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My anecdotal real estate observations
Posted on 2/1/11 at 11:00 am
Posted on 2/1/11 at 11:00 am
In the past 3 weeks, I've probably been inside 50 houses or so around Seattle. It's amazing how basically every house on the market is some kind of "situation" - i.e. bought high and now having to sell lower.
But the most remarkable thing is just how much money people put into things they already overpaid for. I would say 85% of houses we've seen had major, expensive work done - additions, renovations, upgrades, etc. And it struck me - hasn't that whole fake part of our GDP just been permanently lopped off (or at least put on sabbatical for 10 years or so)?
Think about the multiplier effect: person buys house with leverage, uses more leverage to put in expensive renovations, hires plumbers/electricians/carpenters/etc., spends a shitload of money at Home Depot, etc. etc.
The typical situation we are seeing is:
Borrower paid $X
Borrower put in an additional $.2X
House sits on the market at $.8X
But the most remarkable thing is just how much money people put into things they already overpaid for. I would say 85% of houses we've seen had major, expensive work done - additions, renovations, upgrades, etc. And it struck me - hasn't that whole fake part of our GDP just been permanently lopped off (or at least put on sabbatical for 10 years or so)?
Think about the multiplier effect: person buys house with leverage, uses more leverage to put in expensive renovations, hires plumbers/electricians/carpenters/etc., spends a shitload of money at Home Depot, etc. etc.
The typical situation we are seeing is:
Borrower paid $X
Borrower put in an additional $.2X
House sits on the market at $.8X
This post was edited on 2/1/11 at 11:01 am
4
Posted on 2/1/11 at 11:08 am to Tiger JJ
very interesting observation Jersey
even more so is that many of the people who are in a \"situation\" are there because they took out that home equity loan or line of credit in order to complete those renovations/additions which has just added to the problem
even more so is that many of the people who are in a \"situation\" are there because they took out that home equity loan or line of credit in order to complete those renovations/additions which has just added to the problem
Posted on 2/1/11 at 11:32 am to Shankopotomus
Here's the fact pattern for one we're pretty interested in:
Evidently, a young adult couple lived in a house starting like in 2001. They convinced the parents of one of them to buy the place as an "investment", fix it up real nice, and then of course spin it off into the infinite unicorn profits of real estate bubble world.
But of course they got caught. So now on a place that they paid $600K for and probably put in at least $400K, they have it on the market for $850K with very little prospect of getting over $750K for it. Take out commissions, fees and taxes on sale, and basically they net $700K if they're lucky. And they weren't rich to begin with. I think it was basically a lot of their retirement savings.
It's amazing what probably otherwise thinking adults were lured into. I guess that's why they call them manias.
Evidently, a young adult couple lived in a house starting like in 2001. They convinced the parents of one of them to buy the place as an "investment", fix it up real nice, and then of course spin it off into the infinite unicorn profits of real estate bubble world.
But of course they got caught. So now on a place that they paid $600K for and probably put in at least $400K, they have it on the market for $850K with very little prospect of getting over $750K for it. Take out commissions, fees and taxes on sale, and basically they net $700K if they're lucky. And they weren't rich to begin with. I think it was basically a lot of their retirement savings.
It's amazing what probably otherwise thinking adults were lured into. I guess that's why they call them manias.
Posted on 2/1/11 at 11:35 am to Tiger JJ
quote:
But of course they got caught. So now on a place that they paid $600K for and probably put in at least $400K, they have it on the market for $850K with very little prospect of getting over $750K for it. Take out commissions, fees and taxes on sale, and basically they net $700K if they're lucky. And they weren't rich to begin with. I think it was basically a lot of their retirement savings.
Were they carrying any sort of mortgage under this scenario, or did the parents fund the whole thing?
Posted on 2/1/11 at 11:40 am to Tiger JJ
A somewhat similar situation played out on my street a few years back.
Spoiled girl and new husband develop an irrational love affair with a newly renovated house on my street. Knowing there were other very interested buyers and that she HAD to have this house, she and new husband put in a bid above list price to get the house.
About a year later, spoiled girl's love affair with this house has subsided and she has her sights set on an even more expensive one. She brings in various realtors who all tell her that she is not going to get anything near what she thinks the house is worth.
Spoiled girl turns to daddy and convinces him to buy the house from her for the price she wants who apprently thinks he'll certainly break even if not make a profit.
This was 2 years ago and the house has gon on and off the market and has had 3 different sets of renters. He gave his daughter what was an inflated price even at the top of the bubble so I hope he lives long enough to break even.
Spoiled girl and new husband develop an irrational love affair with a newly renovated house on my street. Knowing there were other very interested buyers and that she HAD to have this house, she and new husband put in a bid above list price to get the house.
About a year later, spoiled girl's love affair with this house has subsided and she has her sights set on an even more expensive one. She brings in various realtors who all tell her that she is not going to get anything near what she thinks the house is worth.
Spoiled girl turns to daddy and convinces him to buy the house from her for the price she wants who apprently thinks he'll certainly break even if not make a profit.
This was 2 years ago and the house has gon on and off the market and has had 3 different sets of renters. He gave his daughter what was an inflated price even at the top of the bubble so I hope he lives long enough to break even.
This post was edited on 2/1/11 at 11:42 am
Posted on 2/1/11 at 11:45 am to Y.A. Tittle
I'm a sucker for the "Property Virgins" and similar first time homebuyer shows.
I saw one in Seattle of all places. A younger couple finally settled on a house they liked. Nothing wrong, right?
Well, the show does a shitty job of explaining what the monthly payment is for this new couple....they decided on the I/O option to make the monthly payment more affordable.
Then, in the 30 second segment at the end showing them in their new home...they were showing off the brand new deck built in the backyard complete with 6-8 person hot tub.
I hope those retards are bankrupt now.
I saw one in Seattle of all places. A younger couple finally settled on a house they liked. Nothing wrong, right?
Well, the show does a shitty job of explaining what the monthly payment is for this new couple....they decided on the I/O option to make the monthly payment more affordable.
Then, in the 30 second segment at the end showing them in their new home...they were showing off the brand new deck built in the backyard complete with 6-8 person hot tub.
I hope those retards are bankrupt now.
Posted on 2/1/11 at 11:46 am to Tiger JJ
quote:
And it struck me - hasn't that whole fake part of our GDP just been permanently lopped off (or at least put on sabbatical for 10 years or so)?
Think about the multiplier effect: person buys house with leverage, uses more leverage to put in expensive renovations, hires plumbers/electricians/carpenters/etc., spends a shitload of money at Home Depot, etc. etc.
You could think of it that way or realize GDP was at false levels with Greenspan at the helm going back to ~ 2002 and son of Greenspan hasn't been any better.
Posted on 2/1/11 at 11:47 am to Martavius
Well that spoiled girls daddy is just plain bad with his $$$ IMO
Posted on 2/1/11 at 11:53 am to Shankopotomus
He certainly can't say no to his little angel, that's for sure. It certainly explains why she was such a snooty kernt.
No one was sad to see her go.
No one was sad to see her go.
Posted on 2/1/11 at 11:53 am to Tiger JJ
quote:
In the past 3 weeks, I've probably been inside 50 ho's or so around Seattle.
This story would have been much cooler if it had started like this.
Posted on 2/1/11 at 11:56 am to stevo1a
quote:
In the past 3 weeks, I've probably been inside 50 ho's or so around Seattle.
This story would have been much cooler if it had started like this.
Terrifically unfunny.
Posted on 2/1/11 at 12:08 pm to Martavius
quote:
Spoiled girl turns to daddy and convinces him to buy the house from her for the price she wants who apprently thinks he'll certainly break even if not make a profit.
This was 2 years ago and the house has gon on and off the market and has had 3 different sets of renters. He gave his daughter what was an inflated price even at the top of the bubble so I hope he lives long enough to break even.
Where? Link to the listing?
Posted on 2/1/11 at 12:14 pm to stevo1a
the OT is a few boards up, buddy
Posted on 2/1/11 at 12:15 pm to Y.A. Tittle
quote:
Where? Link to the listing?
It's not listed currently. He's trying to find new renters again.
This post was edited on 2/1/11 at 12:16 pm
Posted on 2/1/11 at 12:19 pm to Tiger JJ
BECAUSE HOUSING PRICES WERE ALWAYS GOING TO GO UP!!
Posted on 2/1/11 at 12:44 pm to Tiger JJ
quote:
And they weren't rich to begin with. I think it was basically a lot of their retirement savings.
what we've seen here is a lot of these cases were the income was based on high-commission sales jobs, which were hammered the past couple of years and don't exist any more. And the guy making the money was really un-employable otherwise, outside of a full-commission gig at a 2nd tier company. I have a buddy at Cisco who knew guys in NYC making upper 6 figures, with a very small number of accounts (even 1 in some cases) who went right back to their <100K base when the bottom fell out.
Posted on 2/1/11 at 12:52 pm to Tiger JJ
quote:I seriously doubt that. It's never been "lopped" off before now in my memory, including the 1981-82 recession. People will still move up, move out of apartments, sell their condos, etc. and they always want to put their scent on their new digs. It's human nature.
hasn't that whole fake part of our GDP just been permanently lopped off (or at least put on sabbatical for 10 years or so)?
Posted on 2/1/11 at 12:54 pm to LSURussian
quote:
I seriously doubt that. It's never been "lopped" off before now in my memory, including the 1981-82 recession. People will still move up, move out of apartments, sell their condos, etc. and they always want to put their scent on their new digs. It's human nature.
Sure, there's always going to at least be some activity at the margin. But HELOC's are much harder to get now and pay has gone down. How does that not kill a substantial percentage of all that sugar high from the bubble?
Posted on 2/1/11 at 12:55 pm to Y.A. Tittle
quote:
Were they carrying any sort of mortgage under this scenario, or did the parents fund the whole thing?
I think the mortgage is only like $350K.
Posted on 2/1/11 at 1:00 pm to Tiger JJ
quote:.....does not equal...
How does that not kill a substantial percentage of all that sugar high from the bubble?
quote:
just been permanently lopped off (or at least put on sabbatical for 10 years or so)?
I think HD's stock price accurately reflects any diminished home improvement activity. It's about 10% under where it was in 2007.
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