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  • Real estate bubble brewing ...

    Any time you see things like this, itís getting heated up.
    How can you have any pudding if you don't eat your meat?

  • #2
    Yep. Same as in 2008. Anyone could get a mortgage.
    james.c.hendrickson@gmail.com
    202.468.6043

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    • #3
      Originally posted by james.hendrickson View Post
      Yep. Same as in 2008. Anyone could get a mortgage.
      First thing that comes to mind is "NINJA" loan scene from The Big Short film.
      "I'd buy that for a dollar!"

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      • #4
        Agree....wait until the NINJA loans show up...then it's game on (again). We sold our first house in 2007 and I remember applying for the mortgage on the next house....no real documentation needed...the amount I was approved for was laughable. "Interest only" mortgages had a big push as well.
        Gunga galunga...gunga -- gunga galunga.

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        • #5
          Nobody learned anything from the 2008 crash, so the cycle will repeat itself and everyone will act super surprised that lending people 6 times their income on interest-only loans turned out to be a bad idea.
          Steve

          * Despite the high cost of living, it remains very popular.
          * Why should I pay for my daughter's education when she already knows everything?
          * There are no shortcuts to anywhere worth going.

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          • #6
            I would love to see home prices fall back to the 2010-2014 levels (probably more accurate to what they should cost IMO)....

            Something is fishy though, as everyone is buying and renting and/or flipping houses now. I have (2) small economical rentals + my residential home. And I have been contacted (via mailers, voicemail, email, AND text) by random investors asking to discuss selling my houses for Cash. I don't recall that happening back before 2015 very often. Not certain how/if this large influx of Real estate investors will connect to another housing bubble. My feeling is that as soon as house prices started to fall in profitbale areas, that all of these homes would be bought up by the vast cash that they investors have. (Unless they're all leveraged to the hilt, and causing this dilemma).

            Heavy leveraging like that makes me sooo worried.... We have been limiting our leveraging to very small amounts. Just seems to risky to leverage more than you should for you typical residence (I think the rule of thumb is 3x your household income, right?). I have heard of some of these people who will get a loan to buy a place, and then cash our refinance after minimal value added, and use any new equity to buy another place. And though clever financing, they will rinse an repeat until they have multiple homes with (i'm assuming) 100's of thousands of dollars leveraged... That always has seemed way to greedy and risky to me (and too much stress / pressure on the investor).

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            • #7
              Originally posted by amarowsky View Post
              I would love to see home prices fall back to the 2010-2014 levels (probably more accurate to what they should cost IMO)....

              Something is fishy though, as everyone is buying and renting and/or flipping houses now. I have (2) small economical rentals + my residential home. And I have been contacted (via mailers, voicemail, email, AND text) by random investors asking to discuss selling my houses for Cash. I don't recall that happening back before 2015 very often. Not certain how/if this large influx of Real estate investors will connect to another housing bubble. My feeling is that as soon as house prices started to fall in profitbale areas, that all of these homes would be bought up by the vast cash that they investors have. (Unless they're all leveraged to the hilt, and causing this dilemma).

              Heavy leveraging like that makes me sooo worried.... We have been limiting our leveraging to very small amounts. Just seems to risky to leverage more than you should for you typical residence (I think the rule of thumb is 3x your household income, right?). I have heard of some of these people who will get a loan to buy a place, and then cash our refinance after minimal value added, and use any new equity to buy another place. And though clever financing, they will rinse an repeat until they have multiple homes with (i'm assuming) 100's of thousands of dollars leveraged... That always has seemed way to greedy and risky to me (and too much stress / pressure on the investor).
              Nothing particularly greedy or risky about real estate leverage as long as the underlying income easily supports the debt service through booms and busts. You have to steer clear of the ďexoticĒ markets for sure. Find places that are trending at 2-3% appreciation and you are perfectly fine.

              If you insist on SOCAL to soup up your returns, youíve got hiney showing.
              How can you have any pudding if you don't eat your meat?

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              • #8
                By the way, we are light years from the loose lending of 2008. But I do see some signs of approaching clouds.
                How can you have any pudding if you don't eat your meat?

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                • #9
                  2008 lenders didnt even bother verifying income, allow you to pull equity to 100% of appraised value,etc. lol but yeah, some people never learn their lesson

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                  • #10
                    I have noticed some loosening.
                    Currently working with a bank to open a HELOC and it's been much smoother than it was the last time that I opened one.
                    Brian

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                    • #11
                      Originally posted by amarowsky View Post
                      I would love to see home prices fall back to the 2010-2014 levels (probably more accurate to what they should cost IMO)....

                      Something is fishy though, as everyone is buying and renting and/or flipping houses now. I have (2) small economical rentals + my residential home. And I have been contacted (via mailers, voicemail, email, AND text) by random investors asking to discuss selling my houses for Cash. I don't recall that happening back before 2015 very often. Not certain how/if this large influx of Real estate investors will connect to another housing bubble. My feeling is that as soon as house prices started to fall in profitbale areas, that all of these homes would be bought up by the vast cash that they investors have. (Unless they're all leveraged to the hilt, and causing this dilemma).
                      I don't find this fishy at all, more likely its a sign of inflated home prices creating very few opportunities for real estate investors. I've been looking for my next rental for more than a year and the reality is home prices are so high that rents won't turn profit unless you're paying cash. My duplex I bought in 2015 for $95k just appraised at $220k and I honestly think I could sell it for closer to $275 based on what other 2-4 plexes are going for in my area. Homes that have sold in the last 5 years are flying off the market for $40k more (big jump when the average home price is less than $200k), and the only new rentals coming on the market are new construction. When that happens, you have to get creative. I've looked up and contacted owners of houses that appear vacant in hopes they might be interested in a quick sale, and usually I wasn't even the first to reach out.

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                      • #12
                        Last time in the loan to everyone era, I was working with people whom all seemed to take out the crazy loans so I had a front row seat to stupidity. I think all have since lost their houses to foreclosure. I lost contact with one person so not sure if they still have home.
                        I recently heard in conversation a bunch of novices are trying once again to get into rentals or to try flipping.
                        .
                        It has been mentioned by at least one of the candidates. Pushing for subsidies for certain groups to buy homes. Like I said before I watched first hand as people with terrible money management get in over their heads and thus added to their sad financial picture... a foreclosure.

                        Always thought it would be interesting to see/ read a where are they now story.

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                        • #13
                          The 2008-2009 collapse was not caused by bad loans. Had it just been bad loans, we would have had just a normal recession, not a great recession with a collapse of the banks. Banks caused the real problem with leverage and swapping bad debt multiple times. Derivatives of derivatives. Now banks are complaining because they can't make any money unless they are allowed to venture back into leverage. If that starts happening, I am going to buy my gold back.

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                          • #14
                            Originally posted by corn18 View Post
                            Now banks are complaining because they can't make any money unless they are allowed to venture back into leverage.
                            They take in deposits from "savers" and pay 0.1% interest and turn around and lend that money out at 3-4%. That's a 30-40 fold profit. What a shame that they can't make any money in the process. I feel bad for them.
                            Steve

                            * Despite the high cost of living, it remains very popular.
                            * Why should I pay for my daughter's education when she already knows everything?
                            * There are no shortcuts to anywhere worth going.

                            Comment


                            • #15
                              Originally posted by disneysteve View Post
                              Nobody learned anything from the 2008 crash, so the cycle will repeat itself and everyone will act super surprised that lending people 6 times their income on interest-only loans turned out to be a bad idea.
                              They learned, but greed overpowers.

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