All Forum Posts by: Doug N.

@Russell BrazilAwesome... that's real data, perhaps the kind some posters are looking for! Thanks!

 I am really wishing for a 'multiple votes' button on the forums, or perhaps a 'stuff the BP ballot box' greasemonkey script. 

Very inspirational, thanks much, Steve!

@Bill S. Thanks for the reply! 

I don't know if a lot of folks are waiting for the bubble to pop to get good deals - that's a long game, imo, probably 8 years out at least. 

I post BubbleWatch articles because I am always interested in the psychology around this subject, and also to generate discussion on what is clearly a fascinating topic. It seems that there is a lot of hype and hyperbole now in REI, and I am seeing a lot of the same markers I saw right before the last recession - ie it seems like everyone's in REI, it seems like there is a generalized anxiety about 'missing out', and it seems like a lot of uneducated investors are making disastrous decisions right now.

The examples are everywhere. (Yes, some folks call them anecdotes, but the question may be 'When do a lot of anecdotes become a trend, and when do trends become a market driver?')

There was gent (a new investor) who posted his BP thoughts the other day on a neg-flowing deal: "That's what I'm banking on - I am hoping for appreciation (over the next four years.)" A local fellow (non REI) paid over 750k for a condo here in Ballard, saying "I know it's way too much, but it is a special end unit, and I know it will appreciate in this market".

These are the examples that you simply don't see in a rational, non-overheated market, and this is what I like to talk about. I see these examples every single day, and to me, they have become so much more than anecdotal - it's growing into a subculture. It's especially fascinating since we are so fresh off the heels of the last bubble, and it seems as if no one can recall it - at all. 

Courtesy of Bill McBride at CalculatedRiskBlog.com

I always think these are interesting. 

Freshly chopped and colorized. Enjoy!

(Original PNG here)

 Hi Luke - 

Welcome to BP. 

I have edited your question down to its essence. 

I find this to be a good technique when I am trying to make a decision - I mean this seriously, and with all good intent. I think there is a reason that good deals are hardly available. If you have a stable income now, why try to destabilize it? 

Best of luck.  

 Travis - this is what I am interested in - the (apparent) disconnect between what is common talk on BP of a tight market and no supply, and some folks' ability to still make prudent plays in these markets. If you feel like posting - even on another thread - about your successful experiences in a market that many folks feel is way too tight, that would probably make for an interesting read!

And yes, I think a random sample in any market can be cherry-picked for anyone's confirmation bias, but the larger question is (maybe?) how to suss that out and get a semi-realistic idea of what's likely to happen. @Mark Ferguson mentioned a 1% vacancy rate - I think that's indicative of a tight, tight market (anecdotal or not), and one that some folks could call bubbly. I'm not sure if it's normal, and if it's not normal, what shall we call it? This I believe is where a great conversation can take place!

Take it easy! 

@Bill S., @Travis Sperr, @Tarl Yarber, @Steve Vaughan, @Mark Ferguson

Where there's smoke, there's fire... or just someone vaping a huge cloud.  

Yes, these are just some anecdotes, and I believe we will be in the ascendant phase of this cycle for some time to come, but I do think it's interesting to a) keep an eye on the canaries, and b) listen to everyone's position. Really, what's more interesting than a lively discussion about the topic of our day? That's why I posted BubbleWatch - I like to hear from everyone. 

To me, these anecdotes are more than just isolated tales of misery and woe - they illustrate patterns of behavior, influence, persuasion, rationalization and more across all of the REI market, and that's just fully fascinating. Does anyone here think that the behaviors mentioned in the Asian Journal, etc, are completely isolated examples, disconnected from the rest of society? I don't and yes, perhaps I am wrong, bit I have seen a little of this before, and parts of it look strikingly familiar.

@Mark Ferguson says:

A bunch of really small markets using very small sample sizes and no real data. No mention that greeley's vacancy rate is still 1 percent or so.

(John Barnett, a Greeley city planner) “In Greeley, we’ve seen the market go from something that was 2⁄3 single family and 1⁄3 multifamily to … closer to 50-50 right now. According to city planning documents, there are six multifamily housing projects under construction right now, totaling more than 560 new units that will hit the market once construction is done (probably in 12-24 months). To compare, only 357 single-family lots are under construction in Greeley.”

Mark - I wonder if the vacancy rate will hold at 1% once those units are on the market? 

Courtesy of http://thehousingbubbleblog.com/ Enjoy!

The Asian Journal on California. “Two different clients both landlords because they both own rental properties came to see me last week with different problems. My first landlord client sold her residence about 8 years ago, just before the burst of the housing bubble. She made a net of $300K from the sale of her residence. She then put $100K down on a new residence, $100K on a rental with 4 units, and the last $100K on another rental with 4 units. At that time all real estate prices were sky high. So, although she made $300K on the sale of her old residence because the price was sky high, she also bought her new residence, and the two rentals also sky high.”

“The first problem with the rentals is that they are negative every month because she has many rental expenses. She’s negative almost $2K a month for 8 units. The second problem is that after 7 years, the properties have no equity. Therefore, after 7 years she lost $168K to pay for the monthly loss of $2K, and she also lost her $200K downpayment, making a grand total loss of $368K for 7 years! Now, she wants to retire and be rid of the rental properties because as she said ‘I already lost all of my $120K savings, and the $200K downpayment, I have to keep on borrowing money to cover the loss, I just want to retire now without this problem. I want to get rid of the two rental properties, but I want to keep my residence, this is what I want to do.’”

“In the other case, client sold her house five years ago and used her net proceeds of $100K to buy a 4-unit apartment. She rents out 3 units and lives in one unit. She breaks even monthly. The problem is she’s having a really hard time paying the first mortgage because husband retired last year. The bank modified her mortgage after her husband retired but the modified amount is still a burden for her. Now she wants to make one last attempt to further modify the mortgage payment. The problem is the bank has set a foreclosure sale for the property in 10 days. She has not paid the mortgage for 12 months and now has a large default of $100K. However, she wants to stop the foreclosure because she believes that she will be able to get a reasonable modification shortly. Certainly, the only way to stop the foreclosure on its tracks is with a Chapter 13 petition.”

The Toledo Blade reports from Ohio.  During 2008 and 2009, the number of new homes built fell into the low 40s a year. Pent-up demand led to a brief surge to 62 starts in 2010, but that quickly subsided. In 2012, it slumped to 46 starts with an average new-home price of $205,000. In 2013, new homes jumped to 54, with an average price of $282,000. Last year, there were 59 housing starts, with an average price of $265,000. So far this year, there have been 46 housing starts, with an average price of $334,000.”

“Jon Modene, a real estate broker at Re/Max Masters in Perrysburg, said most first-time buyers are excluded from the home starts. ‘Now, the average start price is close to $400,000, which is unheard of in this market,’ he said. ‘Before you could do a cheap ranch home for $75 a square foot. You can’t build anything under $130 per square foot now.’”

KPAX in Montana. “The Flathead Valley is known for some high quality real estate. Chuck Olson Real Estate Supervising Broker Wendy Brown says 2015 is not over and yet their gross volume is already up over 40%. She says Baby Boomers are back into investing into secondary and retirement homes, especially those migrating from Minnesota and North Dakota. But, is it too aggressive? ‘So, what it’s saying is that we are probably even growing a little too fast and we need to steady out, but it’s great news - especially for sellers,’ Brown said.”

“Remax of Whitefish co-owner Monte Gilman says in the downturn it was the Canadians that took up to 50% of the buyer’s market in Whitefish, but now make up just 5% of clientele. He says growth is currently at 15% year over year, adding it’s a seller’s market, but coming in from the Canadian side of it. ‘In Whitefish, sale prices are about $350k and the trends are that the developers are starting to develop again.’”

From Florida Today. “Homes sales — and prices — continue to climb in Brevard County. In September, the median sales price of a single-family home jumped 32 percent from a year ago, from $129,900 to $172,250, according to Florida Realtors. Mike Slotkin, an economics professor at Florida Institute of Technology, said he’s concerned about the steep year-over-year home price increase. ‘That’s such a strong price increase that I’d start to worry the market is overheating…. This is something to look at seriously because those kinds of increases are the kinds of increases we saw years ago before the bubble burst, and that was not sustainable, he said.”

“Lynn Whelpley, president of the Space Coast Association of Realtors, said that the association is glad to see rising home prices, but added that there is some concern in the association that the prices might be rising too quickly. ‘We want to be cautious that the prices don’t go too high… The rise in prices is good as long as it’s slow and steady, and the prices don’t get falsely inflated,’ she said.”

The Victoria Advocate in Texas. “The rental market is seeing the effects of the downturn in the oil industry. Rent prices are far below the statewide average and there are more rental properties on the market than there have been since the oil boom, according to area realtors. According to Lee Swearingen in his monthly report, approximately 1,800 new apartments have come on the market or are scheduled to in 2015. The apartments that have recently gone online and are offering specials to entice renters to sign a lease, said Dennis Caka, broker wit DC Realty Rentals. To compete with lowering rent prices and a surge in units on the market, they have had to lower the prices on some of their rental properties as well, Caka said.”

“With the addition of the apartments to the market, there is a flood of more units and properties for rent. ‘There’s much more rent property now than there was in the past,’ said Diane Jernigan, president of the Victoria Area Association of Realtors. ‘There’s more supply available.’”

The Greeley Tribune in Colorado. “In Greeley, we’ve seen the market go from something that was 2⁄3 single family and 1⁄3 multifamily to … closer to 50-50 right now. According to city planning documents, there are six multifamily housing projects under construction right now, totaling more than 560 new units that will hit the market once construction is done (probably in 12-24 months). To compare, only 357 single-family lots are under construction in Greeley.”

“But the question everyone is asking is this: Can Greeley absorb the huge amount of multifamily units under construction? A landlord recently told me she went to rent out a townhome in west Greeley earlier this year, but she wasn’t finding renters. She said she had to lower the monthly rent to compete with the new Owl Ridge apartments nearby.”

“Upstate Colorado Economic Development CEO Rich Werner said the market could use some loosening to keep Greeley a competitive business market. ‘We’re at the top of the food chain,’ he said. ‘You look at places like Austin, Dallas, Phoenix, Portland and Salt Lake — our competition — we’re seeing the highest median prices.’”

The New Haven Independent in Connecticut. “Esra Tara Naamani had to enlist people in high places to get Bank of America to take $215,000—and then to get inside a ‘zombie’ mansion the bank was allowing to rot. It might not sound hard to get a bank to accept $215,000. Especially when the bank agreed to take the money in a property sale. Nor might it sound hard to get a bank to unload a money-hemorrhaging architectural marvel that sat vacant for years.”

“But logic, rationality, and self-interest haven’t always factored into how BOA has handled the continued fallout of the mortgage crisis eight years after the bill started coming due for the bank’s shady and shaky subprime lending spree. The lender would start the proceedings. But it wouldn’t want to take title, because then it would be responsible for upkeep or liens.”

“In fact, Bank of America would extend the closing seven times. And still Naamani couldn’t figure out why. ‘Why is it so hard,’ she wondered, ‘to give this bank $200,000?’”

“Evan Trachten at LCI—who has a knack for spotting clues to real-estate mysteries (like this one)—figured out why BOA was moving so slowly. In addition to the basic bureaucracy problem (knowing that a closing was scheduled), the bank had accumulated close to $100,000 in liens on 500 Central. It didn’t want to swallow that loss.”

Perhaps this post should be re-titled as 'Anatomy of an Investor's Education: A Double Major in Screening and Professional Tenancies'... 

I hope you prevail! Best of luck!