John Paulson sez by real estate

[jpatter666]

Re: John Paulson sez by real estate

But, there is also carrying costs for the mortgage... So, If its investment prop then i would think its cool, bc rent should cover it... If personal residence, i would sleep better knowing im not encumbered in case anything happens to income.

Ah....very good point and the original reason for getting rid of it.

But damn, what I could do with a cash-out at 4%......but you are right -- if I'm wrong, I've got problems. And I *do* sleep well at night in this economy knowing I have essentially no debt.

Sigh...decisions, decisions. As EJ points out, no clear choices anymore. Every path fraught with peril.

[CanuckinTX]

Re: John Paulson sez by real estate

There is no, I repeat NO parity with income at this point in Southern California. . .Wherever you are. This is for the region as a whole. The "average " income in California is $55-60k. Even if someone was to want to borrow money for such, could they qualify?

Paulson is speaking to his "choir."

Totally agree and here are some actual facts to back it up

"The first and most obvious reason why you shouldn’t buy today is that prices are still inflated. According to the California Association of Realtors (CAR) the median California home price peaked in 2007 at $558,000. Today it is down to $318,660 (a decline of 43 percent statewide). Now many might think that a 43 percent correction would make buying a home right now a wise decision in the state. It is not. Sure this plays into our love for a bargain consumer appetite but get something off the dollar menu instead of committing yourself to a giant debt albatross. Banks are flooded with shadow inventory that is now finally being leaked onto the market. It is also the case that the current median price is too high."

http://www.doctorhousingbubble.com/n...y-makes-sense/

Another great point he makes in the article is that a low mortgage rate really isn't a good reason to buy. How do you know you'll stay in that home for 30 years anyway? You might have to sell in 5 or 10 years and if rates are much higher at that point guess what, the buyer of your house is going to be able to pay a lot less than you did.

[karim0028]

Re: John Paulson sez by real estate

Totally agree and here are some actual facts to back it up

"The first and most obvious reason why you shouldn’t buy today is that prices are still inflated. According to the California Association of Realtors (CAR) the median California home price peaked in 2007 at $558,000. Today it is down to $318,660 (a decline of 43 percent statewide). Now many might think that a 43 percent correction would make buying a home right now a wise decision in the state. It is not. Sure this plays into our love for a bargain consumer appetite but get something off the dollar menu instead of committing yourself to a giant debt albatross. Banks are flooded with shadow inventory that is now finally being leaked onto the market. It is also the case that the current median price is too high."

http://www.doctorhousingbubble.com/n...y-makes-sense/

Another great point he makes in the article is that a low mortgage rate really isn't a good reason to buy. How do you know you'll stay in that home for 30 years anyway? You might have to sell in 5 or 10 years and if rates are much higher at that point guess what, the buyer of your house is going to be able to pay a lot less than you did.

Ding Ding Ding! I shudder to think at what higher interest rates could do to house prices. Never trust a salesman for your buying decisions; bc its always a great time to buy

[oddlots]

Re: John Paulson sez by real estate

There was a really great interview with Chris Whalen that I think might have been posted here already but it has some sobering observations about the state of the mortgage market. An analyst he cites sees a good likelihood of 1 in 5 US houses being foreclosed on:

http://kingworldnews.com/kingworldne...is_Whalen.html

[karim0028]

Re: John Paulson sez by real estate

There was a really great interview with Chris Whalen that I think might have been posted here already but it has some sobering observations about the state of the mortgage market. An analyst he cites sees a good likelihood of 1 in 5 US houses being foreclosed on:

http://kingworldnews.com/kingworldne...is_Whalen.html

When 25% of the country is underwater i have no doubt that is a very real possibility... Before i sign up for a lease i always go check the county to see how underwater the owner is and wether he is still performing on his mortgage.

You would be surprise how many are underwater and the number of folks who are still paying their mortgage tell me they want $x amount of rent bc they are being eaten alive and trying to stop the bleeding.....

For renting folks around here i recommend you check up on your landlord and make sure he is still paying on his mortgage if he has one... All you gotta do is check the county filings online.

Yup, fun times ahead!

[mesyn191]

Re: John Paulson sez by real estate

There is no, I repeat NO parity with income at this point in Southern California. . .Wherever you are. This is for the region as a whole. The "average " income in California is $55-60k. Even if someone was to want to borrow money for such, could they qualify?

Yup. Prices have dropped quite a bit but even with the low rates they're still too high given the wages for the vast majority of people. This is true to some degree in nearly every city in the US right now as far as I can tell.

It'll take years, particularly with the gov. trying to prop prices up every step of the way, but those home prices will have to come down quite a bit before they sell. I think its even worse right now than most people realize since not only are wages low but people in general still have lots of debt vs. their income and have no savings as well. Prices may have to drop significantly below the long term trend line before people will be able to buy, that'd be almost another 40-50% decrease more for CA. Which is unbelievable even to me as bearish as I am. The gov. may step in and mass buy more mortgages to prop banks' balance sheets and give the homes away or rent/sell them for a loss in such a scenario.

[jk]

Re: John Paulson sez by real estate

There was a really great interview with Chris Whalen that I think might have been posted here already but it has some sobering observations about the state of the mortgage market. An analyst he cites sees a good likelihood of 1 in 5 US houses being foreclosed on:

if you've been following what's been going on in florida, with foreclosure rulings entered an hour before the hearing is scheduled, a guy with NO mortgage being foreclosed on by a bank [oops], counterfeit signatures on summonses, and so so, it's even easier to imagine so many foreclosures.

[flintlock]

Re: John Paulson sez by real estate

But, there is also carrying costs for the mortgage... So, If its investment prop then i would think its cool, bc rent should cover it... .

Tell that to all the landlords I know, with empty homes. I agree in principle, but the reality is that in a bad economy we have less demand for housing and some are finding out the hard way that you can't always rent out a home, at almost any price. The problem is unemployment. Less and less are able to afford anything. And the open border works both ways. Many have left. It all depends on the particulars of course. Location. Price range.

[karim0028]

Re: John Paulson sez by real estate

Tell that to all the landlords I know, with empty homes. I agree in principle, but the reality is that in a bad economy we have less demand for housing and some are finding out the hard way that you can't always rent out a home, at almost any price. The problem is unemployment. Less and less are able to afford anything. And the open border works both ways. Many have left. It all depends on the particulars of course. Location. Price range.

Yeah, i meant that obviously where the payment is manageable like 30-40% of rent or something along those lines... Not levered up 100% of rental cashflow... Gotta have some buffer for the tough times... I have actually had landlords almost cry telling me their sob story when negotiating the rent some times; that i begin to feel like their therapist... For some reason they feel the need to unload their burden onto me

[flintlock]

Re: John Paulson sez by real estate

For renting folks around here i recommend you check up on your landlord and make sure he is still paying on his mortgage if he has one... All you gotta do is check the county filings online.

Yup, fun times ahead!

Yep. A friend of mine had to move suddenly when he discovered his landlord was pocketing his rent money instead of paying the mortgage. Another reason to buy imo. Depends on your circumstances though. I run a home business, have kids, etc. I need stability.

I hope to re-fi soon but I'm on the fence about a 15 or a 30 year. I think most of us will have to learn to live on less. So I would not want to stretch at all. 4% is cheap money though. I would NOT borrow on investment RE personally. Too much uncertainty. Around here, people are buying the few new homes being built at the expense of re-sales. For the most part, it's the land that has declined in value, not the structure. A lot of the nice new neighborhoods around me were over priced due to ridiculous land prices. Now that that has corrected, some real bargains out there. Most rental stuff is of lower price and older. I just know quite a few "slumlords" who got their ass handed to them in this recession. That said, everything has it's price. You have to know what you are doing. You have to look not only at rents now but what they will be in the future. That will of course be determined by supply and demand. Are more people moving into the area? Are jobs increasing? If not, watch out.

[karim0028]

Re: John Paulson sez by real estate

Yep. A friend of mine had to move suddenly when he discovered his landlord was pocketing his rent money instead of paying the mortgage. Another reason to buy imo. Depends on your circumstances though. I run a home business, have kids, etc. I need stability.

I hope to re-fi soon but I'm on the fence about a 15 or a 30 year. I think most of us will have to learn to live on less. So I would not want to stretch at all. 4% is cheap money though. I would NOT borrow on investment RE personally. Too much uncertainty. Around here, people are buying the few new homes being built at the expense of re-sales. For the most part, it's the land that has declined in value, not the structure. A lot of the nice new neighborhoods around me were over priced due to ridiculous land prices. Now that that has corrected, some real bargains out there. Most rental stuff is of lower price and older. I just know quite a few "slumlords" who got their ass handed to them in this recession. That said, everything has it's price. You have to know what you are doing. You have to look not only at rents now but what they will be in the future. That will of course be determined by supply and demand. Are more people moving into the area? Are jobs increasing? If not, watch out.

Thats kind of why i still am negative on RE Where do you see growth? I look around me and i see broke people.... Watch out; broke man walking


1) Condos are in for a world of hurt w/ defaults, empty units, higher assessments.
2) Jobs contracting.
3) As interest rates rise it should give housing another shellacking. At minimum it will be like a fat lady sitting on housing's wind pipe....
4) Higher taxes on both property and income likely due to shitty govt. Most likely alot more tax seizures.
5) Families bundling in together. Lots more supply of housing than there currently is demand and ALOT more still coming.
6) Stagnant incomes; even if they are indexed to inflation (which i doubt; since there is alot more labor overseas at lower prices); where do you see employee pricing power coming from?
7) Commodity prices rising way faster than incomes. Its a zero sum game. If you pay more for heating and eating, you cant really afford higher rent.... At best incomes wont keep up; at worst they severely cut into real income.
8) Dollar savings quickly losing value relative to consumable tangibles; thanks to Benny boy.

Not to mention if/when EJ's views come true alot more unknowns like neighborhoods, or socioeconomic considerations need to be taken into consideration that are just not really foreseable at this point. A place you thought nice now could end up being the next ghetto.... Govt services could end up being severley cut. Those considerations could also undercut prices in certain neighborhoods...

And that is just off the top of my head... Obviously housing is not going to zero; but we still have a long way to clear supply and quite frankly US fundamentals are not good. Why put new money into a losing proposition? If you have a place; refinancing at these low rates is a smart thing to do. Buying on the other hand, i just cant get it to fit.... There are always going to be times when something is seriously undervalued relative to other things, so buy things that are undervalued. Obviously i am no John Paulson or EJ, but i do have a brain and can think.... And it still doesnt make sense to me.

I keep hearing now is a great time to buy... Its actually a much better time to refi.... I would much rather buy when rates hit 10-16%. Then i can get great leverage on my cash holdings at the time, bc i wont be looking for financing at that point.

[BigBagel]

Re: John Paulson sez by real estate

if you've been following what's been going on in florida, with foreclosure rulings entered an hour before the hearing is scheduled, a guy with NO mortgage being foreclosed on by a bank [oops], counterfeit signatures on summonses, and so so, it's even easier to imagine so many foreclosures.

http://www.propublica.org/blog/item/...n-foreclosures

Read the story linked above about "robo-signers". GMAC had one guy sign off on 10,000 documents a month. How can mistakes possibly be made?

[flintlock]

Re: John Paulson sez by real estate

Funny you mention landlords almost crying. I do electrical repairs and yesterday a lady landlord called almost crying about how something was always breaking. Being mechanically handy would be a great skill to have if you go into that business. Even really minor stuff can get expensive if you have to pay someone every time a light bulb needs replacing. And tenants won't lift a finger. I get called out literally to change the batteries in a smoke detector.

[don]

Re: John Paulson sez by real estate

The doctor is a longtime RE broker that yearns for the good old daze before the bubble, fraud and ponzi schemes. A good guy.

[flintlock]

Re: John Paulson sez by real estate

That is EXACTLY the same list as I came up with. Everyone needs a place to live, so buying a personal residence now might make sense. Refi-ing is a no-brainer. But RE as an investment? Only for those with deep pockets and high risk tolerance
imo. Possibly a better time would be after rates rise a bit, to see where the real low resides. But sadly I'm afraid any comeback in value is a long way off. I just don't see any growth in demand for homes. And so much of the boom areas hardest hit were areas with relatively new construction. So there won't be much attrition due to old age. They'll actually need job growth before anything positive can happen.

This all has been devastating for my area. So much of the economy around here was geared around new construction and home improvements. The "Under-employed" I know are definitely not showing up in the unemployment figures. It's much worse than 10%. Seems the only people doing okay are in the medical field, government, or work for "Big corporate". Even medical is being hit. My employee's wife who works at a doctor's office said the whole office was told they'll take a 5% pay cut plus lose 2 weeks paid vacation/leave. Doctors offices are calling me, "reminding" me I need to come in for a check up. That never happened before. Even local government around here has hiring freezes and layoffs.