006 9:49 am    Post subject: Reply with quote

J-Ro

I didn't mean that the fed was finished, rather that they may be finished.

Quote:
The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.


I took this statement to mean that the fed is sitting neutral right now and that they it will take some big news concerning higher inflation to get them to raise the rates again. I see your point though, and fed futures for August are currently pricing in a 63% chance of a hike in during their next meeting. Maybe I'm taking the optimist angle and hoping for a fed pause because I have not enjoyed the last month and a half of watching my portfolio lose its gains from the past year. Crying or Very sad
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PostPosted: Jun 30, 2006 10:03 am    Post subject: Reply with quote

thrasher, I think the Fed is still slightly hawkish on inflation but the wording leaves the market an out in regards to energy prices and their effect on the market as a whole. Basically taking oil off the table in regards to it's overall weighting on the market. It's still there just with a smaller shadow being cast. I think the markets are done for the rest of the summer. You will see volumes decrease and individuals will actually take control of the fluctuations. Summer is a risky time but if you are more savvy than the average investor, you can do well because the institutions, which are savvier than any of us, are on hiatus.
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