Is this a sign that we may be reaching a bottom in the realestate mrkt?

NumbersUsacom

<< <i>Tighter lending standards were to be expected, the Fed chairman said. But the “pendulum has probably swung too far the other way,” he added. Now, lending rules are “too tight for the health of the economy. >>



If Ben is now telling congress and the Banks that your being to tight, lets loosen up the standards, then are we to take that that as a call to start the engines, the race is now
about to comence?

Or is he just blowing smoke in the open air, and he won't get any traction?

Here is the preceding paragraph to the one quoted above:


<< <i>Addressing an audience of more than 2,500 builders and allied professionals attending the National Association of Home Builders' annual convention here, Bernanke said the fact that many creditworthy borrowers have found it difficult to obtain financing has limited the impact of the steps the central bank has taken to put downward pressure on long-term interest rates. >>

secondrepublic

we're at the bottom and have been so for some time in many markets. that doesn't mean prices are going up anytime soon. however, it does mean that now is the time to buy. real estate is in the same kind of funk that PMs were in fifteen years ago.

derryb

What Ben means is this: "We created a financial crisis with easy credit so let's fix it by having more easy credit." Loans (especially variable loans) to buyers who could not really afford them (mortgage fraud on the part of both parties) were a big reason for the 08-09 financial crisis. It helped to create the real estate bubble. Until excess debt is removed from the system, the economy can not heal. More excess debt is not the answer.

Real estate will go a good bit lower before it every makes any substantial move upward.

MsMorrisine

As soon as Lehman imploded people tightened up.

And even as things recovered, they remained tight.


We've known they have been tight for a while now. This is nothing new.

Tied into this is the whole "we can give the banks money but can't make them lend" thing.


Banks are tight and will be tight as long as there is something big to fear in the market. Right now it's sovreign debt and how low will the RE market go and how long will it remain soft.


So, for me, tightness is foreseen for sometime.

derryb

The FED itself is a primary reason the banks aren't lending. As long as the FED is giving a safer, better return to banks to keep the money - that the FED gave to the banks - on deposit with the FED, the banks will not lend.

Debt, both personal and sovereign is far too excessive. While it is improving on the personal level, it will continue to plague any hopes of recovery. Student loans, in the area of $1 rillion are the next busting bubble and now exceed all credit card debt. Unlike credit card debt, student loan debt is not erased by declaring bankruptcy. Also, note that well before the economic crisis that was fueled by debt occured, measures were taken by Washington to severely tighten bankruptcy laws. This itself is proof that they saw the coming crisis well before it transpired.

Three respected voices see some very tough times ahead

roadrunner

Ben is talking out the wrong side of his mouth on the FED not applying force to interest rates. Through the big banks they piled on another $80 TRILL in interest rate contracts last
year which certainly pushed both ends of the rate curve downward. There is no greater force that could have been applied. The cumulative total of IR contracts pushing down on
that curve is approx $900 QUAD world-wide. The FED hasn't played a role in that?

Baley

Saying "Real estate" or "the real estate market" is like saying "the weather" or "the climate"-- it means nothing without knowing where and when (and why)

And getting a reading off "the real estate market" from statistics heavily skewed by distressed sales in really bad locations means there are great deals in nice places

IMO, the bottom is already in for nice places. If prices are still falling someplace, chances are, it's comparatively not so nice a location, and there is still too much supply there.

57loaded

i don't see how building more new homes could help.

getting the last of shadow inventory "sold" would mean the bottom for me.

57loaded

i like to bump myself, too

here is some info from ZeroHedge

OldEastside

<< <i> Also, note that well before the economic crisis that was fueled by debt occured, measures were taken by Washington to severely tighten bankruptcy laws. This itself is proof that they saw the coming crisis well before it transpired.

Ya I remember that and recall thinking that with the banks giving out interest only loans like
candy at the barber shop, The bubbles gonna burst and scr#w alot of people. I also recall a
conversation with a home appraiser I was selling lumber to one day, and I asked him bluntly
do banks encourage you to pad your appraisals and he answered "ABSOLUTLY" and went on
that if he wanted to work that he had to play the game.

Steve

bronco2078

Nope its going to get worse according to this guy any rebound is more smoke and mirrors

extend and pretend come to an end

topstuf

Real estate is bought with borrowed money.
Loans need jobs.
Real estate is not coming back.

NumbersUsacom

<< <i>i like to bump myself, too

here is some info from ZeroHedge >>



Ouch! That report hurts. Enjoyed the Read, Thanks.

derryb

Is Housing An Attractive Investment?

streeter

<< <i>Real estate is bought with borrowed money.
Loans need jobs.
Real estate is not coming back >>



In the old days about 25% were all cash transactions.

Big projects now are all cash from stock exchange raised capital searching for yields with 10+ year horizons.

A fixer upper squalor? NAH
A well leased NNN, you betcha.

cohodk

Toll Brothers is seliing $500K+ houses and people are paying cash. People gotta live somewhere and the population is growing. This aint Japan. Real estate in many areas is already lower than the bottom. Opportunity is there for those who are not afraid.

NumbersUsacom

<< <i>Toll Brothers is seliing $500K+ houses and people are paying cash. People gotta live somewhere and the population is growing. This aint Japan. Real estate in many areas is already lower than the bottom. Opportunity is there for those who are not afraid. >>



Buying when its a little scarry at or near what looks to be a potential bottom is usually a good thing.

calleocho

I would think that hard assets such as real estate properties, land , guns , art works , coins etc would be fairly popular among most members here.

I think well connected, knowledgeable and well capitalized people can do well in real estate.

We have members here ( Weiss) who have done well in real estate before the boom, during the boom and even after the boom.

However, not everyone is cut out to deal with the stress that being a landlord can create.

Bad tenants, lousy condo fees, taxes, broken ac, appliances getting old etc.

streeter

One of the reasons I picked ESSEX is because I used to work with one of the founders and I know him to be one smart lad. George Marcus. Google him. Also Google Donald Bren and see what he's up to. Then come tell me Real estate if over.



WANNA get smart...go onto ESSEX website and study what they are buying.

Real Estate is not dead by any stretch. The rules are evolving.

derryb

"the expected bottom in house prices is pushed out from end-2012 to mid-2013."

GS delays housing bottom

streeter

DB,

Housing is geographical. North Dakota housing is not overbuilt. Possibly some of the Sunbelt areas are. GS is not who I would consider the go-to-guy for information when buying real estate. They need to feather their own nest and they are not on my team.

In most areas of the country, owning is less expensive than renting and rents are climbing. R3 starts are up dramatically the last two years and still rents are inching upwards.
Interest rates are low for owner occ and well located properties are available.

There are not tracts of empty homes avalable to investors like in recessions past. Apt owners are seeing rents climb.

The deal in RE was AG land about 2 years ago. People are going to drink milk and eat meat. Those cows need feed. If milk goes up, the feed went up first. The more money you get from your crops, the more the land is worth. People buy ag land all cash in a lot of cases. Safer than gold or money in the bank. With a good yield, you can double your land every 10 years and still be producing income in the tenth year. If gold or silver goes into orbit, so will the price of milk. So will the land that feeds those cows.

Baley

Yes, that all sounds very logical, but what if that reasonable point of view doesn't fit my world view that everything is going to hell, period, and therefore I'm stuck on "pessimistic no matter what setting" and the only thing in this whole world that's pure and good and right is GOLD?

derryb

<< <i>Housing is geographical. >>


So is employment. It's better in some areas than in others. Nationally, like real estate, it ain't gettin better. There's a reason the FED has promised near zero interest rates for a while. Those that choose to wear the rose colored glasses need to take them off. Don't listen to me, listen to PMs. They are telling you what you need to know about economic expectation.

Don't worry about the cows, Baley will feed them while he's worrying about gold.

roadrunner

Silver did go into orbit from 2001-2011. It's quite clear that milk did not. In fact it was one of the more stable dairy goods in terms of price.
I'll stick with silver if I'm looking for an orbital flight. Has the price of ag land increased 8X in price the past 10 yrs?

Spooly

Crop returns for a 10- year avg (some good year some bad years) is about 6%. That's why it's almost impossible to farm with borrowed money. (land mortgage)


I think land is a good investment.........mineral rights are even better!

streeter

Food
Shelter
Sex

In that order.


You can't eat silver or gold --last time I checked.

I like income more than looking at silver and gold metal in a SDB. Just my preference.

BTW, the only people buying silver at $35 are those that think it's going to $50. And the people buying it at $50 must think it's going higher. Sooner or later you'll run out of bigger fools. I hope everybody has a chair when the music stops. Silver is for people with a limited view of the investment world. It's fine if that's your game, I guess. If you have a fair size chunk of change, it's impractical. And where do you go with your profits? Into what, other metals? So you have to time the move. Good luck on that.

Most industrial users use a substitution theory rather than a bigger fool theory to make decisions. Silver has less and less industrial use as the price climbs. People I know don't use it for anything any longer. Welding shops don't even carry silver solder anymore. Special order even though it is only 30-40% silver, it's still $90.oz for the stuff. Too expensive to leave around unless it's under lock and key.

derryb

one can prepare for personal survival and one can prepare for financial survival. Two different animals requiring two different approaches.

Cakes

<< <i>Food
Shelter
Sex

In that order.


You can't eat silver or gold --last time I checked.

I like income more than looking at silver and gold metal in a SDB. Just my preference.

BTW, the only people buying silver at $35 are those that think it's going to $50. And the people buying it at $50 must think it's going higher. Sooner or later you'll run out of bigger fools. I hope everybody has a chair when the music stops. Silver is for people with a limited view of the investment world. It's fine if that's your game, I guess. If you have a fair size chunk of change, it's impractical. And where do you go with your profits? Into what, other metals? So you have to time the move. Good luck on that.

Most industrial users use a substitution theory rather than a bigger fool theory to make decisions. Silver has less and less industrial use as the price climbs. People I know don't use it for anything any longer. Welding shops don't even carry silver solder anymore. Special order even though it is only 30-40% silver, it's still $90.oz for the stuff. Too expensive to leave around unless it's under lock and key. >>




I have heard this quite a bit over the years and what I want to ask is when will the music stop streeter? Please take your best guestimate on this crash/correction?

jmski52

Streeter, it's undeniable. It is more satisfying and more fun to make money than to watch a precious metal investment go up simply because the dollar is going down.

Those businesses are steadily being winnoed out by bad policy, and that's the main problem. Everything tumbles downhill until it affects real estate. Now, we're there. The whole economy has to heal before real estate heals in real terms. At this point, it's all smoke & mirrors.

Having real estate is better than not having it, but there's a question in my mind whether or not it will yield a net profit in a few years. I think that nervous investment dollars will be scrambling all over the place, and there's really no sure bet to take.

NumbersUsacom

<< <i>
Most industrial users use a substitution theory rather than a bigger fool theory to make decisions. Silver has less and less industrial use as the price climbs. People I know don't use it for anything any longer. Welding shops don't even carry silver solder anymore. Special order even though it is only 30-40% silver, it's still $90.oz for the stuff. Too expensive to leave around unless it's under lock and key. >>



Streeter,
Check this out:Silver Usage

streeter

Numbers,
I read that. I don't have the knowledge to discuss his facts.

I do believe that as SILVER---an industrial metal----rises in price......substitutions will be found and the only driver will be people who are speculating and that may prove to be disastrous for the people who got on the train late in the game. Anyone can project where the train will crash. I'm leary after 10 year bull runs.

Remember, last year...all the people who jumped on the wagon late after $35-40 and were giddy as it approached $50?

I think there are better bets than silver after silver hits $35. I guess if you are buying small amounts periodically, it may be one of the better ways to climb the ladder. If you've got a few sheckels, silver is down the list of plays IMO.

While I rarely talk about what I do, I will admit that my preference right now is for certain coins that seem undervalued and I buy these with my Ebay profits. I have about $9,000 on ebay right now and my net on that stuff is about $4,500 and I will take about 1/3 of this amount and buy coins at what I consider attractive prices. There are several dealers in So. CAL. that IMO, don't grade properly and I can always shop them and find good value. A couple of people on this forum know my ebay venue and I am, luckily, having a fairly decent run right now.
Since I manufacture my own products, I almost never run out.

derryb

IMO buying currently undervalued silver bullion is less speculative than buying undervalued coins when viewed as investments.

NumbersUsacom

<< <i>Numbers,
I read that. I don't have the knowledge to discuss his facts.

I do believe that as SILVER---an industrial metal----rises in price......substitutions will be found and the only driver will be people who are speculating and that may prove to be disastrous for the people who got on the train late in the game. Anyone can project where the train will crash. I'm leary after 10 year bull runs.

Remember, last year...all the people who jumped on the wagon late after $35-40 and were giddy as it approached $50?

I think there are better bets than silver after silver hits $35. I guess if you are buying small amounts periodically, it may be one of the better ways to climb the ladder. If you've got a few sheckels, silver is down the list of plays IMO.

While I rarely talk about what I do, I will admit that my preference right now is for certain coins that seem undervalued and I buy these with my Ebay profits. I have about $9,000 on ebay right now and my net on that stuff is about $4,500 and I will take about 1/3 of this amount and buy coins at what I consider attractive prices. There are several dealers in So. CAL. that IMO, don't grade properly and I can always shop them and find good value. A couple of people on this forum know my ebay venue and I am, luckily, having a fairly decent run right now.
Since I manufacture my own products, I almost never run out. >>



Diversification is always good. Dave Wnuck of CRO on their "coin commentary" was asked a question regarding putting together an Coin Investment portfolio for a potential client,
one consisting of $25,000 and One at $250,000.00 He certainly diversified his selections and made it a well balanced Investment as well as aestheticaly pleasing.

Having some Silver, some Gold, Some Select Coins, Balanced Mutual fund, Adequate cash Savings, Investment Real Estate when the time is right, all of it is good in its own time.

streeter

OK, let's just suppose that the ultimate investment is GOLD AND SILVER. (It's not my ultimate)


What the hell do you do with it when it appreciates in value? The dollar didn't decline enough to warrant silver and gold going to the present numbers.

You can't eat it. You can't blank it. You can't live in it.

If you profit from it, how do you take your profits and what do you do with them? If those two metals double in price, Do you just stare at it in your SDB and feel good about them and ignore the general horrible condition of the economy/political landscape/ deteriorating USD/increasing US debtload/etc?

Or do you winnow the herd and do something constructive with the capital? Buying silver and gold helps no one, it's just a way to spend money. Now if you are a miner, that's another story.

My end game is RE that produces income. Gold and silver are a means to an end.

roadrunner

Last I checked you couldn't eat your home or car, or drink your oil either. And fwiw gold can be eaten, silver too. Both have uses inside the body that are still mysteries to us.

Buying silver and gold prior to 1971 (or prior to the 1933 gold ban) played a key role in economies. And that role was to keep in check proliferating paper money and debt while
keeping economies in the sweet spot of the boom/bust curve. Of course we tossed away that "outdated" feature in 1971. Bankers told us they could properly regulate the system on their own. So since 1971, rather than buying gold and silver when paper money and debt proliferated, people started buying stocks, real estate, land, and collectibles as a means of survival. Of course rising prices in those areas (except collectibles) is considered "good" and of economic benefit. At least that's what economists and bankers tell us.

Part of the problem with silver substitutes is that they tend to be more expensive metals such as gold, plat, pall, and rare earths. Silver is already near the bottom of the heap. And
corrosive copper, nickel, lead, tin, aluminum, and other base metals just don't cut it. If the periodic table could be shuffled to come up with an easy replacement for silver we'd already
be there. The supply/demand types say that more silver will be mined to make up the difference. And 10 yrs of rising silver prices has shown that doesn't happen either. Silver has a
huge list of important industrial uses that are continuing to grow. A cruise missile contains about 15 kilograms of silver (33 lbs). There is research going on in the medical field that
is suggesting gold plays a role in DNA. And silver's use as a disinfectant/biocide is well known. The US stockpile of silver is long gone including the 14,700 tons of silver used in the Manhattan project.

Baley

Last I checked you couldn't eat your home or car, or drink your oil either. And fwiw gold can be eaten, silver too.

had to quote it, before you decided to edit the ridiculous logic back out of your post

jmski52

This is a good discussion:

<<OK, let's just suppose that the ultimate investment is GOLD AND SILVER. (It's not my ultimate)

What the hell do you do with it when it appreciates in value?>>

I celebrate just a little.


<<The dollar didn't decline enough to warrant silver and gold going to the present numbers.>>

It usually doesn't, but there IS a strong inverse correlation.


<<You can't eat it. You can't blank it. You can't live in it.>>

True - but if you own gold & silver you can still do those things and owning gold & silver may be helpful in doing them.


<<If you profit from it, how do you take your profits and what do you do with them? If those two metals double in price, Do you just stare at it in your SDB and feel good about them and ignore the general horrible condition of the economy/political landscape/ deteriorating USD/increasing US debtload/etc?>>

They aren't profits until they are sold off. Until then, they are a solid form of security that can be helpful when you DO want to deploy the capital.

Regarding the general horrible condition of the economy etc. - my contribution to society is made every single day that I stay with my career. I contribute over and over as a producer. On the other hand - my financial security is definitely not society's business, but my financial security is paramount to me.


<<Or do you winnow the herd and do something constructive with the capital? Buying silver and gold helps no one, it's just a way to spend money. Now if you are a miner, that's another story. >>

My capital will probably be used after I retire, and regardless of how it's spent, that spending will help keep somebody employed, won't it? In my own case, buying land helped no one, it's not really productive farmland, and it was just a way to spend money on something that I enjoy - some open space and less traffic.


<<My end game is RE that produces income. Gold and silver are a means to an end.>>

And my end game is my career, which also produces income and is beneficial to society in general. Gold and silver aren't a means to an end for me - they are a store of value for the time when I will undoubtedly need it more than I do right now.

Fair enough?

streeter

<< <i>Last I checked you couldn't eat your home or car, or drink your oil either. And fwiw gold can be eaten, silver too.

had to quote it, before you decided to edit the ridiculous logic back out of your post >>



Thank you Baley. I am too busy to moniter the thread 24/7. The mind, it's a terrible thing to waste

fishcooker

Historically, land has had many years when it was not a good investment. How is it that today, land is "good" but a PM is "bad?" This thought process reminds me of y2k when gold was "bad" and stocks were "real investments."

cohodk

<< <i>Historically, land has had many years when it was not a good investment. How is it that today, land is "good" but a PM is "bad?" >>




The same way that today PMs are good and land is bad? Everything has cycles. Every dog, er asset class, has its day. PMs were certainly a better buy 10 years ago than today. Wouldnt you like to buy gold at the price it was 10 years ago? Well, in many areas you can buy real estate at the same price it was 10 years ago.

Baley

thought experiment:

Say you had 3 hypothetical asset classes that, over the past 50 years, have each averaged the same 10% annual return. (and, for the purposes of argument, have the same range of return from -50% to +50% per year, and the standard deviation among the various annual returns is also the same)

Question: For a NEW purchase with cash, to maximize your chances for a positive future return on the investment,

Would you choose the asset that has overperformed the average every year for the past 10 years, or the asset that has underperformed historical returns for the past 10 years?

Or would you choose the one that has performed exactly average over the past 10 years? And why??

derryb

Last I checked you couldn't eat your home or car, or drink your oil either. And fwiw gold can be eaten, silver too.

Can't eat dollars either but you need them to buy what you can eat. Everyone needs dollars, only the uninformed keep their savings in dollars.

OPA

<< <i>thought experiment:

Say you had 3 hypothetical asset classes that, over the past 50 years, have each averaged the same 10% annual return. (and, for the purposes of argument, have the same range of return from -50% to +50% per year, and the standard deviation among the various annual returns is also the same)

Question: For a NEW purchase with cash, to maximize your chances for a positive future return on the investment,

Would you choose the asset that has overperformed the average every year for the past 10 years, or the asset that has underperformed historical returns for the past 10 years?

Or would you choose the one that has performed exactly average over the past 10 years? And why?? >>



Since past performance is the only indicator in your scenario, I would choose the "over performed" asset. Because: "I don't look a gift horse in the mouth."

secondrepublic

<< <i>thought experiment:

Say you had 3 hypothetical asset classes that, over the past 50 years, have each averaged the same 10% annual return. (and, for the purposes of argument, have the same range of return from -50% to +50% per year, and the standard deviation among the various annual returns is also the same)

Question: For a NEW purchase with cash, to maximize your chances for a positive future return on the investment,

Would you choose the asset that has overperformed the average every year for the past 10 years, or the asset that has underperformed historical returns for the past 10 years?

Or would you choose the one that has performed exactly average over the past 10 years? And why?? >>



Generally I would pick the asset that has underperformed recently... which is why I've mostly invested in real estate the last 2 years... but I might also put some money in the asset that's outperformed the last 10 years -- like PMs -- if I feel there's a case to be made for doing so.

streeter

<< <i>

<< <i>Historically, land has had many years when it was not a good investment. How is it that today, land is "good" but a PM is "bad?" >>




The same way that today PMs are good and land is bad? Everything has cycles. Every dog, er asset class, has its day. PMs were certainly a better buy 10 years ago than today. Wouldnt you like to buy gold at the price it was 10 years ago? Well, in many areas you can buy real estate at the same price it was 10 years ago. >>



This about sums it up and I would go a little further.

Good agricultural land is NEVER out of fashion. People need to eat. If you have the chance to profit from a run in PM's...like from $5-35 on silver or $300-1700 on gold---that AG land is a splendid opportunity right now. The land may be expensive but I get chills when I see people not taking chips off the table after a ten year bull run on PM's and still listening to the barkers extrolling the virtues of PM's at this level.

I have learned the HARD WAY that when your assets are weighted more than 25% in any group...it's time to think about what you are doing and avoid the tulip mania syndrome. HARD WAY.

fishcooker

The same way that today PMs are good and land is bad? Everything has cycles. Every dog, er asset class, has its day.

No doubt. To assign moral/immoral, good/evil, etc. to various investments is remarkable, IMO.

jmski52

thought experiment:

Say you had 3 hypothetical asset classes that, over the past 50 years, have each averaged the same 10% annual return. (and, for the purposes of argument, have the same range of return from -50% to +50% per year, and the standard deviation among the various annual returns is also the same)

Question: For a NEW purchase with cash, to maximize your chances for a positive future return on the investment,

Would you choose the asset that has overperformed the average every year for the past 10 years, or the asset that has underperformed historical returns for the past 10 years?

Or would you choose the one that has performed exactly average over the past 10 years? And why??

Using your parameters, even though the investments are in totally different asset classes, your pick really doesn't matter. Does it?

And for that reason, I'll pick precious metals instead of real estate at this time.

Baley

Assume the 3 asset classes had correlation coefficient R= -0.67 where 1 is a perfect positive (same direction) correlation and -1 is perfect negative correlation.
A correlation of -0.67 would mean that the asset class values move in opposite direction usually but not always, and not always by the same amount.

My answer is to have all 3, and shift weightings periodically to rebalance (not necessarily equally weighted, proportions depend on market conditions) or leave alone and shift weightings by adding with new cash to underperforming assets with improving fundamentals. Like streeter, I tend to grow wary of extended bull runs in any given asset class, particularly when it loses momentum

derryb

Housing prices continue to decline

57loaded

and i've felt this is the reason

Baley

No doubt, that sucks if you're trying to sell real estate.

However, wouldn't the converse be true? It's ok if you DON'T plan on selling your current holdings in a weak market (ie, your property is not "distressed") , but instead you want to ADD to your holdings?

It does seem that an awful lot of folks like to buy high and higher, and sell low and lower. Not sure why, might have something to do with emotions.