Housing Rolling Along 2

Vinny1 · Jan 17, 2007

Quote from Covertibility:

Wow I thought this thread ended when I said sell on the homebuilders back in 2005 for the easy double digit gains.

Lets see this thread, and in response to Lanser's inbox message, was started in continuation of a 2004 thread where people were proclaiming a crash then. 2004 double digit home appreciation. 2005 double digit home appreciation. 2006 down 3%. (If anyone lives in Northern NJ, you saw price appreciation last year, double digits in some parts.)

Wait til Thursday to see how the year ended. I'm amazed at all the banter about how supposedly bad things are yet nothing looks like how bad it was in the mid 90's when unemployment was the cause then. Today rates aren't going anywhere, everything that can be outsourced has been and with the healthy job market, no one wants to live in a cardboard box(apartment). It appears the softness to be in the overbuilt areas, but for the long run crowd, why worry, everyone wants to live in these areas as opposed to the midwest, the south and other shit areas.

And to see someone say inflation is gonna get worse, double digit mortgages, lol. I'll have to bring back the Weimar fan reference and post cpi numbers again.

I used to live in Northern NJ and all I can say is it sucks. Overcrowded, overpriced with many delapidated areas. 99% of the young people can't afford a house there, so they live with their parents or in some crappy apartment. Young people are moving out of NJ. The only ones who will be left in NJ are the senior citizens who bought a house back in 1952 and are stubborn to leave because they are so brainwashed into thinking that it's the greatest place to be. Every time I visit the folks up in NJ, I can't help but notice that the percentage of old folks there is alot higher than the Atlanta area. I love the Atlanta area. Alot better quality of life compared to NJ and more bang for your buck when buying a home.

My wife's friend in NJ is a realtor and she says that market in NJ has been real slow the past year. In my old town, a house was listed for 830k and it's now 700k and still can't sell after a year. I think that NJ is due for a HUGE correction.

TrendSailor · Jan 17, 2007

Quote from Vinny1:

I used to live in Northern NJ and all I can say is it sucks. Overcrowded, overpriced with many delapidated areas. 99% of the young people can't afford a house there, so they live with their parents or in some crappy apartment. Young people are moving out of NJ. ...

See this for what it is. Essentially, children living with parents or in-laws is a social phenomena that is pragmatically an early advance on their inheritance. There is a huge huge amount of wealth that is going to be liquidated and re injected into the economy as soon as the older generation passes. The only thing that can prevent this wealth transfer effect is if the doctors and medical community manage to get to it and extract it first. That is a very real possibility too. So if the elderly elect to spend their entire life estate to keep themselves alive in the last 2 weeks of their lives we will lose a substantial part of this wealth transfer effect to big pharma and big medicine. Actually, sadly this is the normal pattern that many seniors fall into and the medical & drug community has been laying this trap for years for precisely these wealth transfer times with their hands out waiting. But a lot of seniors in those old industrial blue collar worker companies (e.g. Chrysler, GM etc.) have excellent life insurance and health plans so that money will get passed on to family.

What remains to be seen is if estates will liquidate the homesteads and move to other more cost effective and higher quality regions of the country. I predict that will be the case simply because tax overhead of "welfare/social" states typical of northern liberal tax-n-spend states is simply much too high now. The only option available to northern states is a massive cutting of local government spending and social programs to get the tax base down. But that is apolitical impossibility so the same pattern of floating debt to the next generation will prevail while credit scores permit it.

But essentially I think a lot of the northern states are essentially doomed to suffer a migration of wealth to the sunbelt or southern states and that means real estate is going to get hammered up there. It's not that the homes suddenly lost real value relative to their replacement costs but rather no one wants to live or can afford to live there anymore. But the wealth will definitely migrate to seek lest cost overhead and highest quality of life. The only thing that can change this effect will be if inheritances can be held in liquid form and moved into and out of investments in various other parts of the country to earn a cash flow sufficient to counter their expenses.

Just my 2 cents.
TS

drsteph · Jan 17, 2007

Quote from TrendSailor:

See this for what it is. Essentially, children living with parents or in-laws is a social phenomena that is pragmatically an early advance on their inheritance. There is a huge huge amount of wealth that is going to be liquidated and re injected into the economy as soon as the older generation passes. The only thing that can prevent this wealth transfer effect is if the doctors and medical community manage to get to it and extract it first. That is a very real possibility too. So if the elderly elect to spend their entire life estate to keep themselves alive in the last 2 weeks of their lives we will lose a substantial part of this wealth transfer effect to big pharma and big medicine. Actually, sadly this is the normal pattern that many seniors fall into and the medical & drug community has been laying this trap for years for precisely these wealth transfer times with their hands out waiting. But a lot of seniors in those old industrial blue collar worker companies (e.g. Chrysler, GM etc.) have excellent life insurance and health plans so that money will get passed on to family.

What remains to be seen is if estates will liquidate the homesteads and move to other more cost effective and higher quality regions of the country. I predict that will be the case simply because tax overhead of "welfare/social" states typical of northern liberal tax-n-spend states is simply much too high now. The only option available to northern states is a massive cutting of local government spending and social programs to get the tax base down. But that is apolitical impossibility so the same pattern of floating debt to the next generation will prevail while credit scores permit it.

But essentially I think a lot of the northern states are essentially doomed to suffer a migration of wealth to the sunbelt or southern states and that means real estate is going to get hammered up there. It's not that the homes suddenly lost real value relative to their replacement costs but rather no one wants to live or can afford to live there anymore. But the wealth will definitely migrate to seek lest cost overhead and highest quality of life. The only thing that can change this effect will be if inheritances can be held in liquid form and moved into and out of investments in various other parts of the country to earn a cash flow sufficient to counter their expenses.

Just my 2 cents.
TS

Dead on. 100%.

Too much aging infrastructure, aging welfare statism, and aging population up in NY and NJ. If you're not making seven figures up there as a trader, forget it.

Immigrant populations target the area precisely because of its liberal benefits which help their aging and infirm. While they are probably the only bright spot in the economy there, many economists are unsure if their contributions on average equal the social services they & their families utilize. Might be a wash, might be net positive or negative, nobody really knows. While their children will certainly assist with the areas' recovery, you need to wait at least 30 years for that!

Might be a nice place to retire to in 30 years or so, though. A reverse florida effect, if you will.

Vinny1 · Jan 17, 2007

TrendSailor · Jan 17, 2007

Quote from Vinny1:

Here are some of the homes you can get in a few Atlanta suburbs for under 250k...

I blame Sherman & incompetent Yankee project management for this. Sherman was suppose to burn ALL of Atlanta to the ground. Clearly he missed a few sections of town...

TS

dandxg · Jan 17, 2007

Vinny,

You are making want to move to Atlanta from Denver. Oh yeah, it hot and humid as can be in the summer, no mountains, and racial tension. I think I will stay here even with higher home prices.

Vinny1 · Jan 17, 2007

Quote from dandxg:

Vinny,

You are making want to move to Atlanta from Denver. Oh yeah, it hot and humid as can be in the summer, no mountains, and racial tension. I think I will stay here even with higher home prices.

The summer weather is the same as NJ. Florida is alot more humid. It does get cold in the winter; 44 was the high today. There are mountains north of Atlanta, where all these suburbs are and where most people prefer to be. It's not flat like south of Atlanta. As far as racial tension, I haven't seen any problems. Blacks down here are really friendly and polite.

dandxg · Jan 17, 2007

I was just kidding Vinny. Relative to Denver the humid is very high, we have 15% in the summer, you have prob. 75-80 I would guess. Yes I was in SoBe last summer and it was freakin humid, even at night I was sweating. The racial tension, comes from a white guy whom grew up in Atlanta, and now lives in Denver. He said whites are afraid to take light rail, they will deal with the traffic. I was in Marietta, for a week, many years ago, it war real nice and quite green. Everything has it's pros and cons. Heck it was -9 the other night here. That's freakin cold, even by our standards.

I will say though I have thought of moving East to trade. It sure would be nice to get up, work out, take a shower, have a nice breakfast, then trade. I am not complaining, I am done at 1:30 PM everyday.

jasonjm · Jan 19, 2007

dang what is up with this market?

I thought the subprimes were supposed to implode by now and restore some balance to the market especially here in CA

although prices here in the good areas are not falling at all it seems, i did notice one ominious trend

if you take a look in one of the best zips for Los Angeles, there are now 12 pages of tax liens and pre-foreclosures....

http://www.foreclosure.com/search.html?st=CA&cno=037&z=90049

this time last year there was about half a page?

what you all think? housing sideways in the good areas for a few years?

or you think we see a significant drop even in the good areas?

(I dont care about not good neighborhoods, which are evidently already falling anyways it seems)

TrendSailor · Jan 19, 2007

Quote from jasonjm:

dang what is up with this market?

I thought the subprimes were supposed to implode by now and restore some balance to the market especially here in CA

although prices here in the good areas are not falling at all it seems, i did notice one ominious trend

if you take a look in one of the best zips for Los Angeles, there are now 12 pages of tax liens and pre-foreclosures....

http://www.foreclosure.com/search.html?st=CA&cno=037&z=90049

this time last year there was about half a page?

what you all think? housing sideways in the good areas for a few years?

or you think we see a significant drop even in the good areas?

(I dont care about not good neighborhoods, which are evidently already falling anyways it seems)

I would not pay too much attention to the tax liens. These days Developers and some of the wealthy use tax liens as a normal business practise to get essentially a free no-qualifying loan and the lowest possible competitive interest rate from greedy investors who think they are going to get the house. These kinds of liens do not even show up on credit scores and its a clever way to tap equity and not pay tax and put the money to work somewhere else for the 2 years it takes before the house goes up on auction. These people will come back in plenty of time and pay off the lien admin and penalty fees and the relatively low interest rate that their neighbors competitively bid against the property. For example its not a bad deal if one can force the county to put a tax lien to collect $100K in back taxes if some investor is willing to only take 5% on that tax certificate and hold it for 2 years. Most of the idiots bidding on the tax certificates do not realize that they do not even have first rights on any foreclosure bids that do happen to live through the long 2 year administrative process before its put up for bid. The developers and the wealthy then use that freed up tax money to invest at 20% return levels or something much higher than the carrying costs of the admin fees + interest and pay it off before the time limit kicks in. For someone experiencing cash flow problems and having a lot of leveraged debt its a great way to get a subsidized free-ride at low interest rates. Its certainly better than margin rates at brokerages and no chance for an early call...

TS