Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

127 responses to “11.5 Million More Foreclosures? Bring Them On!”

These comments are paged! This is page 2. Navigate the pages here:
1 2
  1. Jonness

    By David Losh @ 82:

    So you are sitting on a cash down payment for some dream home. I can tell you from experience that Real Estate is a hard knocks, hard work business, but you can trade up. You’re going to need to trade up.

    What you say only makes sense in an appreciating market. Unfortunately, we are in a depreciating market, so it doesn’t work that way. Let’s say you traded up in 2007, all you did was lose more money. You say I don’t understand, but the truth is, I do understand. It’s about market cycle timing. You have to know when it’s best to hold cash, when it’s best to hold stocks, when it’s best to hold bonds, when it’s best to hold real estate etc., and how to diversify your risk by not holding too much of any one thing at any point in time.

    Imagine where people in Japan landed after following the “trade up” advice.

    http://www.marketoracle.co.uk/images/2008/japan-house-prices–nov08.gif

    Rate this comment: Thumb up 0

  2. Jonness

    By Kary L. Krismer @ 90:

    With an 80/20 you’ll likely still owe the second mortgage, so your exposure is the amount of that mortgage.

    Perhaps in theory. But in actuality there’s a very good reason the banks no longer offer the 80/20. It’s a LOT more difficult for them to squeeze blood out of a turnip than it is to wipe out a cash downpayment just ripe for the picking.

    Rate this comment: Thumb up 0

  3. Jonness

    By Kary L. Krismer @ 97:

    I would say those are things that should simply not be said.

    Realtors say them all the time. That’s why I would never hire a real estate agent who is also a Realtor (not that all Realtors are unethical, just that the organization they joined is highly suspect IMO). There’s a lot of risk hiring a person who belongs to an organization that purposely goes out of its way to put its salespersons’ best interests ahead of the clients they represent.

    Rate this comment: Thumb up 0

  4. Jonness

    RE: EconE @ 100 – IMO, Ira has remained pretty level headed throughout this ordeal.

    Rate this comment: Thumb up 0

  5. David Losh

    RE: Jonness @ 101

    OK, you got me with the swings in price from the tax credit. That doesn’t change the fact there are some properties worth owning, and paying off.

    That is the point. If you can afford a $400K mortgage, but buy a $200K house, you can pay down the principal balance. If you buy well, you can buy fix, and sell.

    The guy we were working for today is building houses to live in, and rent out behind. In this market. He builds the places himself.

    No matter how you look at the housing market today, you have to think that you will need to pay down the mortgage to get equity.

    I’ve come to the conclusion, from everything I’ve seen, that we will be in a market place of high down payments, or cash transfers of property. What ever you are saving, you’re going to need more.

    Building equity to trade up makes sense to me.

    Rate this comment: Thumb up 0

  6. David Losh

    RE: EconE @ 100

    Give it a rest.

    If you have an opinion then put some thoughts together.

    Rate this comment: Thumb up 0

  7. EconE

    RE: David Losh @ 106

    OK. I have an opinion.

    You squeeze peoples hands too hard when you shake them.

    Why?

    Is it a macho thing?

    Rate this comment: Thumb up 0

  8. Ira Sacharoff

    By Jonness @ 104:

    RE: EconE @ 100 – IMO, Ira has remained pretty level headed throughout this ordeal.

    Thanks. I’m the one EconE has bestowed ” wishy washy” upon.
    He could be right, but then again maybe not :)

    Rate this comment: Thumb up 0

  9. EconE

    RE: Ira Sacharoff @ 108

    If you say what you mean you’ll always mean what you say.

    Rate this comment: Thumb up 0

  10. ray pepper

    RE: EconE @ 100

    Thx Econ… In 2006-7 when I started 500 Realty I was bashed incessantly. I loved it and was blamed for single-handedly shutting down the News Tribune Real Estate Blog! Imagine that…It was me and not that people were not buying papers anymore. Reading the commentary here I find very entertaining. Tim’s bashing of old Agents calls I also find equally fun. We MUST laugh at ourselves first, understand our own mistakes, then cautiously laugh at others.

    I always stand behind what I say and Yes, I do tell Buyers when I believe they are purchasing a GEM, but in the last couple years I only said that a few times to “retail” Buyers.

    Rate this comment: Thumb up 0

  11. ray pepper

    RE: Ira Sacharoff @ 108

    Absolutely love this:

    “Thanks. I’m the one EconE has bestowed ” wishy washy” upon.
    He could be right, but then again maybe not :)”

    Just came home from Monthly Claim Jumper Night and my laughing caused a bit of unsettling of the Gold Rush Chicken.

    Rate this comment: Thumb up 0

  12. mwh

    RE: S. Marty Pantz @ 1 – dunno if your stat is right — it sounds inflated to me (in the interest of being factual, I’d love to see a cite for that “fact”). but just the sake of argument, let’s assume it’s true: that would mean that two-thirds of mortgages were on primary residences. Even based on your own (probably inflated) figure that means that the VAST MAJORITY OF LOANS WE’RE TALKING ABOUT INVOLVE PRIMARY RESIDENCES.

    Rate this comment: Thumb up 0

  13. Kary L. Krismer

    By Jonness @ 101:

    By David Losh @ 82:
    So you are sitting on a cash down payment for some dream home. I can tell you from experience that Real Estate is a hard knocks, hard work business, but you can trade up. You’re going to need to trade up.

    What you say only makes sense in an appreciating market. Unfortunately, we are in a depreciating market, so it doesn’t work that way. Let’s say you traded up in 2007, all you did was lose more money.

    That type of argument makes more sense with stocks or something else you can easily pick the entry and exit points on, and which doing so does not otherwise affect your life.

    Imagine that if Chase had so many foreclosed houses that they were able to offer stockholders subsidized rent on houses. Assuming you would take advantage of that, would you get into and out of your investment in Chase the same as if you weren’t taking advantage of that?

    The point is simply that where you live is not first and foremost an investment decision.

    I’d also point out that your planned exit point could also make short term trends irrelevant.

    Rate this comment: Thumb up 0

  14. Kary L. Krismer

    By Jonness @ 102:

    By Kary L. Krismer @ 90:
    With an 80/20 you’ll likely still owe the second mortgage, so your exposure is the amount of that mortgage.

    Perhaps in theory. But in actuality there’s a very good reason the banks no longer offer the 80/20. It’s a LOT more difficult for them to squeeze blood out of a turnip than it is to wipe out a cash downpayment just ripe for the picking.

    I suspect the reason there are few or any 80/20s is that it’s difficult to sell the 20. Investors have wised up that “secured by real estate” does not mean safe. That’s something I’ve known for over 25 years, but apparently that’s not on the curriculum for earning a MBA degree.

    As to the individual borrower though, when you’re doing your planning you have to assume that they will come after you. The same is true of short sellers who don’t get a release. The most likely way they’ll come after you may be the same as on credit card debt. They’ll sell the debt to a collection agency. Your exposure is likely to last for six years, at least if Washington law is applicable, it could be longer.

    Rate this comment: Thumb up 0

  15. Kary L. Krismer

    By Jonness @ 103:

    By Kary L. Krismer @ 97:
    I would say those are things that should simply not be said.

    Realtors say them all the time. That’s why I would never hire a real estate agent who is also a Realtor (not that all Realtors are unethical, just that the organization they joined is highly suspect IMO). There’s a lot of risk hiring a person who belongs to an organization that purposely goes out of its way to put its salespersons’ best interests ahead of the clients they represent.

    I suspect a lot of this is due to your not fully understanding the different “Realtor” entities. If you were familiar with them you’d probably have the most problem with NAR, less with WR and less with SKCAR (or whatever your local is), unless perhaps you’re anti-development in general, in which case you’d hate all three. To join one you typically have to join all three.

    Rate this comment: Thumb up 0

  16. Jonness

    By Kary L. Krismer @ 115:

    To join one you typically have to join all three.

    Therein lies the problem.

    “The National Association is the proud owner of numerous marks including but not limited to the terms REALTOR®, REALTOR-ASSOCIATE®, REALTORS®, the REALTOR® Logo and the Block “R” mark (which may be referred to collectively as the “MARKS”).

    The Marks are collective membership marks which serve to identify Members of the National Association and distinguish them from non-members*. Since 1916, when the unique term REALTOR® was first “coined” or “invented”, the public has come to recognize those who use the MARKS as Members of the NATIONAL ASSOCIATION OF REALTORS® and, as such, providers of real estate related services consistent with a strict Code of Ethics and the highest standards of professionalism. Member Boards**, through their use of the MARKS, are recognized as Member organizations.

    Members are licensed by the National Association to use one or more of the MARKS in connection with or in reference to themselves and their real estate businesses.

    Member Boards are licensed to use the term REALTORS® as part of their name, or in the title of their publication, and to use the REALTOR® Logo in connection with their name. Member Boards may also be licensed to use the Block “R” mark in connection with a Member Board logo.”

    http://www.realtor.org/letterlw.nsf/pages/mmmPartOne#OneI

    Rate this comment: Thumb up 0

  17. Kary L. Krismer

    RE: Jonness @ 116 – Note that the NWMLS is not a Realtor owned entity.

    Rate this comment: Thumb up 0

  18. Ira Sacharoff

    RE: Jonness @ 116
    As an agent, when you affiliate with a brokerage, those brokerages which are members of the Realtors group require you become a Realtor, and that includes all the ” big boys” like John L Scott and Windermere. These brokerages devote a lot of energy to see that their agents do things their way in order to become successful. But in addition to paying your brokerage beaucoup bucks, you then have to pay the Realtor group beaucoup bucks.
    It’s not so much by principle that I’ve chosen to not affiliate with a Realtor brokerage. It’s more that I’m cheap.
    The brokerage I’m affiliated with leaves me alone, lets me do my thing, and charges me almost nothing. I just can’t see myself being a cheerleader and being told to parrot BS lines in order to make sales.

    Rate this comment: Thumb up 0

  19. Jonness

    By Kary L. Krismer @ 113:

    That type of argument makes more sense with stocks or something else you can easily pick the entry and exit points on, and which doing so does not otherwise affect your life.

    IMO, it’s much more important to live within your means than it is to get a perfect top or bottom pick of the housing cycle. In fact, just remaining aware of the direction of the overall trend is all a person really needs to do to protect him or herself. If you miss by 5%, it’s not a back breaker.

    I don’t see why picking the overall price trend in houses is supposedly difficult as long as a person manages the risk. Buying when prices are going down is a sucker’s bet. It’s much better to wait until a period of economic recovery begins, and this is easily recognizable by consistent meaningful gains in employment. Even if the market finds a bottom in the meantime and stabilizes, the typical homebuyer is better off waiting, because ongoing appreciation will not be eating into their down payments as they continue to save. Once prices begin to rise again (without government gimmicks), buyers can feel safe their dreamhouse will not turn into an economic prison trapping them underwater and unable to migrate if need be.

    The difference between living comfortably and living in a debt nightmare can be due to as little as a mere $100K dollars of debt overextension beyond what the income can support. Obvioulsy, this makes leveraging into a declining market unadvisable for most people. In addition, people should be extremely leery of buying into a highly volatile market. What makes bottom-picking so dangerous is not the fact the person might buy too late and miss the bottom, as the person has bought into an appreciating asset despite where the previous bottom was. The real danger is in buying too early and having the market collapse beneath you. So people should keep an eye on unemployment, as it is the true gauge of the health of our economy.

    The housing market will eventually heal, and RE will once again be a hot item. It’s just that it is going to take a period of years for this to occur.

    Rate this comment: Thumb up 0

  20. Kary L. Krismer

    By Jonness @ 119:

    By Kary L. Krismer @ 113:
    That type of argument makes more sense with stocks or something else you can easily pick the entry and exit points on, and which doing so does not otherwise affect your life.

    IMO, it’s much more important to live within your means than it is to get a perfect top or bottom pick of the housing cycle. In fact, just remaining aware of the direction of the overall trend is all a person really needs to do to protect him or herself. If you miss by 5%, it’s not a back breaker.
    . . .
    The housing market will eventually heal, and RE will once again be a hot item. It’s just that it is going to take a period of years for this to occur.

    I would agree with the first part. No matter when you buy, you should buy well within your means. Part of the problem prior to the 2007 mortgage crisis was that banks were willing to make too large of loans to people. That’s improved some.

    Buying when the market is “hot” has disadvantages, mainly needing to act quickly when a good house does come on the market.

    Rate this comment: Thumb up 0

  21. David Losh

    RE: EconE @ 107

    Again you have no clue what you’re talking about.

    Rate this comment: Thumb up 0

  22. David Losh

    RE: Jonness @ 119

    Real Estate isn’t an appreciating or depreciating asset. It keeps pace with inflation, it is a hedge against inflation. Real Estate stays constant according to the value of present and future dollars. If the price of gas, bread, education, and health care goes up so does the price of Real Estate. Commercial Real Estate keeps up with what the market will bear, it’s all rental income.

    To build equity you pay down the principal.

    The problem we have today is that we never had inflation, and the inflation we thought we had was actually a credit bubble. I personally never knew what a credit bubble was, or could be. I never saw debt as a security to financial instruments. The whole economy is just a house of cards.

    So what I was saying before, and will say again is there is a lot of opportunity today if you are willing to risk. If you continue to hold, or worse, turn your money over to stocks, bonds, or banks, I think you will lose.

    Rate this comment: Thumb up 0

  23. Agents Ranking Real Estate Agents

    You’ve got to wonder if the government has any idea what they’re doing here. The administration is talking about eliminating home owners ability to deduct their mortgage interest and we’ve got people buying homes using FHA with 2.5% down. They’re making it too easy for people who are under qualified to get into homes and at the same time they’re talking about eliminating a major incentive to home ownership.

    Rate this comment: Thumb up 0

  24. Kary L. Krismer

    RE: Agents Ranking Real Estate Agents @ 123 – They’re not going to eliminate the deduction without also reducing rates. So whether you win or lose will depend on the size of your mortgage (or if you have none at all).

    Presumably the people with the larger mortgages will be better able to absorb the loss, unless their mortgage was through WAMU, Countrywide, Indymac, etc. ;-)

    Rate this comment: Thumb up 0

  25. doug

    RE: Agents Ranking Real Estate Agents @ 123

    The deficit reduction council (the only political entity to advocate the elimination of the mortgage interest tax break) does NOT speak for the administration. No one in the adminsitration is ‘talking about eliminating’ that tax break, to my knowledge.

    If you want to know how seriously the administration wants to reduce the deficit, look at the tax deal passing right now.

    Rate this comment: Thumb up 0

  26. Ione

    Tim, you are wrong on the number of homes that will be in foreclousre by 2013. The number is closer to 33.1 million homes that will be foreclosed upon. We already have about 10 million people who have lost home on the last 3 years. They are living in tents, sewer drains of Las Vegas, on the banks of the Sacramento River. As for your estimate of how many home in the United States have mortgages if you used the Case-Schiller index you are way off the mark. Look Seattle is in denial just like New York was 2 years ago. I know the parking lots of shopping malls are constantly packed, bars are seemingly packed as well; but when all of that credit runs out and they can’t pay the bills next year, it will be a different story. As for strategic defaults— Seattle is rift with them. We probably are the Strategic Default capitol of the United States. Get you facts right

    Rate this comment: Thumb up 0

  27. Seattle Bubble • Tim’s Top Ten of Twenty-Ten

    [...] 11.5 Million More Foreclosures? Bring Them On! – 12/08, 126 comments [...]

    Rate this comment: Thumb up 0

These comments are paged! This is page 2. Navigate the pages here:
1 2

Leave a Reply

Do you want a nifty avatar picture next to your name, instead of a photograph of Tim's dog? Just sign up with Gravatar, and make sure to use the same email address in the form below. It's that easy!

Please read the rules before posting a comment.

You have 4 comments remaining on this post.

Archives

Find us on Google+