Atlanta Metro News

November 2009
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By maxmoose03

November 22, 2006 06:57 PM | Link to this

Good blurb.

Folks, please READ the above before you argue with me. I don’t make the news.

It’s just agreeing more each day with what I have posted on these blogs for weeks. :-)

By ...

November 22, 2006 08:15 PM | Link to this

Maxmoose, we know you are a cheerleader :-)

And we know you’re doing damage control so that people don’t think that the market is too bad and they will start buying again.

So as long as we know where you come from, it’s all good…

By maxmoose

November 22, 2006 08:38 PM | Link to this

Mr. Dots, I am interested in knowing your interpretation of Jeff’s last blurb, in which the NAHB states that prices in South Florida are actually UP this year, not down.

How do you suppose they made such an egregious error? Is it a conspiracy? Do I have them in my back pocket, or vice-verse?

After all, I know from the wisdom you have manifested on the blog that prices are down at least 200% this year.

How do you explain it?

By ...

November 22, 2006 09:24 PM | Link to this

I am not interested in conversing with you, Mr. Maxmoose.

Feel free to interpret this as my humble acceptance of your striking intellectual abilities, if that makes you feel better.

By maxmoose03

November 22, 2006 09:42 PM | Link to this

You initiated the converstion, I merely responded out of politeness.

It appears I’m dealing with a ditz intstead of dots.

By DOI

November 22, 2006 09:54 PM | Link to this

The RE gains experienced during 2004-5 was GREED-DRIVEN. Plainly, lay people caught on that throughout 2000-4 RE underwent a steady fundementals-driven expansion and decided to cash-in. Many other dynamics happened,which cannot fit in here.

By INTERNET MADAM

November 22, 2006 09:56 PM | Link to this

Max I followed you all the way to this blog just to say wow I’d like to meet you. Are you single Max? You are all what you say you are because I know someone with almost the same exact background which you posted. You are for real allright.

You excite me Max. Here I am taking a break from the kitchen, smelling my pumpkin pies baking in the oven and decided to get some entertainment and what do I find but the man of my dreams writing here. Have my soft Christmas jazz music playing in the background and wow there you are. But before I go on dreaming anymore about you, tell me please if you are single. Contrary to what Rich R will say about me, I do have my ethics. If you are married, your wife is a very lucky woman. I do have a special someone but he nows lives in Palm Springs. You might say Max that this real estate market has separated many happy couples who are looking to be reunited again, whenever this market turns around. That is the real toll of the 2006 real estate market for people still here during the holidays. There are so many unhappy couples this holiday season who will not be spending the holidays together. For all those couples separated and not celebrating the holidays united due to real estate market slowdown, let’s hope 2007 will bring them together again. Cheers.

By maxmoose03

November 22, 2006 11:56 PM | Link to this

MADAM: Do you know me? Maybe you know the guy whose profile I copied. Writing operating systems? Gee, he sounds like a barrel of laughs.

Unfortunately, my dear, I only date quadrupeds, and I gather that you are a biped. Besides, my antlers would probably knock over your Christmas tree.

Besides, you are apparently well known to the blogging community, and I daresay some are watching with great glee to see how this adventure unfolds. Let’s give them nothing to talk about.

I am not sure what the real estate market has to do with couples being separated — can you fill me in on this?

Meantime, thank you for your kindness, especially on a day when I have repeatedly had to deal with generation-Y nitwits, who think making a show of their poverty, their stupidity, and their ignorance is “playin’ with ya, man.” :-)

On a down note: does today’s date mean anything to anyone but me?

By TANC

November 23, 2006 05:47 AM | Link to this

IMHO Professor Snaith is simply describing the “degree” to which housing values in Florida will drop. He states that he believes prices may fall more in 2006 and even in 2007 as inventory is worked off. He takes issue with the word “Bubble” as he believes that a 10 to 20% drop is not indicative of a bubble bursting (using the dot.com analogy).

If you’re a new homeowner who had the unfortunate luck of buying at the top, a 10 to 20% drop will feel like a bubble bursting. Especially if it is eroding all of the equity you have or puts you upside down. Upside down is not a very comfortable place to be and unfortunately many people are there now. Couple that with excessive insurance increases and RE taxes rising signficantly after you’ve bought and you won’t be feeling very good about things.

I would be highly suspicious of any report from the NAHB or NAR that says prices in SFL are UP this year. It simply flies in the face of reality. Perhaps there are micro-geographic pockets where values have risen but overall…I don’t think so. All anecdotal evidence I see in the market shows that prices are DOWN.

I do take issue with the prediction from the professor that mortgage rates will increase to near 7.50% in the next few years (in the report). I believe rates will stay under 7% and may even dip under 6% (they’re almost there now). That will help buffer the blow a bit.

All this being said, I don’t believe we’re in a bubble and things will come crashing down. I do believe we are in a slow period of downward adjustments to prices that will finish playing itself out throughout 2007 as sellers finally wake up and smell the coffee. Will it be 20%? 10%? 5%?

No one really knows but I don’t believe it will be the extremely dour predictions of some. I hope I’m not wrong about that.

By TANC

November 23, 2006 05:52 AM | Link to this

Oh, and maxmoose, I believe the meaningfullness of Nov 22nd is the anniversary (bad word) of the assassination of Pres. Kennedy in the early 60’s. I think I was 4 at the time and I still sort of remember the shock of it all when we heard. A sad day indeed…

Today, however, it’s time to be thankful for all we have, and get down to some serious eating activities. I’ll be working out extra heavy the next few days!

By TANC

November 23, 2006 05:53 AM | Link to this

CORRECTION:

“He states that he believes prices may fall more in 2006 and even in 2007 as inventory is worked off.” SHOULD BE 2007 and 2008 for the years in question.

By maxmoose03

November 23, 2006 08:25 AM | Link to this

The dog has me awake again at 7:30 AM. He’s history. Dogburgers. If anyone wants a sweet but hyperactive purebred chocolate lab, let me know ASAP — must have a gentle family environment.

TANC - They say everyone remembers where they were when they heard JFK was assassinated, and I am no exception. A very sad reminder, but coming on the heels of a day of celebration, so I won’t dwell on it.

In view of the fact that today IS Thanksgiving, maybe everyone will stop groaning about their house values for a day, and be thankful to whatever they choose to be thankful to, for living in one of the most beautiful places in the greatest nation on earth. This country survived genocide of its native peoples, slavery, and civil war, only to learn from its mistakes and evolve “a more perfect union.” Similarly shall we survive the current Bush Administration, one the darkest and most despicable chapters of American history, although not without consequences for decades to come.

In our persistent neurotic preoccupatioon with statistics, we are implicitly striving to find a way to make the housing market more like the stock market, so that we could assign a value to each house every day. Hey, new Publix opening up a block away, my house up $1000 today. Uh oh, registered sex offender moving nearby, house down $5000 today.

TANC, this is why I must take issue with you when you say:

“If you’re a new homeowner who had the unfortunate luck of buying at the top, a 10 to 20% drop will feel like a bubble bursting.”

If you are not a flipper, and buy a house to create a homne for your familly for a number of years, why are you even thinking about what the value is? Why are you trying to put a daily or monthly price ticket on it? This neurotic insistence on knowing the price every minute is something our parents’ generation escaped, as well as most or all generations before them. One thing I will be thankful for today is that we don’t have the technique for doing this yet, although it is coming uncomfortably close.

I also have a problem with:

” All anecdotal evidence I see in the market shows that prices are DOWN.”

Exactly why everyone believes the market is diving. You, my friend, choose to believe the statistics when they say that prices are down, but only anecdotal evidence when they say prices are up. You can’t have it both ways, sorry.

The simple fact is that the costs of both materials and labor are soaring, the dollar is dropping, and there is simply no way to price an equivalent new home today at the same price as a year ago, - it’s impossible. Fundamental accounting principles match costs and revenues.

Does that mean homebuilders are doomed? Take a look at the recent performance of the homebuilding stocks and mutual funds on Wall Street, and see if the financial world thinks there will be a problem on Main Street.

Thanks for writing so prolifically, TANC. Happy Thanksgiving to you and all my neighbors in PBC and everywhere.

By maxmoose03

November 23, 2006 08:52 AM | Link to this

BTW TANC: There is nothing suspicious about that NAHB report — in fact it serves to confirm the earlier Association of Realtors report which you did not question.

The Realtor report foes from 3Q 05 to 3Q 06, whereas the NAHB report goes from 1Q 06 to 3Q 06. The Realtor report splits out single family houses from condos, and finds a 5% drop in prices for single family houses, but a 16% rise in condo prices. The NAHB report throws them all in one big pot and comes up with something like a 3% rise overall.

16% rise in condo prices, yet people have the impression the market is falling. I know in the buildings that I follow unit by unit, that 16% rise is for real.

Sorry if I am not always clear in which report I am referring to. I hope this clears it up.

As I said at the beginning of this little blogging adventure weeks ago, I am waiting to see what the season brings, especially in January and February. Moose may be a bit slow, but with a 16% rise in the condo market this year, I really don’t see the horrific crash we are supposedly experiencing.

By Econ 101

November 23, 2006 10:31 AM | Link to this

Wrong again Max, construction materials are tanking see this http://www.nahb.org/generic.aspx?genericContentID=527

By TANC

November 23, 2006 11:14 AM | Link to this

When I referred to anectdotal evidence I should have been more clear.

I am a mortgage banker, have my MBA and BS in Finance and have been in banking/financial services/mortgage banking for 28 yrs. I had my best year ever in the business in 2005 and my business is down 65% in 2006. For the first time in as long as I can remember, appraisals are not coming in at expectations. Some Realtors I work with and know are getting second jobs. Title company reps are getting laid off, hours reduced, and health benefits taken away.

You’re right maxmoose in that homeowners shouldn’t be so worried about values if they are living in the home as a primary residence and think they will be there for awhile. Human nature takes over, however, unless you are wealthy enough that it doesn’t really matter. This does not apply to most people.

When you know your value is way down (especially if it happens just after you purchased), you feel worse about it. You perhaps spend less money in the stores, go out to eat less often, etc. etc. Also, the average person owns a home only 7 years. In 7 years, if you’ve bought at the wrong time, you may or may not make up for the loss in value. You probably will, but, you may not. You wonder, you worry. It’s human nature.

As I said, I believe the market will not crash, but it will hurt for awhile. And, I also am suspicious of the NAR and FAR reports as well as the NAHB. I don’t have facts to back it up, just my experiences in the business.

I too anxiously await the “season”. It will no doubt be a harbinger.

Happy Thanksgiving to all…let the gastronomic festivities begin.

By maxmoose

November 23, 2006 01:08 PM | Link to this

Hmm..oh yeah.

ECON 101:

Leave it to a fool like you to quote board prices in a town where the buildings are made of concrete and steel. I don’t need a web page to tell me how much building costs are per square feet, I just call up the builder and ask how it’s going.

BTW: Why didn’t you point me to the article about the severe shortage of concrete, on the same website?

Kindly stop saying “wrong again” — since you haven’t shown me to be wrong about anything yet. (And don’t be a nit-wit and respond with “wrong again.”)

TANC - With the integrity you have shown on this board, I am hardly going to question your statements about your business.

I do know other MBB’s though, that claim to be enjoying a brisk re-fi trade.

For my part, I don’t get involved with loans too much for a simple but surprising reason: more than half the offers here (East Boca) are for cash.

Yes, the season will tell all of us what the story is, make geniuses of a few and liars of a few.

Meantime, you don’t need to count on any organizations’ numbers if you don’t trust them.
What I do is to follow all sales from specific buildings or subdivisions, getting the data directly from the property appraiser at www.pbcgov.com/papa

I sort the sales prices by date. I am finding no pattern of falling prices anywhere I look.

Enjoy!

By FL Rennaissance

November 23, 2006 04:10 PM | Link to this

Let’s go back to the Souffle analogy. If you were a saavy chef, having paid only 98 cents for a dozen eggs.. then through wisdom, sheer skill including lots of creativity and being in the proper location, whipped up an enticing 12 egg Souffle fetching a $10.99 brunch price tag. Am I stupid?? I think not! But neither is the purchaser who does not posess the nesessary culinary skills to prepare his own. Simply put do not blame the owners who have had the ability to buy right nor the renter who has not as yet wised up. The best time to buy a home has always been “5 years ago”. So it’s betterin the game before everyone else decides to do so once again! I am not a “cheerleader” nor do I really care if you ever learn your lesson, but you are welcome to eat in my restaurant anytime!

By TANC

November 23, 2006 11:58 PM | Link to this

As I sit here like a bellied up lion after the feast of the year, I begin to wonder when “season” will begin.

The weather was awesome today and looks to be getting better, and I hope it gets quite cold up North to spur on the buyers.

Waiting …and hoping.

By maxmoose03

November 24, 2006 01:08 AM | Link to this

TANC and everyone ….I hope your Thanksgiving day was as enjoyable as mine.

Speaking narrowly of condos in downtown Boca - which concern me most right now - February is usually the month when they pop, although in 2006 it was January.

This is all backwards, however, and what I really want now is to find renters. I should be buying now. I want to avoid the familiar trap of selling when I should be buying (in a buyer’s market), then buying when I should be selling (in a seller’s market). That is probably the single most prevalent reason for people getting nowhere in the real estate or stock markets.

By Oscar De Low Renta

November 24, 2006 06:24 AM | Link to this

“I want to avoid the familiar trap of selling when I should be buying (in a buyer’s market)”

Buyer’s market? Nah. Buyer’s market will be in 2011. Prices will be much lower then. For all you buyer’s out there when the buyer’s market comes try not to haggle with the seller. When buying or selling you can hardly avoid sin. So, in either case, be sure you lose a little in the transaction.

By jupiterandthegardens.com

November 24, 2006 08:18 AM | Link to this

What most people don’t look at and should is that when prices are depressed buying a home can be a bargain as the taxes and insurance can be less.

By Oscar De Low Renta

November 24, 2006 08:24 AM | Link to this

“when prices are depressed buying a home can be a bargain”

I would rather be shackled to a funeral parlor.

By Econ 101

November 24, 2006 09:12 AM | Link to this

Max, facts are horrible things to you aren’t they? So you get your facts from the supplier. Man do I wish you were a customer of mine. So when you make a demonstrably false statement such as “construction prices are going up” you mean just for your builder buddy but not the nation at large? Have you ever taken a course in Economics? Do you understand we live in a nationwide or even a worldwide economy? Never mind I am trying to make a realtor cheerleader a critical thinker.

By maxmoose03

November 24, 2006 09:41 AM | Link to this

Oscar — Thank heaven for people like you. You are the people that allow the rest of us to acquire something in life, because you are willing to pay for it.

You will have nothing in life, because you are satisfied to give away 700 after-tax dollars a month or more for an apartment the size of my closet. The next time you have to sign a new lease, it may be over $1,000. My tenant pays $1,800 a month for a 1 bedroom, in a building you will never be able to afford to live in, and I am raisng that.

You will be running behind, living paycheck to paycheck your whole life, because you will never have any appreciating assets.

What is an appreciating asset? I will demonstrate for you. A few years ago , I had some money in a bank account. The account paid less than 5% interest, but let’s say 5 for simplicity’s sake. Then I noticed something odd. The bank’s stock was up a lot more than 5% for the year, and it was early in the year. So here’s what I did. I took my money out of the account, and I bought bank stock instead (actually FSRBX). The result? I made 50% on my money that year instead of 5. Since this was incomprehensible in my hippie view of the world, I asked a friend in banking to explain it. He said: “The bank depends on rubes like you to lend it money for almost nothing. Then the bank goes and invests in things that matter.”

Even stock though, isn’t enough. Levitt houses peddled to GI’s like my Dad returning from World War II were sold for $6,000. Go on realtor.com and see what a house in Levittown, NY sells for today. As I noted earlier, houses in my neighborhood that sold for $60,000 when I was a kid, are worth 4 to 5 million today. Not only have prices increased to 60 or 70 times their value in a working lifetime, these prices were typically leveraged with 80% LTV loans, so the profit on investment is something like 350 times their value, or 35,000 per cent. Today, people can leverage with 90, 95 or even 100% LTV. As a broker, I buy with nothing down, so I can’t even give you a per centage.

Prices go up in a year, they go down in a year. I have said before, it hardly matters. Those who lose a house to foreclosures aren’t hanged for it. My last client who lost a house to foreclosure - despite my best efforts, I’ll admit - responded by buying a 100-unit apartment building in Belle Glade. This is a guy from a background of no money, let me assure you.

So, this thanksgiving day, I hope we all give thanks for people like Oscar, who are grateful for being ripped off.
Oscar, I take the time to write this in the hope that you are a good guy, or a young kid, who just happens to have a terminal case of the stupids.

Talk to a CPA, talk to someone who can talk “turkey” to you. Otherwise the system will just “gobble” you up.

Ciao.

By maxmoose03

November 24, 2006 10:17 AM | Link to this

ECON 101 -

No, I don’t talk to suppliers, kindly learn to read.

You may go back and read some of my earlier posts on the effect that currency fluctuations in the global marketplace have on house prices.

I do not work as a realtor. I started a brokerage firm as a convenience to me. I hire and fire realtors for my firm, as a convenience to me. You clearly do not understand what the terms realtor, broker and salesperson mean.

I don’t mind arguing with a 20-something with 3 courses in economics and a job in Home Depot — but you really seem to be exceptionally stupid, and no better informed than Mr. De Low Ranter.

By Rebrowser

November 24, 2006 10:52 AM | Link to this

Just a few from listings on Palm Beach Post online :

VILLAGE OF NPB$355,000 JUST REDUCED, CHARMING 3 BEDROOM/2 BATHROOM HOME IN DESIRABLE NPB, OVERSIZED YARD, OVERSIZED DETACHED GARAGE, ATTACH CARPORT,ADD’L ROOM TO STORE BOAT. COMMUNITY OFFERS, PUBLIC DOCK, LIBRARY, POOL, GOLF.

4/3-pool, 100% updated, 1BR sep. entr or office, Reduced $392,500, 9744 Dahlia, Open Sun 1-4pm

VENETIAN ISLES DRASTICALLY REDUCED!! MOTIVATED SELLER!! THIS BEAUTIFUL HOME HAS THE THIRD BATHROOM WITHIN THE GUEST BEDROOM PROVIDING A MINI-SUITE FOR YOUR GUESTS AT THE OPPOSITE END OF THE HOME. HUGE EXPANDED & SCREENED PAVER PATIO OVERLOOKING A PRIVATE YARD.$399,000

$375,000 ReducedYou will be impressed! Complete Remodel in ‘05.3/2.5/2cg No HOA. New roof, windows, kit, baths flrs, pool. Corner lot. Motivated, 11885 Prosperity Farms Rd,

Historic Flamingo Park 718 Ardmore - $425,000 Bedrooms with 2 re-done baths! Where can you get a 3/2 at this price with no renovating necessary?! It even has a beautiful kitchen with granite counters and stainless appliances. THE OWNERS WANT TO SELL NOW! THE PRICE HAS JUST BEEN REDUCED AGAIN. They want offers on this truly crisp and tidy property.

Tons more houses and condos, all areas, reducing over and over. Just browse and see.

By Reduced

November 24, 2006 11:02 AM | Link to this

Historic Flamingo Park 718 Ardmore - $425,000 Bedrooms with 2 re-done baths! Where can you get a 3/2 at this price with no renovating necessary?! It even has a beautiful kitchen with granite counters and stainless appliances. THE OWNERS WANT TO SELL NOW! THE PRICE HAS JUST BEEN REDUCED AGAIN. They want offers on this truly crisp and tidy property.

Bear Island (WPB) 3/2/2 Price Reduced 50K! Lakefront & Gated Golf! Like New! Stainless Steel Appliances, Granite, New Carpet, etc. Motivated! $426,900

Motivated Seller ReducedTequesta Country Club Roomy 4/2/2, pool/spa, CBS, updated kit., Boat ramp, ocean access. Home Warr. $430K Mimi Delise

By maxmoose03

November 24, 2006 11:20 AM | Link to this

Guys, stop being such rubes.

When a realtor puts a listing in MLS, there’s a field called “OLP” -original list price, and it’s automatically maintained by the system. A savvy realtor COULD list the property at 90K or so above where he wants to be listed. He COULD leave it on MLS for a few days just in case there is some nut out there who is interested at that price. Then he COULD modify the listing and lower the asking price to where it was meant to be in the first place — and guess what: PRICE REDUCED. When the buyer’s broker goes to verify the price reduction, sure enough, doggone it — the OLP was what the seller claimed. Of course, an honest old moose like Max would NEVER condone such a practice. :-)

Guys, ignore the verbiage. Do your homework. Take the asking price and compare it to actual sales prices on www.pbcgov.com/papa

Trust me, there is no way you are going to beat a realtor at his own game, unless you do some serious homework.

By REbrowser

November 24, 2006 11:32 AM | Link to this

Pool of buyers sharply reduced as two tier RE tax system and Insurance Costs now more known about via national publications.

At same time, normal number of sellers competing to sell with other owners who are trying to sell as ticked off with new INS. Bills and Taxes, traffic, overbuilding, etc.

Do not need advanced degrees to see tough times ahead for sellers, just browse the listings.

Smaller pool of buyers, larger supply of “motivated” sellers .Some very nice places have been on the market for more than a year despite multiple price drops. Some sales, but no where near enough to offset huge inventory.There is other factor :those who want to sell, but not bothering to list yet in this market. They will eventually add to inventory if market does start moving, ensuring steady supply of “motivated” sellers.

By maxmoose03

November 24, 2006 11:55 AM | Link to this

REbrowser: Why don’t you try reading some of the voluminous material on this blog, instead of trying to reinvent the wheel?

Almost noon, time for all good moose to get out of bed. Have to go listem to Boca millionaires who want a $900,000 apt. for their kid, so he won’t have to live in a dorm while attending Lynn U. How worried do you suppose they are about the real estate tax, or thumb tax, or whatever tax?

By Reduced

November 24, 2006 12:00 PM | Link to this

3570 S OCEAN # 603, Palm Beach, FL 33480 Price Reduced: 08/30/06 — $479,000 to $449,000 Days on Market: 450 3520 S OCEAN # 206 VA, Palm Beach, FL 33480** Price Reduced: 09/21/06 — $540,000 to $499,000 Price Reduced: 10/30/06 — $499,000 to $479,000 2774 S OCEAN # 210, Palm Beach, FL 33480 Price Reduced: 08/31/06 — $595,000 to $550,000 Price Reduced: 11/12/06 — $550,000 to $499,000 3610 S OCEAN # 505, Palm Beach, FL 33480Price Reduced: 09/07/06 — $579,000 to $559,000 Days on Market: 263

By REbrowser

November 24, 2006 12:20 PM | Link to this

Rereading these and other blogs is not very flattering to spinners such as you. Go back as far as you want, cheerleaders touting “prices going up” endlessly.

Vast majority of properties in SOFl have gone down and still not sold despite your efforts at spin.

If anyone listened to cheerleaders advice over past two years, 8 out 10 would now have seen market value of home dropped significantly, yet still be paying Tax and Ins on higher price they paid.

good luck with the millionaires.

By maxmoose03

November 24, 2006 01:29 PM | Link to this

REbrowser:

“Vast majority of properties in SOFl have gone down “

If you bothered to read this newspaper — or even the blog topic introductions — you would know that condo prices are UP 16% since this time last year. If you don’t distinguish between houses and condos, those properties are UP 3% year to date.

Being poor and stupid, as you obviously are, is one thing. But when you continually spread false information because you are indifferent to finding out the truth, that militates heavily against your integrity as a person.

By Econ 101

November 24, 2006 01:34 PM | Link to this

Max tell us the truth? How many listings to you have right now? Your ad-hominem attacks reveal a rather immature personality. So my guess is you inherited a little money and were too good for college. So the only way you could make some money on your own was some house flipping maybe a realtor who is hurting pretty bad right now. “Currency fluctuations in the global marketplace” and the influence they “have on house prices” is a good one. I guess when your car breaks down you try to impress your girlfriend by saying the flux capacitor is broken!? Come-on if you want to play with the big boys make some good logical and concise arguments.

By Markmax33

November 24, 2006 01:40 PM | Link to this

MaxMoose, Explain this these points. I am real economist with real data from California, but Florida is has all of the same issues. The housing market is toast and will drop 30 at a minimum:

Long term interest rates have been relatively stable lately. The question is how does that impact the housing market and the house YOU want to buy? It really does not affect the housing market because 80% of the loans in the last 4 years were Adjustable Rate Mortgages (ARMs). 60% of the loans in the last 4 years were Interest Only ARMs. What you need to evaluate is the short-term interest rates over the past 4 years. I’m not sure this link works:

http://www.bankrate.com/brm/graphs/graph_trend.asp?tf=1800&ct=Line&prods=325,360&gs=480,320&st=zz&c3d=False&web=brm&cc=1&prodtype=M

(short terms rates are up from 4% to nearly 6% - A MAJOR increase - play with a loan calculator)

http://www.mortgage-calc.com/mortgage/simple.php

I know you may ask, I am planning to use a fixed-loan product why does this matter to me? It matters because if 80% of your neighbors used an ARM or refinanced with an ARM that their % rates will reset over the next 5 years. For example if 80% of your neighbors bought and had a 4.8% ARM and the reset period for that loan is 1, 3, or 5 years, their current interest rate would be around 6%. This is inevitably happening to ALL 80% of these people. Their loan reset on a 500k home would take them from a mortgage payment of ~$2600/month to nearly $3000/month. Realizing that most people bought with an ARM because they could not afford a 30-year fixed at the time an ~20% increase in mortgage is going to put a lot of these people in trouble.

Now on to the scary part. 60% (60% of your soon to be neighbors) of all of the loans in the past 4 years were Interest-Only ARMs. These people got the loan based on paying no principle for 1, 3, 5 or 7 years. Their mortgage payment is approximately ~ $1650/ month on a 500k loan and interest rate of 4.8%. This term lasts for 1, 3, 5 or 7 years. At the end of the introductory rate the person not only resets an interest rate from 4.8% to 6% BUT they have to pay the principle and it is amortized over a shorter period of time 29, 27, or 25 years typically. The long and the short of this is that the mortgage payment for these people will jump to around $3400/month, an increase of OVER 100%. I predict that at a minimum 50% of these people foreclose, which means 30% of the homes sold over the last 4 years will be foreclosed. The graphs above show that it is IMPOSSIBLE for these people not to have a major increase in mortgage payment with an order of magnitude of 50-100% increase. Remember that the MAJORITY of these people bought with an Interest Only loan or ARM because they could not afford the other loan to begin with. How can they stomach a 100% increase? They better get a big big big raise. These people will not be able to refinance either because they do not have the income to qualify for a 30-year fixed loan!!! Their mortgage payment is not locked!

Now imagine when all of these people start realizing they are screwed and put 0 money down to begin with. They are going to file for bankruptcy and foreclose in waves. It gets worse and worse as more neighbors foreclose because house values are dropping and will probably drop below the owed value of their loan to begin with. It is basically an avalanche waiting to happen.
Watch the skyrocketing foreclosure rates. They are up over 100% from last year and trend will continue and increase exponentially.

www.dqnews.com has foreclosure rates BUT the site hasn’t been up for a few days. You can Google news “California foreclosure rates”.

"But wait, the Fed said they were going to stop raising interest rates and maybe even lower them...!!!" Be very careful what you read. It took almost 2 years for long term interest rates to START rising after the Fed started raising short term interest rates. It is extremely difficult to say that they fed had much affect on these rates other than the fact you probably won't see a long term rate below a short term fed funds rate of 5.25%. % rates are somewhat dependent on the Fed but MUCH MORE dependent on other things. The short term interest rates rose as a direct cause of the increase of the fed funds rate. The Feds #1 concern is inflation. If inflation is not in check which is debatable at this point, they will NOT be cutting interest rates anytime soon. Remember, rates are still NEAR all-time lows and cutting rates weakens and already weak dollar and RAISES inflation.

The biggest question to ask is what happens to my loan after I purchase my home and what really controls interest rates?! Few people understand this concept. Mortgages get packaged together in lots of 100, 500 or 1000 and sold as a bond by Fanny Mae, Freddie Mac or the bank which originated the loan. Who buys these loans you may ask? The Chinese and Japanese purchase the majority of our homes loans because they are presumed to be VERY LOW RISK and keeping interest rates low helps keep the dollar strong and allows us to purchase more things from their country. The Japanese sell us electronics and the Chinese sell us everything including the kitchen sink. Imagine what happens if people begin to foreclose on their home loans? The basic premise that our loans are LOW RISK no longer holds true and the Japanese and Chinese will not buy our mortgage backed securities or they will demand a higher interest rate because of the increase risk! This is another part of the avalanche, if a few people start foreclosing interest rates tick upward which then triggers more people to foreclose and the cycle just multiplies. Another likely scenario is that the old lending standards of 20% down and financial checks will ACTUALLY be enforced again which will kill everyone trying to refinance or buy/speculate. Anyone with good credit and some cash is going to be sitting pretty.

"Housing is coming down" This is a very true statement. If you look at the history of California real estate in particular it is extremely volatile. It goes up a bunch it goes down a bunch. The good thing is that the housing market is not a very "liquid asset". This means houses can't be bought and sold over night or at the click of a mouse and that the transaction costs are HIGH ~6%. The affect on the market is that it is much more momentum driven. The turns are loooong as in years, the tops of cycles are looong as in years and the bottoms are looong as in years. You will know you are at the bottom of a cycle when you see no change in the market for 1-2 years. We dropped 8% last year and have a TON of crappy loans to deal with still, and everyone is priced out! Housing will drop for the next 5 years at ~8-12% per year. Condos will drop much more than houses.

"They aren't making any more land" They weren't making any more land in Japan when the real estate market went down 60% over 15 years (non-inflation adjusted)

"This is the best place to live, everyone wants to move here" GREAT!! Where is temperature on my mortgage application? The only thing that plays into your ability to buy a home is your income and your ability to acquire credit. Why were homes here the same ~price as everywhere else 5 years ago and for the prior 200 years? What changed over night...absolutely nothing! We just have a ton of speculators!!

PLEASE read this blog once a day:

http://thehousingbubbleblog.com/

Peer pressure - Everyone you know probably has made a ton of money in real estate and tells you it will never go down.  That's what I would say too if I had millions invested in something.  You know a market is overbought and due for a correction when the taxi cab driver, bathroom attendant, and McDonalds worker starts telling you about getting into real estate.  Follow the smart money and stay away while you can.  Warren Buffett the best investor in the world laughed at the southern California housing market and sold his house 2 years ago.  Follow the smart money!!

"The tax incentives are wonderful, I save soooo much money"  This is one of the biggest lies ever.  Few people really understand the tax incentives.  Lets do the math.

1 - You only receive a tax credit for the portion of the loan that you pay interest to someone else. This means if you are paying $25,000 per year and only $20,000 in interest you only can claim the $20,000 that you are giving away anyway. Additionally you do not get a 20k tax write off, you don’t get taxed on the 20k you are giving away to someone else. 2 - This means that if you are in the 37% tax bracket and pay 20k in interest that you get back 37% of the difference between your mortgage interest and the standard deduction = (20k - ~6500)*.37 = ~$5000 per year for paying 20k in interest to someone else!! 3 - Lets say you pay 40k per year in interest. You would get a write off of (40k - 6500)*.37 per year. Your net is about 12000 dollars per year of advantage for paying 40k in interest to someone else and having a 500,000 home loan. This tax write off decreases every year because you are paying less and less interest and the government increases your write off every year. Does that 12k really sounds like it is worth it in a decreasing home market? If your house drops 8% that year you already lose 40k . In fact that 40k drop probably covers rent pretty easily!!!

My plan is to save money like crazy and wait for the bottom and which point I won't need to take a large loan for the property AND I can refinance as rates drop.  Here is an old real estate adage, "Cash is King in a foreclose environment".  I would move to a place with cheaper rent and bankroll the money and buy CDs @ 5% or something like that.  It will pay off greatly in the end.  Just because the rest of the idiots jump off the bridge doesn't mean you have to follow them!

By Markmax33

November 24, 2006 01:43 PM | Link to this

Here is MaxMoose’s contact info for anyone who is interested.

Ingber, Joseph R maxmoose03@yahoo.com Technicity Inc. , (561) 866-5610 4400 N. Federal Hwy, Boca Raton, FL 33431

By REbrowser

November 24, 2006 01:55 PM | Link to this

mickeymouse03: Previous postings show listings on mkt for extensive time, not selling, despite good locations and large price drops . This dose of reality evidently struck a nerve.

Evidence of where prices are is easily found. Go to any open house this weekend.

Before Internet, which now allows access for all to sites like forsalebyowner, ziprealty, etc,etc, spinning of statistics by cheerleaders was easier.

Now, with THOUSANDS of SoFl listings, prices, and pleas to “bring all offers”, “must sell”,”owner anxious” readily viewable, you sound at best silly, at worst, pathetic.

Guess your Boca millionairs dont need to bother looking at online listings, lucky for you, hope the 900K apt deal went real well.

By Markmax33

November 24, 2006 02:11 PM | Link to this

His coworker and webiste:

http://bocahabitats.com/

By REbrowser

November 24, 2006 02:33 PM | Link to this

AMT is creeping down income scale. (never indexed for inflation) Wipes out most deductions, including State RE taxes. Excerpt from article at street.com : Families: Fight the AMT By Tracy Byrnes TheStreet.com Contributor 11/24/2006 9:58 AM EST AMT: A Time-Bomb “The Joint Committee on Taxation estimates that 3.8 million taxpayers will be hit with the AMT this tax season. And if the rules don’t change, roughly 30 million tax households will be paying AMT by 2010. That’s one in every three tax returns.

Currently, folks who have household earnings between $100,000 and $200,000, own a house in a state with high state taxes and have dependents are the biggest targets.”

By Econ 101

November 24, 2006 02:59 PM | Link to this

Dear Maximoose,

Sorry, I saw your website I don’t blame you for your anger now. Feel free to vent on this blog as it will be a good stress relief. By the way your kitchen in the boca house is about the size of my kids closet! Talk about the wrong side of a flip! Good luck to you.

By To Markmax03

November 24, 2006 03:07 PM | Link to this

To: Markmax03

Why would you disclose somebody’s personal information like that!

Everybody has their own opinions on the real estate market. That’s what makes the blog interesting and fun.

We have many rivals here such as Easy, Rich R, and others. Most of us have a good sense of humor. Obviously, You don’t!

Obviously, You couldn’t handle his heat!

Very CHILDISH, IMMATURE, AND TRULY UNPROFESSIONAL!

Maxmoose03, I enjoy your posts. Keep up the good work. It’s very informative.

“What happens in the blog stays in the blog”

No need to get personal and get co-workers involved.

By ReBrowser

November 24, 2006 03:08 PM | Link to this

By maxmoose03 : “I know in the buildings that I follow unit by unit, that 16% rise is for real”

Can you give hint on where the buildings with 16% rise in SELLING price are ?

Other postings citing condo price drops by address, apt no. and prices and reductions :

3570 S OCEAN # 603, Palm Beach, FL 33480 Price Reduced: 08/30/06 — $479,000 to $449,000 Days on Market: 450

3520 S OCEAN # 206 VA, Palm Beach, FL 33480** Price Reduced: 09/21/06 — $540,000 to $499,000 Price Reduced: 10/30/06 — $499,000 to $479,000

2774 S OCEAN # 210, Palm Beach, FL 33480 Price Reduced: 08/31/06 — $595,000 to $550,000 Price Reduced: 11/12/06 — $550,000 to $499,000

3610 S OCEAN # 505, Palm Beach, FL 33480Price Reduced: 09/07/06 — $579,000 to $559,000 Days on Market: 263

By A.B.R. SYNDROME

November 24, 2006 03:32 PM | Link to this

Markmax:

You’re suffering from A.B.R. syndrome.

A.B.R. is the medical terminlology describing ANOTHER BITTER RENTER.

Ask Mike fink, he’s familiar with the illness.

The only cure is being a homeowner. Something you’re not.

By TANC

November 24, 2006 03:41 PM | Link to this

Markmax33,

I don’t profess to be a “real economist”, but I am a mortgage banker with many yrs of experience, and I take issue with your statements.

The statistic you give that 80% of the mortgage loans originated in the last 4 yrs were ARM’s is just plain wrong and especially in Florida. Certainly the percentage of ARM’s in California where the Median Priced Home is so, so much higher and harder to afford is higher. But in Florida, which is what is relevant to this blog, the number is far less than a third of that AND, Interest Only Loans did not account for 60% of the loans (even in Calif.). They may have acounted for 60% of the realistic number of ARM’s (in Calif), but no way 48% of all loans (80% X 60%). No way. Where do you get these numbers from?

Yes, long term interest rates have been stable for awhile now, and the way it impacts the housing market is significant. The spread between ARM rates and Fixed Rates has narrowed to virtually zilch thereby making it more sensible to get the fixed rate which creates less volatility, more certainty for the borrower, and thereby less risk for a homeowner. This certainly has an impact.

AND, evaluating short term interest rates over the last 4 years doesn’t provide you with that much useful information for the future. It’s history…done with…over with. The future is what matters and even “real economists” can’t predict the future with good success.

Now with stable fixed rates that are still pretty low historically, ARM holders should seriously consider refinancing into a fixed rate.

The problem of course comes in if you were a borrower who took out the ARM because that was the only way you could afford the home to begin with. And, perhaps you put down too little and now you’re value isn’t there anymore. If you did that, well, you knew what you were getting yourself into to begin with. No crying allowed now. The basic tenet of finance is the concept of Risk and Return. Investors(borrowers)will not realistically take on more risk (an ARM) without the prospect for a better return (lower rate and payment). But, there is RISK you must be willing to accept.

By TANC

November 24, 2006 03:51 PM | Link to this

And by the way, I am not a “cheerleader” either. I don’t believe maxmoose’s prices rising statement either as I believe we are in for some more hurt here in SFL as well. But, I don’t think we’re crashing. We’re adjusting to a new reality that will certainly include prices perhaps 10% lower within the next year (in general) as we work of huge inventory.

And putting someone’s personal info on here like that is ridiculous. What’s the point?

Personal opinions about the market are what’s important here, not childish words left better for the playground back in 4th grade. That goes for everyone on this blog.

By TANC

November 24, 2006 04:22 PM | Link to this

Further rantings…

Markmax33’s tax discussion coming under scrutiny.

“1 - You only receive a tax credit for the portion of the loan that you pay interest to someone else.”

That is a tax deduction my friend, not a tax credit. Big difference (it appears you recognize this later on).

“This means if you are paying $25,000 per year and only $20,000 in interest you only can claim the $20,000 that you are giving away anyway. Additionally you do not get a 20k tax write off, you don’t get taxed on the 20k you are giving away to someone else.”

Sorry, but I’m completely lost here. Is it a tax deduction or not?

“2 - This means that if you are in the 37% tax bracket and pay 20k in interest that you get back 37% of the difference between your mortgage interest and the standard deduction = (20k - ~6500)*.37 = ~$5000 per year for paying 20k in interest to someone else!!

Wait a minute…I think I get what you’re trying to say here, but in fact you do get a tax deduction for the whole amount. If your standard deduction is $6500 and you only have $6499 in write offs, you deduct $6500 saving 37% of that number. If your interest deduction is $20,000, far exceeding your standard deduction than you’ll itemize which will get you $20,000 X 37% in tax savings NOT $20,000 minus $6500 X 37%. Now, your “incremental savings” (there’s an economic word for you) is how you describe it, but you save the same amount of taxes either way on that first $6500 and the entire $20,000. Right? It’s not either/or.

“3 - Lets say you pay 40k per year in interest. You would get a write off of (40k - 6500)*.37 per year. Your net is about 12000 dollars per year of advantage for paying 40k in interest to someone else and having a 500,000 home loan. This tax write off decreases every year because you are paying less and less interest and the government increases your write off every year. Does that 12k really sounds like it is worth it in a decreasing home market? If your house drops 8% that year you already lose 40k . In fact that 40k drop probably covers rent pretty easily!!!”

First of all, you don’t lose anything unless you sell. Not a penny. And, you are also building some equity (assuming no interest only minimum payments of course - refer to previous post on this).

Also, don’t forget, you also get to deduct your annual real estate taxes on the property as well as your mortgage interest. Don’t forget that significant number.

Oh, and please let me know when the bottom is since you seem to know when it will be. If you can predict that with accuracy you should be a rich man.

By maxmoose03

November 24, 2006 04:31 PM | Link to this

wow…I missed a lot of fun.

Mr. Economist: I don’t mean this in a derogatory way, and perhaps the fault is mine, but I can not for the life of me follow your English. I’m sorry, but I have no idea of what you are trying to say. English is not my native language, so maybe, as I say, the fault is mine. I caught something about a 30% drop coming. Are you willing to stake your professional reputation on this? Will you inform all your future potential employers of your prediction, and the outcome?

To “To MarkMax” and others: Thank you for saying the obvious about MarkMax: he is an infant who can not play by the rules that adults implicity understand. Wounded, as he was, by commentary on this blog, he set to strike out personally. All he is going to accomplish is annoying my friend from whom I borrowed an email address. I am aware of one thing he mentioned, not of the others.
What is important, though, is his malicious intent. I think everyone now knows everything they need to about MarkMax :-)

Now, HE does sound like a starving realtor.

BTW: I am not 100% sure about this, but I think the address he gave is actually Lenson Realty. Can anyone verify this?

By AMTquestion

November 24, 2006 04:33 PM | Link to this

Anyone willing to take shot at AMT mentioned earlier ? As far as I can tell State RE taxes and some other deductions fazed out if family income certain amt. ? either way more and more families are going to have to get answer or risk penalties for not doing AMT ?

By Markmax33

November 24, 2006 04:37 PM | Link to this

TANC, You could only read part of my email so let me just clarify the points you are wrong about WITH PROOF:

Let me quote something from your neck of the woods on the ARM usage:

http://www.palmbeachpost.com/business/content/business/epaper/2006/11/08/a1d_foreclosures1108.html

Not less than 1/2 of the people that bought on these exotic loans including ALL OF YOUR NEIGHBORS who recently bought will forclose. I can get more quotes on ARM usage The San Diego Tribune and DQNEWS.com regular quote the 80% ARMs figure and 60% Interest Only loan figure. It is fact and it is fact in your town too, probably to a slightly less extent.
2. Open this link and tell me how on God’s green earth someone who got an interest only loan at 4% 2 years ago can maintain a 4% and how their mortgage payment will not DOUBLE. Do the math:

http://www.bankrate.com/brm/graphs/graph_trend.asp?tf=1800&ct=Line&prods=325,360&gs=480,320&st=zz&c3d=False&web=brm&cc=1&prodtype=M

You are ABSOLOUTLY incorrect about the loan spreads from 2-3 years ago. That graph proves it.
Any other economic rookies that want to take me to the test? I will destroy your argument with facts and data in a heartbeat.

By Markmax33

November 24, 2006 04:38 PM | Link to this

As for my inclusion of his personal information, he should not spout off about something and spread bad press if he isn’t proud of it. Without credability a blog is nothing. He obviously has none.

By Markmax33

November 24, 2006 04:48 PM | Link to this

TANC, Let me correct you yet again. Everyone gets the standard deduction so your benefit over someone renting is 20k-~6500. Do the math it is simple. You may also get to write off thousands of dollars in tax payments, but you are probably paying AT LEAST that much in HOA fees, maintenance, etc. That means there is 0 benefit there.

The point you are CLEARLY missing is that the majority of people will be FORCED to sell because of the crappy loans. The more that sell, the further the market is under water and the avalanche begins. Don’t you see it??

As for my prediction, it is always hard to say what the government will do which will have a significant effect on the outcome BUT you will know there is a bottom when:

The medium income can afford a home again with the interest rates at that time.
The bad loans are all out of the system (atleast 5 years away)
The majority of realtors go find another job
It is not “cool” to be in real estate.
Fannie Mae and Freddie Mac go broke.

P.S. I am an EXTREMELY PROUD RENTER right now!! I live 3 blocks from the beach in an awesome house and $450/month and I am BANKROLLING $$ so I can buy 3 properties! IT IS COOL TO RENT!!

By Markmax33

November 24, 2006 04:52 PM | Link to this

TANC, Historically low interest don’t mean a THING. The only thing that matters is what these people with 4% are going to do when they were already stretched to their limit! The only thing that matters is the realative interest rate compared to the peak of this bubble. That is going to be what makes history.

By Markmax33

November 24, 2006 04:54 PM | Link to this

"This is the best place to live, everyone wants to move here"  GREAT!!  Where is temperature on my mortgage application?  The only thing that plays into your ability to buy a home is your income and your ability to acquire credit.  Why were homes here the same ~price as everywhere else 5 years ago and for the prior 200 years?  What changed over night...absolutely nothing!  We just have a ton of speculators!!

By Markmax33

November 24, 2006 04:56 PM | Link to this

“They aren’t making any more land” They weren’t making any more land in Japan when the real estate market went down 60% over 15 years (non-inflation adjusted)

By Markmax33

November 24, 2006 04:57 PM | Link to this

This is the best place to live, everyone wants to move here… GREAT!! Where is temperature on my mortgage application? The only thing that plays into your ability to buy a home is your income and your ability to acquire credit. Why were homes here the same ~price as everywhere else 5 years ago and for the prior 200 years? What changed over night…absolutely nothing! We just have a ton of speculators!!

By Markmax33

November 24, 2006 05:01 PM | Link to this

Long term interest rates have been relatively stable lately. The question is how does that impact the housing market and the house YOU want to buy? It really does not affect the housing market because 80% of the loans in the last 4 years were Adjustable Rate Mortgages (ARMs). 60% of the loans in the last 4 years were Interest Only ARMs. What you need to evaluate is the short-term interest rates over the past 4 years. I’m not sure this link works: