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SnakebyteXX
07-15-2005, 10:45 AM
Housing bubble could be a replay of 1990s rise, burst

By Rachel Beck
Rachel Beck

Federal Reserve Chairman Alan Greenspan sees signs of "froth" in some local housing markets, but says overall the nation doesn't appear to be in a housing bubble that could potentially burst.

Such a sanguine prediction might do little to calm the nerves of anyone who remembers when the dot-com stock boom went bust five years ago and how that led to a market-wide bloodbath. Investors lost wealth that they have yet to recover and Wall Street's collapse played a significant role in pushing the economy into a recession.

That's something for homeowners today to consider. It could be that even if there isn't a housing bubble in their backyard, they may still get caught if demand slows somewhere else.

Of course, that "if" is the big unknown these days. Among economists, homeowners and market-watchers, there seems to be a wide range of opinions over whether the housing market has spun out of control.

Recent data show the housing market is accelerating rapidly. Home prices overall have jumped 12.5 percent over the 12 months ended in March. Sales of new homes in May climbed to the second-highest level in history, providing further evidence that low mortgage rates continue to fuel a booming housing market.

The "froth" shows up in pockets around the country where home prices are soaring beyond the average. New research by Merrill Lynch looked at the housing markets in 52 large cities, and found that 30 of them had signs of overheating.

Topping that list: Miami, where home prices have jumped 85 percent since 2001 and price-to-income levels are soaring. Six cities in California -- San Diego, Riverside/San Bernardino, Los Angeles, San Francisco, San Jose and Sacramento -- were also considered "white hot." On average, home prices there have risen about 75 percent since early 2001.

More surprising, perhaps, are the price gains in markets like Milwaukee, Minneapolis and Cleveland.

"House price bubbles in these Midwestern cities -- where manufacturing is king and activity is on the decline -- flashes even bigger warning flags, in our opinion," said Sheryl King, the Merrill senior economist who wrote the report.

With those kind of examples, it's easy to see how comparisons to Wall Street's technology heyday come to mind. Back in the late 1990s, the major market indexes soared and that momentum boosted stock prices all around. When the tech-bubble burst in early 2000, the plunge was crippling.

Maybe some of what fueled the equity market's boom then was that investors lived by what history showed, with stocks recovering losses if held long enough. What they seemed to forget was that stocks don't always quickly rebound from losses.

A similar theory could hold true in real estate today, according to Citigroup Smith Barney senior economist Steve Wieting, who points out that investors could be taking heart in knowing that national median home prices have never had a down year.

Should that change even slightly and lead to weakness in the housing market, it could cut into economic growth.

Rachel Beck is the national business columnist for The Associated Press.

web page (http://www.detnews.com/2005/business/0506/30/B01-232779.htm)

SnakebyteXX
07-15-2005, 10:49 AM
The housing bubble

“The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops.” That’s the subhead in a special report in The Economist, a leading conservative business journal. From Business Week to The New York Times to, most likely, your hometown newspaper, articles about the housing bubble are becoming common.

The main features of the housing bubble:

• In the past 10 years, house prices in the U.S. have risen 45 percent faster than inflation — 60 percent in the “bubble region” of the Northeast, Pacific Coast, and pockets in between.

• Twenty eight percent of new loans are “sub-prime” — high rate loans to low-income families who can barely afford their payments.

• Almost one-quarter of homes bought in 2004 were purchased not to live in, but for investment. “Investors are prepared to buy houses they will rent out at a loss, just because they think prices will keep rising — the very definition of a financial bubble,” according to The Economist.

• This bubble extends to most developed capitalist countries. It is larger than the global stock market bubble of the late 1990s; The Economist calls it “the biggest bubble in history.”

Many business-oriented economists are ignoring the housing bubble, or think it can go on indefinitely. But increasingly the question being posed is not whether there is a bubble, but how much economic pain there will be when the bubble ends. What kind of pain?



Defaults, foreclosures, bankruptcies

Already, many homeowners are in trouble. Deep in debt, any unexpected expense — medical, home repair, tax increase, job loss — can cause missed payments, leading to foreclosure. The problem is about to get worse. At least one-third of new homebuyers nationally in 2004 (60 percent in California) have mortgages with artificially low initial monthly costs. After 3-5 years, the monthly payments will soar. In 2007, an estimated 12 percent of the total national mortgage debt will be “adjusted” — almost certainly in the direction of higher monthly payments.



Recession and lost jobs

In the last four years, increased consumer spending has driven most of the country’s economic growth. Much of that spending is being financed by homeowners’ borrowing against the increasing value of their houses. In addition, an estimated 40 percent of private-sector jobs created in the last four years have been in construction, real estate, and otherwise directly related to the housing bubble. A collapse of the housing bubble could cut housing construction almost in half and reduce consumer spending, resulting in a serious recession with up to 6 million jobs lost!



Financial meltdown

The impact of a recession, along with rising mortgage defaults, will put strains on the financial system. Big mortgage lenders will be threatened, as will investors (like pension funds) that have a large stake in mortgage-backed securities. The last time something like this happened was the savings and loan scandal of the late 1980s. Taxpayers spent $500 billion bailing out the big players, including Neil Bush, brother of the current president, whose Silverado Savings and Loan Co. took $1.3 billion to clean up. The financial fallout from this housing bubble could be much worse.

State and local budgets will be impacted as the property tax base stops growing or shrinks, and rising unemployment leads to falling revenues from income and sales taxes.

It is impossible to predict when the housing bubble will end, whether it will deflate gradually or in a sudden burst, or the severity of the economic fallout. But we can predict with confidence that the Bush administration will try to put the full cost on the backs of the working class. That’s what happened when the stock market bubble burst, triggering a recession in 2001. Bush resisted any efforts to aid the victims of the crisis, directing billions in tax cuts to the very rich while letting unemployed workers and cash-strapped communities fend for themselves.

The possibility of severe recession ahead makes it even more important to win the fight to save Social Security and end the war in Iraq. Not only are these critical demands to protect the interests of working families, but defeating Bush on these key issues will also leave the people’s movements in a stronger position to demand that Wall Street, not working America, bear the cost of any future crises. A fact sheet on the housing bubble can be found at www.cepr.net/publications/housing_fact_200507.pdf. (http://www.cepr.net/publications/housing_fact_200507.pdf.)

economics@cpusa.org.

web page (http://www.pww.org/article/articleview/7388/1/278)

SnakebyteXX
07-15-2005, 10:50 AM
Housing market roars; some fear bubble burst

[published on Sun, Jun 19, 2005]

 By DAVID STREITFELD
Los Angeles Times

The chief economist for the Mortgage Bankers Association in Washington is worried enough about the torrid housing market to get out of it.

"I'm going to rent for a while," said Douglas Duncan, who expects "significant reversal" in regions that have enjoyed strong home price appreciation, including Washington, D.C., Florida and California.

He plans to sell his suburban Washington home, which has tripled in value since he bought it a dozen years ago, and move into an apartment.

Duncan is among a multitude of experts and consumers across the United States debating the possibility of a housing bubble – a condition where prices have risen so much they crash.

Prominent policymakers and academics, including Federal Reserve Chairman Alan Greenspan, recently have warned about bubbles in regional markets. A recent nationwide Gallup/Experian poll of consumers showed that nearly four in 10 said they expected a housing bubble to burst in their region in the next three years.

Many experts and media pundits have been predicting a downturn for the last three years – and home prices have continued to rise. Consequently, though some homeowners are pulling back, others are buying as if prices will continue to rise for quite some time.

Last week, the Commerce Department reported that housing starts rose 0.2 percent in May, as builders broke ground on about 2 million housing units at an annual rate.

"These are powerful engines creating a boom in home sales, and all booms end the same way," Richard Curtin, director of the survey, said in a statement.

Three years ago, Phoenix Management Services, a turnaround firm based in Philadelphia, asked about 100 lenders in its regular quarterly survey if they thought there was a real estate bubble. Voting yes were 58 percent, and 29 percent said no.

A few months ago, Phoenix asked the question again. Despite the last three years of zooming prices, 46 percent of the lenders said it was a bubble, and 39 percent believed it was not.

"They're saying, 'This isn't a bubble – this is here to stay,' " Phoenix Managing Director Michael Jacoby said. "That's really scary."

In 2002, Dean Baker was an emphatic housing bear. He has not changed his mind.

"We're going to have a decline in house prices in six months," said Baker, director of the Center for Economic and Policy Research, a Washington think tank. "I've been saying that for three years now."

But the crash refuses to happen.

The Gallup/Experian poll, while showing consumers expect a regional bubble to burst, also found 25 percent of the respondents said they expected the value of their homes to increase by at least 10 percent a year.

web page (http://www.nwherald.com/BusinessSection/292967179389621.php)

SnakebyteXX
07-15-2005, 11:29 AM
Cover Story: Bubble Bath of Doom!

By Howard Kurtz
Washington Post Staff Writer
Monday, July 4, 2005; Page C01

Watch out! Take cover! Any minute now, this thing is going to pop!

"Will The Housing Bubble Burst?" asks New York's Daily News. "After the Housing Boom," says a Business Week cover story. "Some Economists Warn of Housing Bubble," says The Washington Post. A Time cover story has some experts warning of a bubble inflated by a "psychology of greed." "Are Home Prices Really So Crazy?" Money magazine asks in a 43-page section. The Economist's cover shows a brick, labeled "House Prices," plummeting to earth.

Five years after most of the media cheered on a stock-market mania that blew up with disastrous consequences, journalists seem determined to sound warnings about the overheated real estate market. This time, even as housing prices continue to soar, many are erring on the side of pessimism.

"I do think the press has gone way overboard," says financial commentator James Glassman. "They're scaring people."

CNBC anchor Ron Insana, who has a less rosy view, says he is drawing the same kind of criticism for "spoiling the party" as he did before the Nasdaq nose dive in 2000: "You get hate mail: 'When are you getting off this topic? You want prices to go down?' There are going to be some huge blowups. Someone's going to get killed somewhere. It's totally irresponsible to ignore the speculative behavior that's going on."

Memories of the media's stunning failure in the late '90s bull market, when Newsweek ran a cover titled "Everyone's Getting Rich but Me," are still painfully fresh. Journalists "are a little more wary the second time around," says Stephen Shepard, a longtime Business Week editor who is now dean of City University of New York's new journalism school. "The fact is that the business press and the press in general missed the story about what I call the tech bubble. It's also true that housing prices have escalated at an extraordinary rate and people are very sensitive about a collapse."

Many journalists have firsthand knowledge of the subject. Shepard has seen a big price run-up in his Manhattan co-op and Westchester County weekend home. Insana bought a New Jersey house that he is knocking down to build a new one. Glassman, an American Enterprise Institute fellow, has had a big appreciation on his Connecticut home but rented a place in Washington last year because skyrocketing prices have made rents more attractive.

On the other hand, Eric Schurenberg, Money's managing editor, says he has bought and sold houses in San Francisco and New Jersey in the past couple of years and "managed not to get rich in the process."

Why the 43-page effort? "The conversations that people used to have at parties about their tech stocks and telecom returns have now been replaced by, 'Can you believe what my neighbor got for his three-bedroom?' " Schurenberg says. Besides, he says, "a lot of us feel we didn't do the best possible job during the tech bubble, and we're not going to drink the Kool-Aid this time."

While no one knows whether the housing market merely contains "froth," as Fed Chairman Alan Greenspan says, or is in an out-of-control spiral that will lead to a crash, the story's appeal is unmistakable. Perhaps half of Americans owned stocks when day trading became a national mania, but nearly three-quarters own their homes, and a growing share are buying second homes, flipping properties and taking out home-equity loans.

This is turf that every local paper can claim. "Is Dallas in a housing bubble?" asks the Dallas Morning News. "Florida's Housing Bubble: Is It Ready to Burst?" asks the St. Petersburg Times. The Pittsburgh Post-Gazette sounds a bit wistful in reporting: "Pittsburgh Has No Housing Bubble to Burst."

Journalists stress the difference between the stock market and the housing field, starting with the fact that homes also provide shelter. "There are a zillion housing markets," Shepard says, noting the localized nature of the industry. "You can't panic and sell your home the way you can panic and sell your Cisco stock," says Glassman, since it takes more time and is more expensive to unload a property.

he tone of this cacophony of housing stories varies widely. Money says that while prices "look nuts . . . the roof isn't going to fall in," and your home "is still a great investment." But the London-based Economist, taking a global view, calls housing "the biggest bubble in history," adding: "Prepare for the economic pain when it pops."

Of course, some have been sounding these warnings for years. "What if Housing Crashed?" Forbes asked in a Sept. 3, 2001, cover story. That same week, Business Week observed: "A housing bubble may be developing -- right behind the Nasdaq bubble." Last September, it was Fortune's turn: "Is the Housing Boom Over?" In April, Business Week said that "2005 looks to be the year that housing finally cools off."



But low mortgage rates have kept things hot. Besides, as Time's cover story noted -- along with five-year jumps in single-family home prices of 135 percent in the Los Angeles area, 117 percent in Las Vegas and 108 percent in Washington -- "who wants to listen to buzz-kill talk? Just as during the 1990s' stock frenzy, the idea that 'everybody's getting rich' echoes in a vast media chamber."

Eventually, the naysayers will be proved right and the rocket ship will run out of fuel. In the meantime, hundreds of thousands of people have made small fortunes by ignoring the media's warnings.

web page (http://www.washingtonpost.com/wp-dyn/content/article/2005/07/03/AR2005070301161.html)

dg-in-centralpa
07-15-2005, 02:36 PM
As one who is in the business,I'm a real estate agent, I've been seeing this trend for several years. There has to be an end to the rising prices or at least level off for awhile. It's getting to where first time home owners won't be able to afford to purchase, because of the high prices.

DG

Cueless Joey
07-15-2005, 03:07 PM
Problem in California is, inventory is really low b/c land is getting scarce.
So, unless people start moving out of here and interest rate go up, I don't see why the prices would go down.
We bought a home for $575K two Januaries ago. The house is now worth over 800K.

landshark77
07-15-2005, 03:52 PM
The worse that could happen is the prices will level off and the loan rates will increase and the investors (me) will not be able to get rid of their property. IMO.

<~~had this discussion last night, LOL.

Cueless Joey
07-15-2005, 04:08 PM
True that.
Rent rates never go down though.
So, renting it with a little negative might not hurt.]
Or, you could just burn it and claim insurance. /ccboard/images/graemlins/tongue.gif

dg-in-centralpa
07-15-2005, 05:33 PM
I just sold the last of my rental properties 2 weeks ago, in anticipation of a drop. Also I've wanted to sell it for many years. I'm still looking for other investment properties, more to fix and resell. Right now multi-units, mainly 2-4 unit buildings don't give much of a return to keep as a rental. It's not good business to have a rental that you have to put money out of your pocket every month. It should at least break even.

DG

Gayle in MD
07-19-2005, 01:04 PM
Hi,
I'm wondering your opinion on what will happen in the resort areas, such as Ocean City Maryland, when interest rates go up, or housing prices level off.

I decided against buying a condo on the ocean in OC, this year, since there seemed to be a glut of new condos being built there, and after doing a bit of investigating, I learned that a great number of those condos were bought with interest only loans. Do resort areas suffer more in the midst of a R.E. correction? A one bedroom condo on the ocean in Ocean City Maryland is in the three to four hundred thousand dollar range. How can such prices in resort areas continue to rise? Do you think they will come down at all when the market slows?

Thanking you in advance....
Gayle in Md.

dg-in-centralpa
07-19-2005, 02:26 PM
Gayle,
In my opinion, the prices will come down. If you are looking at the condo as an investment to rent out, remember that your busy season is May thru September or early October. Figure what your monthly mortgage payment is, and remember that you will have roughly 6 months with no income to help pay it. Check with a local realtor and ask what the vacancy rate is, what's his commission for managing the condo, who takes care of repairs, cleaning each week, plus you'll need insurance on the property as well. If you decide to spend a week there, that is a week with no income. If you aren't looking at the rental side, but for just your personal use, it may be worth buying and reselling within 5 years.
Interest only loans are not the best way to go. Nothing ever gets paid off on the principle. You will actually pay more in the long run. I think the prices will slow down or even drop. How soon, I don't know. I would say 5 - 7 years.

DG - jmho

Wally_in_Cincy
07-20-2005, 04:35 AM
<blockquote><font class="small">Quote Gayle in MD:</font><hr>

Hi,
I'm wondering your opinion on what will happen in the resort areas, such as Ocean City Maryland, <hr /></blockquote>

Hey Gayle, I was in OC a coupl weeks ago (we stayed at Sea Colony in Bethany Beach), sorry I missed you.

Maybe if I could talk to you in person I could convince you what great leader Prezdent Dubya is /ccboard/images/graemlins/smile.gif

Wally &lt;~~ loved the Thrasher's fries

Gayle in MD
07-20-2005, 04:47 AM
Wow, I am so sorry I missed you. I hope if you're ever there again you'll PM me so I can send you my Cell number.

Yeah Wally, I'm sure you could change my mind, LOL. I probably would have walked in with a big stack of books and a giant yellow highlighter in my hand, LMAO!

Let me know if you ever travel to OC MD, or Bethany again. My uncles house is just a few blocks away from Sea Colony, Bethany Villiages....right on the Ocean. Sea Colony is nice, we've stayed there a few times, Our boat is at the old Ocean City bridge, right at the inlet. We could have taken you fishing for some Tuna, weather permitting, and as long as you wouldn't be afraid I'd throw you overboard, LOL.

Let me know if you get back there again, or near Annapolis Md.

Gayle in Md.....Man, could have shown you some good spots for pool too!

Gayle in MD
07-20-2005, 04:56 AM
Hi, again, DG. I used to practice RE, and let me liscence go to spend more time marketing our businesses, now I'm renewing it.

You're right about interest only loans, that's a trap. Those interest only loans are very prevalent around resort areas, which is why I think that the resort areas will be a good investment in a few years. Ocean City has priced itself out of reach for a lot of renters these days. I am now looking at property just over the bridge, in Berlin....where the Runaway Bride was filmed.
Low taxes overthere, and close to my marina. I wanted a place for my daughter and son in law and grand daughter to stay in on weekends. I like staying on the boat.

Do you think since we now have one third of the loans going for investment property, the second home market will drop a good deal?

Gayle in Md.

eg8r
07-20-2005, 08:40 AM
[ QUOTE ]
Yeah Wally, I'm sure you could change my mind, LOL. I probably would have walked in with a big stack of books and a giant yellow highlighter in my hand, LMAO!
<hr /></blockquote> You are too funny. This is what I am expecting should my trip to DC in October happen. /ccboard/images/graemlins/smile.gif

eg8r

Wally_in_Cincy
07-20-2005, 08:46 AM
<blockquote><font class="small">Quote Gayle in MD:</font><hr>
...We could have taken you fishing .... as long as you wouldn't be afraid I'd throw you overboard, LOL.

<hr /></blockquote>

Hmmm... that possible scenario just might keep me ashore matey /ccboard/images/graemlins/smile.gif

anyway we went in this bar in OC called "Peppers" and this cute girl that worked there said she was from Finland and I asked her if she had heard if Mika Immonen and she said "yeah he's from my hometown"

small world

Cueless Joey
07-20-2005, 10:01 AM
<blockquote><font class="small">Quote Wally_in_Cincy:</font><hr> <blockquote><font class="small">Quote Gayle in MD:</font><hr>
...We could have taken you fishing .... as long as you wouldn't be afraid I'd throw you overboard, LOL.

<hr /></blockquote>

Hmmm... that possible scenario just might keep me ashore matey /ccboard/images/graemlins/smile.gif

anyway we went in this bar in OC called "Peppers" and this cute girl that worked there said she was from Finland and I asked her if she had heard if Mika Immonen and she said "yeah he's from my hometown"

small world <hr /></blockquote>
There might be only one town in Finland. /ccboard/images/graemlins/tongue.gif

dg-in-centralpa
07-20-2005, 02:50 PM
Second home as in vacation home or second home as in moving to suburbs and getting away from urban neighborhoods. If moving from urban areas, no I don't think the market will drop. The prices will level off, but with most families having two incomes, the normal urban "starter homes" sales will decline. We have that problem here. Especially when no one wants to live in the "city." Everyone wants anywhere but the city.

DG

Gayle in MD
07-21-2005, 04:24 AM
Hey Ed, For you I'd have to bring the books, the highlighter, and a rolling pin....LOL. I'd have to use the rolling pin first, and then bring out the books!

Just kidding...really I am.... /ccboard/images/graemlins/grin.gif

eg8r
07-21-2005, 04:28 AM
/ccboard/images/graemlins/smile.gif

eg8r

Gayle in MD
07-21-2005, 04:35 AM
My interest is presently regarding what to expect in the resort areas. I am just amazed at the extreme increase in the prices of the Ocean Front and Ocean Block condos in OC. The days are gone when those properties would come close to paying for themselves through rentals. I would think, when the rates go up, or if the bubble predictions occur, that those resort areas will become a buyers market. I would expect that with so many old buildings having been torn down, and huge new buildings being built, with more units per building, and at much higher prices, in the $600,000 range, that if the bubble does pop, area like Ocean City, will absorb a big decrease in value, mostly because second homes, as in vacation property, are usually what folks get rid of first, and if there are already many new buildings sitting empty, and for sale, that when folks start to unload, the prices will take a big correction....????

Gayle in Md...

Wally_in_Cincy
07-21-2005, 04:40 AM
<blockquote><font class="small">Quote Gayle in MD:</font><hr>. I would expect that with so many old buildings having been torn down, and huge new buildings being built, with more units per building, and at much higher prices, in the $600,000 range, that if the bubble does pop, area like Ocean City, will absorb a big decrease in value, mostly because second homes, as in vacation property, are usually what folks get rid of first, and if there are already many new buildings sitting empty, and for sale, that when folks start to unload, the prices will take a big correction....????

Gayle in Md... <hr /></blockquote>

you would think that, but over the years, despite a few corrections, real estate prices have continued to amaze

the place we stayed in sea colony was a 3 br condo a good 15 minute walk from the beach, the guy bought it in 1990 for 100G and was recently offered 300G

SnakebyteXX
07-21-2005, 06:53 AM
<blockquote><font class="small">Quote Wally_in_Cincy:</font><hr>
...over the years, despite a few corrections, real estate prices have continued to amaze
<hr /></blockquote>

Amen to that. Here in Northern Cal of the two counties directly north of San Francisco the first is Marin and the second is Sonoma. I live in Sonoma County. In May the average home price in Marin hit $1,300,893 while the median price hit $955K. Here in Sonoma County our median home price currently stands at $615K.

The pending bubble problem as I see it is tied to the high number (approximately twenty percent) of homes currently owned by investors many of whom are paying more in monthly mortgage expense than they're generating in rental income in an effort to capitalize on rapidly escalating property values. Combine these folks with those who have bought in with interest only loans and 'creative financing' and you have the makings for a market that's literally a house of cards.

Rising interest rates and rising oil prices indicate that soon come the cost of borrowing money, the cost of doing business and the over all cost of living will all be increasing (not to mention the looming prospect of rising unemployment). The real estate market like most markets is based on supply and demand. Currently with readily available low interest loans the low cost of borrowing has been fueling the rising prices. Demand has exceeded supply driving prices ever higher.

What happens when circumstances change and investors fearful of losing their existing equity begin putting those houses on the market to try and lock in their profits? What happens when those who have bought in at these extraordinary high prices find that due to increasing supply and declining prices the home they bought is no longer worth what they have paid? What happens when those who have invested with negative cash flow mortgage situations find that the home they bought will take months longer to sell than they originally expected?

Living in a Wine Country cocoon as I do I didn't realize until recently that the real estate boom has become a worldwide phenomenon.

What will it mean on a worldwide basis when and if panic sets in and existing equity evaporates as the market becomes flooded with sales? What will the banks and lending institutions do when faced with the prospect of massive foreclosures?

I own three homes - one residence and two negative cash flow rentals. I am in the process of having the two rentals appraised and will be liquidating those two holding as soon as possible. My concern is that the increasing cost of borrowing combined with the potential for a major economic downturn and the fragile state of the market may leave a lot of unhappy homeowners holding the bag in the not too distant future.

I think we may be facing the prospect of a worldwide recession if the current 'house of cards' that is commonly known as 'the real estate bubble' bursts.

My dos centavos and worth what you paid for them.

Snake

catscradle
07-21-2005, 07:05 AM
<blockquote><font class="small">Quote dg-in-centralpa:</font><hr> ... but with most families having two incomes, the normal urban "starter homes" sales will decline. We have that problem here. Especially when no one wants to live in the "city." Everyone wants anywhere but the city.

DG <hr /></blockquote>

It is pretty amazing that nobody wants to buy a "starter home" anymore, everybody wants to start with a 3 or 4 br, 2 bath colonial less than 10 years old.
My first house was a cottage for lack of a better word, 2 SMALL bedrooms, 1 bath, kitchen in the basement, steps to the kitchen eating up a fair bit of the living room, but we bought that so my wife could stay home and take care of the kids; eventually that appreciated and I got a bigger paycheck and we moved up to a smallish 3 br colonial built in 1946 which we're still in. 79.9 k in 1984, about 450 k now, amazing. The funny thing is I had to buy a condo because my job moved too far to commute, and my mortgage is now 134 k, more than the original cost. Almost had it paid off twice, but first the college expense thing, now the work thing.
Some day I'll sell it, but I guess I'll never have it paid off.

Wally_in_Cincy
07-21-2005, 07:31 AM
<blockquote><font class="small">Quote SnakebyteXX:</font><hr>
Amen to that. Here in Northern Cal of the two counties directly north of San Francisco the first is Marin and the second is Sonoma. I live in Sonoma County. In May the average home price in Marin hit $1,300,893 while the median price hit $955K. Here in Sonoma County our median home price currently stands at $615K.

<hr /></blockquote>

how could someone afford such a thing?

<blockquote><font class="small">Quote SnakebyteXX:</font><hr>


What will the banks and lending institutions do when faced with the prospect of massive foreclosures?


<hr /></blockquote>

they'll come crying the feds (taxpayers) just like the pension funds that are about to be bankrupted

dg-in-centralpa
07-21-2005, 02:34 PM
If the resort areas are your forte, go for it and make as much as you can. Be ready to jump ship if the bubble does burst.

DG

dg-in-centralpa
07-21-2005, 02:37 PM
If you ever get back to OC, there is a great restaurant called "The Angler." They have great seafood plus a one hour party boat ride at sea. Depends, they sometimes travel to Assateague to see the wild ponies. This is part of the meal.

DG

dg-in-centralpa
07-21-2005, 02:41 PM
My first house cost me $24,500 back in '85. It was a fixer upper. I remodeled the whole house from top to bottom. Sold it 5 years later for $57k. My mortgage with taxes and insurance was a whopping $249.00. The median price in my county is $118,000.

DG - cost of living is much cheaper as well

DickLeonard
07-22-2005, 04:33 AM
Gayle with concrete encasing his brain he might not be able to float. I wouldn't throw him overboard.####

catscradle
07-22-2005, 04:44 AM
<blockquote><font class="small">Quote dg-in-centralpa:</font><hr> My first house cost me $24,500 back in '85. It was a fixer upper. I remodeled the whole house from top to bottom. Sold it 5 years later for $57k. My mortgage with taxes and insurance was a whopping $249.00. The median price in my county is $118,000.

DG - cost of living is much cheaper as well <hr /></blockquote>

Sounds like a good place to live on a fixed income after retirement, but I could never get my wife that far from the ocean. Me too for that matter, I'm not a beach person or a boat person, but the ocean is just kind of "in the air". Even moving to NH for the work week I miss the ocean and I'm probably not more than 30 or 40 miles as the crow flys. Matter of fact the ocean may just be the reason for the premium house prices on the various coasts, shipping is what makes the world go round.
Back to the original topic, I don't see the housing boom (or bubble) to be like the ".com" bubble. There was no real product behind the ".com" bubble. The internet is nice and all, but it really is not a very good way to deliver advertisement which was supposed to be the basis of it's game plan. Housing on the other hand is a real product with real demand, more people growing up and getting married all the time, bldg materials growing scarcer all the time, land being used up all the time; I just see the housing thing being real and based in real need. I do however see the problem of the economy not being up to the task of supporting the increased prices. Already a regular working stiff can't get a house. Of course, due to the great wisdom of moving all our manafacturing work off shore to get the rich richer, the number of working stiffs is shrinking as the welfare roles grow, thereby eliminating that concern.
Now I'm rambling. Suffice it to say I hope the bubble bursts just after I cash out and just before I buy that retirement bungalow my wife wants by the beach. /ccboard/images/graemlins/grin.gif

Gayle in MD
07-22-2005, 06:53 AM
LMAO! Well, atleast if we lose the anchor, we'd have an equally heavy object to throw overboard, LOl. /ccboard/images/graemlins/grin.gif

How's it going friend?

Gayle

SnakebyteXX
07-22-2005, 07:25 AM
Rich House, Poor House

Financial guru Robert Kiyosaki has turned bearish on the boom he helped create

by Carol Lloyd, special to SF Gate

Friday, July 22, 2005

You read the real estate-to-riches books and finally took the plunge. You pulled the equity out of your home and bought another and then another. Despite your income of $45,000 a year, now you're leveraged to the tune of $1.7 million and loving every minute. Because when the properties appreciate you'll have made the nest egg of your dreams.

Then you log on to your investment guru's Web site and discover this stunning news: Your real estate dreams are soon to be dust in the wind.

If you want to be smart, buy gold coins.

Such may be the roller-coaster ride of advice for the followers of Robert Kiyosaki. His books -- "Rich Dad, Poor Dad" (1997), "Cashflow Quadrant" (1998), the upcoming "Rich Dad's Before You Quit Your Job" (September, 2005) and nine other titles authored by him and his "Rich Dad Advisors" -- have dominated the best-seller lists for years, selling over 24 million copies in 44 languages worldwide. His infomercials, lectures and classes have reached millions more. This year he was one of several superstars at a two-day, 46,000-person event in Los Angeles called Real Estate Wealth Expo, with this slogan: "One Weekend Can Make You a Millionaire." He's played live at Madison Square Garden, chatted up Oprah on her show and hawked his ideas on everything from CNN to PBS pledge drives.

The essence of his thinking is one of simple financial literacy. Learn about money. Educate yourself financially and you too can learn what the rich have known for eons: Don't work for money, let money -- via the right investments -- work for you. Grow your assets. Shrink your liabilities. But unlike many investment gurus, Kiyosaki, a Hawaiian-born surfer who describes himself as old hippie and environmentalist, despises standard financial planning advice: earn, save and buy a nice collection of mutual funds to supplement your Social Security. Instead, he preaches self-determination through entrepeneurship and for him that has often meant investing in real estate.

But now, in the past couple of months, the man -- whose engaging financial parables have coaxed millions of ordinary under-earning boobs (including yours truly) into the real estate market -- has become a major bubble-blower. On richdad.com, which contains a forum for his casual and dedicated followers (including those who pay $100 a year to join his "INSIDERS" club), he's begun posting articles that caution against what might be called "surreal estate exuberance." He cites the Economist at length, including the assertion that "the global housing boom is the biggest financial bubble in history." He confesses that he's currently dumping real estate that produces no cash flow (from rental income) and going "long on gold and oil."

Curious about why one of the foremost real estate boosters had begun to sound like a survivalist in the Utah desert, I caught up with Kiyosaki by phone at his home on Waikiki Beach.

"Don't get me wrong, I'm still buying real estate," he told me, adding that he was in the process of buying seven new properties but that he wasn't buying anything in expectation of appreciation. "I'm an investor, not a speculator. ... I want it to cash flow."

He knows that many others have not been so prudent. "I'm worried about people using their houses as ATM machines," he says, referring to those homeowners who have refinanced their homes to buy cars, remodels or simply more real estate. "And I'm worried about all the people who are flipping properties [those who buy properties in order to immediately resell for a profit] -- that's really stupid right now."

But didn't his books -- despite all their sound financial advice about reducing liabilities and increasing assets -- probably help fuel this real estate craze?

"I think it's so," he concedes.

To be fair, Kiyosaki hasn't recommended that people leverage their homes for real estate riches. One of the key tenets he hammers away at is that a home is not an asset but a liability. "A lot of people think of their homes as real estate," he says. "I don't play games with my home. I own two houses and I'm very attached to them, but I don't get attached to my real estate investment. It's just 'Show me the money' -- if it doesn't cash flow, then I sell it."

The problem is that real estate -- especially as depicted in his books -- stands out as one of the few investments available to cash-poor individuals that can still return an income and long-term profit. Most of us don't have water rights or enough capital for a hedge fund. We don't have successful inventions that bring in royalty checks every month.

At least that's the message I took away when a review copy of "Rich Dad, Poor Dad" fell on my desk in 1998. I recall opening the barely copy-edited, self-published book with a tinge of sympathy. With writing like this, who is this guy going to convince?

But by the next day, I'd read the book cover to cover and committed to changing my ostrich-like attitude about all things financial. I didn't want to be a millionaire, but owning a little wedge of real estate seemed like a better idea than what I had been doing: nothing. Houses were something I could subject to my creativity and fantasy world. They also were something that I felt somehow secure about borrowing on -- even though I'd sooner chop off my earlobe than buy a stock on leverage. Since it was 1998, it was a good time to mistake his advice as Real Estate 101.

Although Kiyosaki's advice may have helped inflate the real estate bubble, he wants me to know that his influence has also had more positive effects. In Australia -- the country with the greatest number of readers per capita of "Rich Dad, Poor Dad" -- the government has decided to create a national program for teaching financial literacy to children. "I would like to take credit for that," he says, "though I don't have any proof."

The real culprit behind the real estate bubble, he contends, is the federal government. "They're printing too much money," he says. "It's Gresham's Law: When bad money enters the system, good money goes into hiding."

Kiyosaki believes the U.S. government has devalued the dollar, weakened the economy and created such distrust of the stock market that people have sought more secure ways to invest their money. And that has driven up real estate values.

"There's been enormous inflation," he explains. "Greenspan walks around saying there's no inflation, but that is based on the Consumer Price Index. They've taken all the assets out -- housing has gone through the roof, my steak has gone through the roof, oil has gone through the roof. In 1997, the price of oil was $10 a barrel -- now it's $57. If that's not inflation, I don't know what is."

Kiyosaki's solution is to invest in oil, gas, gold, silver -- whatever might be a hedge against the coming financial crisis.

If this sounds a little on the eccentric side, the fact is that Kiyosaki has always been something of an iconoclast. "I never diversify, I never get out of debt and I never save money," he explains, adding that he doesn't put much stock in the stock market either. "Do you know why they call them broker -- because they're always broker than you are."

Like most influential self-help gurus, Kiyosaki's power lies in his charm, which is at once self-effacing, brash and disarmingly straightforward. This has allowed him to walk both sides of the street -- as an altruistic educator who shares his knowledge with the average wage earners whose pain he feels and as the calculating, unabashed Machiavellian player who lives to win. In this sense, his sounding the alarm bells about the real estate market may be anything but altruistic. It may be, simply put, good business.

"Please crash, so I can buy some more," he says with a hardy laugh. "I want it to bust anyway. There's more opportunities in a down market."


web page (http://sfgate.com/columnists/lloyd/)

dg-in-centralpa
07-22-2005, 04:13 PM
My wife is like you, she loves the ocean. I don't mind laying on the beach and watching the "sights." But after a couple days, I need to do something. Where we are, we're 3 hours from Atlantic City and the beaches there. We have lots of Amish and Menonite people, most everyone is laid back compared to NYC, Philly, etc. We are considered a bedroom community.

DG

catscradle
07-25-2005, 05:35 AM
<blockquote><font class="small">Quote dg-in-centralpa:</font><hr> My wife is like you, she loves the ocean. I don't mind laying on the beach and watching the "sights." But after a couple days, I need to do something. Where we are, we're 3 hours from Atlantic City and the beaches there. We have lots of Amish and Menonite people, most everyone is laid back compared to NYC, Philly, etc. We are considered a bedroom community.

DG <hr /></blockquote>

I loved the Dutch country when I visited. I had a full Amish type beard when we visited there, confused the hell out of more than one fellow tourist. /ccboard/images/graemlins/grin.gif
I'm surprised house prices are as good as they are there if you're considered a Philly bedroom community. My home town became a Boston bedroom community when a major highway to Cape Cod went through 40 years ago or so. Ruined the town in my opinion, I couldn't afford to buy there when it was time for me to buy at any rate.
As to the ocean, I only like going to the beach in the winter when there are no people and nature is really showing her teeth, but I like knowing the ocean is close at hand.