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Discussion in 'California (Southern)' started by Clax, Mar 29, 2005.
Yeah, I heard this as well. Too bad it's a bit too far from where I need to be .
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In the end, real estate prices can only climb as fast as wages increase. Recent years have demonstrated one of the very few exceptions to this fundamental economic rule. Interest rates hitting 47 year lows helped offset wage increases, and thus allowed property to appreciate faster than would normally be the case. The problem going foward is that the Fed has raised rates eight times and indicated that further increases are forthcoming. At some point, rates will hit the level at which they lose there positive economic effect. This will lead to lower real estate prices. The exact timing is anyones guess. Be very careful in this rising rate environment! Tim
P.S. The old adage "buy low, sell high" is worth remembering. I think that it is silly to "buy high and hope for higher". A good point of reference would be the Nasdaq at the end of the 90's. Remember how that party ended!
Bingo. This is something the die hard real estate bulls seem to forget. They often say things like, "it's different this time." Or, "people always need a place to live, therefor the market can't crash." Dangerous, dangerous stuff. The experts will miss this crash just as they missed the stock market crash of 2000.
Should we run for the Hills! Sell now and move to Arkansas.
When the Jobs leave and rates go beyond a reasonable threshold, say above 8 percent. Thats when I would worry.
If we had more entry level housing I would be less concerned.
A bubble is not something that will sneak up on us, unlike the stock market the real estate market is not manipulated by the Investment houses......whereas the public is the last to know.
Mindset and perception will be the biggest enemy aside from interest rate increases.
If jobs remain and rates do not get extreme the rest is keeping people from not panicking
It is my opinion even as interest rates rise we will not see a crash in the market. We might see a stabalization. However, We will see a correction in the market if all the lenders out there tighten their guidelines for the purchcase or refi of a home. Right now The lenders out there are giving loans to anyone that has a pulse. Once the lenders start getting scewed by a large amount of foreclosures then they will start terminating alot of these wonderful programs that are available. There are lenders out there that have programs where one with a 500 fico score can buy a property with 5 % down. There are others that with a 620 fico score and 5% down have a 2.95% minimum payment (Not interest Rate). All these programs that are so flexible are allowing people to afford houses that they would have not been able to afford in the past.
However, in our market in San Diego, very few properties ever go to default, this will increase for the reasons you mention.
For right now, plenty of speculators and investors still see long term value here and do not let properties foreclose, they get creative and cure such situations.
In the long term, these loans you mention are more geared to allow for appreciation. When appreciation decelerates below 10% a year, we will have more default activity. Alot of folks in 100% financing. Highpayments hoping for appreciation relief.
You can go stated documentation to $1million, with 0 down.
When in the History have we seen these programs!
Fortunately as I mention before, Job growth, schools and location (i.e. OC and San Diego) are big factors in long term value.
A buddy of mine bought a home for job relocation reasons 2 years ago in Ohio, he is delighted to see his 4% appreciation per year.......yeah right.
I prefer a healthy 5-8% and things will stabilize
If you guys really want to make a ton of money, DMB development is doing a huge project in Kaui that VERY little people know about. If you want more info email me at firstname.lastname@example.org and i can set you up with the VP of sales to get your name on the interest list that is small now but is expected to grow into the thousands.
As i mentioned in a prior post, they are finishing up www.santaluz.com which has been a huge sucess because DMB really is a great develper for higher end projects. Trust me on this!
WOW! What else have you got?
I just have that one project which is a big one for me and have other properties as well. I plan on cashing out in the next 12-18 months and keep the rest stashed away and see what happens. I'm not a wealthy guy and don't even own a Ferrari, yet.... heh.
I'm in real estate and am fortunate to work around some of the most sucessful loan officers/agents in the country so i get lots of "tips".... Santaluz is one of them and has worked out great. Oh, and after this converts i already told the wife that the Viper SRT10 is out and a 360 is on it's way
Like i said, i am not wealthy but the fact that i can get those 1.95% payment mortgages on my other properties allow me to have more cashflow to get into other projects so i can get to the next level financially. Some will say "if you only pay the 1.95% your balance is going to go up"....Thats true, my balance increased $3k last year but my house went up 303k in 18 months, big deal. If i was loaded and didn't care about an extra $1500 per month times 4 other properties then it wouldn't be an issue but saving $6000 per month is a big deal for me.
I would imagine there are some wealthy people on this board, i'm not wealthy but on paper i've managed $5.5-6 mil in properties in the last 4 years without ever touching any of my savings. It's a beautiful thing, just don't want to get caught up like the stock market 5-7 years ago. I guess i wasn't happy when my portfolio was up 218%, just recouping it now...... duh!!
Hope this helps.
by the way....MarkyMark, you are absolutely correct, isn't it amazing how these banks just want to give away $???? Scary actually but thats why i'm going to sit back in the future and try to be as liquid as i can. I don't wish it upon anybody but defaulting might be a small issue in the future.
Oh. OK! If you say so! Are you sure I can trust you? Yes? OK, that does it for me, I'm in!!!!!!