What Was That Sound?

[WrongWay 0]

Back when the tech bubble went pop, rich people went looking for a new place to put their money. They found bonds, and the bonds that pay best were Mortgage-Backed Securities.http://www.fanniemae.com/mbs/index.jhtml?p...cked+SecuritiesBack in the old days, you’d go to your bank or savings and loan to get a mortgage, and they’d make money off the interest. Sure, they charged some closing fees, but that was mostly to cover the cost of doing all the paperwork.Well, no more. Now mortgage brokers package the loans into big blocks and resell them to investors. They make the money off the closing fees, not the interest.So, we have this money flowing into mortgage backed securities, which drives down the interest rates. Well, since most people look at the monthly payment rather than stated price of a house, lower interest rates allowed prices to start to go up.As people saw prices rising, they wanted in, even if they really couldn’t afford it. And, mortgage brokers, making profits off value, not long-term quality of the loans, were MORE than willing to let them in. How? $0 down piggy back, ARMs, interest-only, negative amortization, and other “risky” practices that allowed people to buy more house than they could afford. The brokers weren’t concerned about the ability of their clients to pay back the loans, since they made there money at closing. The bond market kept buying them from the brokers because as long as the prices of housing was gong up, they were protected from loss because bad loans could result in foreclosure, but the house could be re-sold for whatever was owed.So, like the tech boom of the 90s, people saw rising markets, and people with no idea what they were doing started jumping in. Wait, I must digress. Back in the day, you could get a thing called “concessions” written into a loan. Let’s say you want to buy a house, but the backyard isn’t landscaped. You offer them full price, but ask that they give you $2000 cash back at closing so you can re-landscape the yard. Engh, a couple thousand here or there is still likely to fit in within the appraisal, so it gets funded into the loan.Well, suddenly, cash back at closing becomes the way to get rich. You buy a house, get cash back at closing, repeat. Anyone ever heard of Carlton Sheets? This guy brought the scam to the masses.www.carletonsheets.comAnd he had plenty of students.http://www.usatoday.com/money/economy/hous...pper-usat_x.htmSo, how does this work? If you don’t want to read the article, they take out “Alt-A” loans. They lie about their income, assets, etc. They use “questionable” appraisals, and off contract cash back. I sell you my $150K house for $180K, using an “inflated” appraisal, then give you $30K back at closing.Well, now that $180k house is a comp for future inflated appraisals, and for re-fi’s, and comps for the general housing market.Like the tech bubble, soon everyone was jumping in. Everyone was buying “investment properties”, becoming flippers, etc. There are actually 2 tv shows, one called “Flip this House” and another called “Flip that House”. So, there is another kind of loan that is worse than your basic ARM. The negative amortization loan that lets you reduce your monthly payment by basically, using a higher interest home equity loan piggy backed on your ARM.And, that has hidden the foreclosure problem for awhile as people got in deeper and deeper. Worse, the lenders got to claim the sub-minimum payments as pure profit.http://www.itulip.com/forums/showthread.php?t=1245Rising housing prices allowed home builders to jump in and crank out houses like insanely fast. If they can buy land for $50K, build a house for $100K and sell it for $250K, then you’re gonna do it. So, easy bond sales drops interest rates, causes prices to rise, allows fraudulent appraisals, causes cash-back fraud, causes rising prices, causes more people to jump into houses they can’t afford with exotic loans they can’t pay back unless prices continue to rise.Florida, Boston, California, Las Vegas, etc. All go mad with rising prices. But, eventually, an ever rising market has to top out.As soon as prices leveled, the flippers were stuck, the people in over their heads couldn’t refi, balls started falling out of the air, and foreclosures skyrocketed. Prices started to drop. People that wanted to sell, decided to take the house off the market until the prices recovered. Well, the bond purchasers started taking losses. So they started going through the loans in their bundles and kicking them back to the brokers. The loans in the packages had to conform to standards, and if they didn’t, the broker had to take them back. Well, the brokers didn’t have the money, so they started going bankrupt one after another. 22 so far, including some of the largest.So, now that the brokers are going bankrupt, and housing is no longer going up, the bond market has JUST NOW, finally stopped buying these risky loans that allowed people to get into homes they couldn’t afford, or allow people with houses they couldn’t afford to refi.So, now huge numbers of buyers can’t qualify.http://money.cnn.com/2007/04/27/real_estat...rce=yahoo_quoteHouses that were under contract are coming back to market because the people didn’t qualify. http://blogs.ocregister.com/mortgage/archi..._ma_1.html#moreForeclosures are skyrocketing.http://www.foreclosure.com/That is just going to get worse.http://www.msnbc.msn.com/id/18355590/So many people are taking their houses off the market and trying to rent it out until conditions improve, that there is now a record vacancy.http://biz.yahoo.com/cnnm/070427/042707_la....pf=real-estateListings are now skyrocketing.Market after market is gowing POP!Vegas: http://biz.yahoo.com/ap/070429/flippers_fl...ersonal-financeL.A.http://www.ocregister.com/ocregister/homep...cle_1674087.phpSan Fran:http://www.sfgate.com/cgi-bin/article.cgi?...BUGS9PFLEJ1.DTLSan Diego:http://www.signonsandiego.com/uniontrib/20...h29reasses.htmlTexas:http://www.star-telegram.com/100/story/85065.htmlSouth Florida:http://www.news-press.com/apps/pbcs.dll/ar...3/1014/BUSINESSCentral Florida:http://www.orlandosentinel.com/orl-subprim...-home-headlinesBoston:http://www.bostonbubble.com/Some point out that it isn’t going to get that bad because housing starts are still high. Here is the problem with that thinking. The home builders are way in debt, and have to sell houses to raise the money to pay on it. It is build or die, so they dump inventory into a saturated market.http://www.msnbc.msn.com/id/18356983/site/newsweek/When will the pop stop?When houses are affordable again.That means that whatever gains your market had since about 2002 are going to go away.Oh, that assumes we don’t have a recession, which is highly unlikely given last weeks GDP numbers.

[Flushgarden 0]

Welcome to 9 months ago...but I think its just a minor correction.The economy as a whole is thriving right now...just look at the records the stock market has been setting.

[WrongWay 0]

Welcome to 9 months ago...but I think its just a minor correction.The economy as a whole is thriving right now...just look at the records the stock market has been setting.

No. 9 months ago it stopped going up. Now that the bond market has turned off the spigot that was keeping it afloat, it turns down hard. HARDAs far as the economy being strong? Where have you been?Dollar is at a record low, exploding our trade deficit.http://finance.yahoo.com/q/bc?s=USDEUR=X&t=5yhttp://finance.yahoo.com/currency/convert?...;submit=Converthttp://bob.wjla.com/headlines/0207/396944.htmlWith our astronomical imports, weak dollar means higher trade deficit means weaker dollar... This cycle can only be stopped if we raise interest rates or other countries lower theirs. Unfortunatly, the exact opposite is likely to happen.Stories out last week were that UK and China are both fighting inflation. Meaning higher rates for them, not lower.http://www.cnbc.com/id/18380779And we can't raise interest rates. GDP grew at 1.3 rate in first quarter. Whenever it has been that low in the past, it has been followed by recession. http://www.cnbc.com/id/18348297Meanwhile, inflation ramains a major problem.So, we can raise rates and kill our economy or lower rates and further kill our exchange rates and make inflation way worse. According to lots of comments last week, the fed is still officially more worried about inflation, and the exchange rate, meaning they are more likely to raise that lower. Bad news for the housing market.When fed economists talk about the possibility of a recession, they are saying that it is very likely. They are always more positive than reality.http://www.cnbc.com/id/18380806Minor correction? Nope. Drastic drop back to pre-bubble levels.

[NewBrunswickBruiser 0]

bring on the pop... I'm 26, starting to make some serious $$$ at work and looking to buy soon.

[BigDMcGee 3,352]

Wow, this is a great thread.. fascinating topic. Thank god all the land I own is farm land, and not housing.

[runthemover 39]

excuse me sir. you're not allowed to use that thread title if you're not talking about Buffalo Springfieldedit: I guess it's slightly different. Close call there pal. Be careful

[MisterB 2]

As a mortgage broker, I can tell you that you have some inconsistencies in your O.P.-Mortgage Brokers do not package Loans, that is left up to the Investors. I personally can choose from no less than 25 places to send a mortgage right now. They all offer different things, and have a different "Niche" where a multitude of things are affected. They are the ones who package loans for Wall Street.-Alt-A is not where you lie about income, and that's a pretty broad statement as well. Sometimes the wife has decent credit and the hubby is the breadwinner. Unfortunately you can't put it into a full-doc program because the wife doesn't make enough. -Ill add to this in a couple of hours when I get to my office, but right now It really bothers me because I think you read an article, and now you're "proficient" at mortgages and the mortgage industry.

[Zeatrix 0]

We've got a similar thing going in Sweden. House prices have been going up steadily for years since the interest rates were going down. Now the rates are going up but prices are also going up. One day, this **** will go down...

[WrongWay 0]

-Mortgage Brokers do not package Loans, that is left up to the Investors. I personally can choose from no less than 25 places to send a mortgage right now. They all offer different things, and have a different "Niche" where a multitude of things are affected. They are the ones who package loans for Wall Street.

I was simplifing. Point is, the savings and loans no longer hold the loan and make their money off the interest. The people that are talking people into houses they can't afford, pass the loan off to someone else, taking their cut at the time they sell the mortgage, not off the interest.I see a MAJOR problem that the sales people are that isolated from the risk they are selling. They can sell crap, then when it collapses, they've taken their cut and are long gone.

-Alt-A is not where you lie about income, and that's a pretty broad statement as well. Sometimes the wife has decent credit and the hubby is the breadwinner. Unfortunately you can't put it into a full-doc program because the wife doesn't make enough.

Again, simplifig... And yet, the Alt-A are known as "liar loans" by the insiders. Point is, these are people that are doing "funny things" with the documentation... That is the point of the "reduced documentation". Not to make it easier to apply for the loan. It allows you to fudge stuff.

-Ill add to this in a couple of hours when I get to my office, but right now It really bothers me because I think you read an article, and now you're "proficient" at mortgages and the mortgage industry.

I look forward. As far as read an article? Did you not notice the more than 18 linked to in the O.P. I've been talking about this for 2 years... People are going to scream 2-3 years from now when property is falling fast, but the problem won't be then, it is now when property is rising 20% a year.... said I three years ago.Of course, in 1999 I was telling everyone the tech bubble would pop in 2000 or 2001. Engh, I missed it by a year.Not everything popped in 2002. Just the segments that we way overpriced. Ditto this time. If you're in a market where the prices are way up since 2002, then expect a pretty big pop.And what are today's headlines? Manufacturing index is way down. Inflation signals still above fed targets. Interest rates up in China. Dollar further down. Gas prices going further up. Residential construction spending down 14%. Consumer confidence down. Consumer spending up less than expected, less than wages up... meaning people are spending less and trying to save more, and since the economy is 70% consumer.I'll add more later as the bad headlines continue to roll in.

[WrongWay 0]

We've got a similar thing going in Sweden. House prices have been going up steadily for years since the interest rates were going down. Now the rates are going up but prices are also going up. One day, this **** will go down...

Here in the U.S. refinances usually go in direct opposite direction of interest rates. Makes sense. If interest rates are down, refi for a lower rate. If up, don't refi. Well, from 2006-2007, interest rates are up a full % or more. Yet for some reason, refi's are still running 50% or more of all new mortgage application.One could wishfully hope that a lot of those are people with ARMs and some equity are refinancing into fixed rates and able to drop their PMI (mortgage insurance for if you have less than 20% equity). I fear, as do a huge chunk of others, that they are people with ARMs with the initial low period running out, refinancing into a new ARM to get another couple years of low rate, while eating into any equity they may have had. It really has only been within the last month that this spigot has been cut off.

[DoinSublime 0]

Without knowing anything about it, I saw this first hand with a good friend of mine, who read through all the loopholes of refi'ing etc., and completely bought into it thinking it was golden, and got a 2 unit which has basically ruined his life since then.I couldn't put my finger on it, but it seemed pretty suspicious and not on the up and up from the start as he explained the whole process and how it would work for him. The appraisal, cash back, refi, etc.I'll be surprised if he ever recovers financially/credit wise.

[WrongWay 0]

I couldn't put my finger on it, but it seemed pretty suspicious and not on the up and up from the start as he explained the whole process and how it would work for him. The appraisal, cash back, refi, etc.

How flippers wanted you to think it worked.1) Someone wants to sell their house. They hire a realtor that looks at the house and says "Wow, this place is out of date. If you put $20K into fixing it up, you could sell it for $50K more." The owner says, "Nah, let's just sell it as is."2) You buy it, put that $20K into it, and 3 months later sell it for the $50K more, and pocket the $30K.Does this make sense? No.How flipping REALLY WORKED!!!!1) Someone has a house that is out of date. The realtor says, "If you put $20K into this house, you could sell it for $20K more." The owner says, "Nah, lets just sell it as it".2) Someone comes along and says, "I'll buy the house off you for $20K over the list price, but I want you to give me $20K back at closing so I can put it into the house to fix it up."3) They preasure an appraiser to ignore the fact that the house is out of date, and give them an appraisal at the top end of what similar houses in the neighborhood are going for. So, they get teh loan for $20K over what the house is worth, and the flipper gets $20K back at closing.4) Other houses in the area use the house as a comp at its full sale price, ignoring the cash back. But the newly appraised house is better than the one that sold at step 3, so the whole neighborhood is inflated by the inflation of the appraisal in step 3.5) The flipper puts $10K into the house, but claims to have put $20K into it. Three months later they bring it back to market. Their own inflated appraisal in step 3, and the other comps based on it, are now used as comps, except they say the house really is $20K better than the market since they claim to have just put $20K into it. So, they resell into the infated market for $20K more than their last sell. ($40K more than what the house was really worth.$10K in, $40K out.6) The house is again an over inflated comp for the neighborhood, so again inflates the whole neighborhood.Sure, there are some people like shown in the tv shows that really didn't know what they were doing, that happened to buy the house for $20K below market, but $20K into it, and sell it for $40K more than what they paid. Yeah, they happened to catch the updraft created by the "REAL" flipper. They could have made that same $20K simply by buying the house, waiting for inflater appraisals to push up the market, then sell back without having done any work.Don't beleive me.....http://www.realestatejournal.com/buysell/m...html?refresh=onThe 2007 National Appraisal Survey released in December said 90% of the 1,200 appraisers surveyed reported feeling pressured to restate, adjust or change values, up from 55% in the first such survey in 2003."If an appraiser speaks to the facts and indicates a market is declining and in oversupply, there's a good chance deals won't be consummated and referrals will dry up."The ways to inflate values are simple enough. Appraisers might overlook the extent of a property's datedness or disrepair, use comparable sales of similar-size homes in nicer nearby neighborhoods or not call a seller's agent to discover a comparable property's sales price included tens of thousands in closing-cost assistance and escrowed repair funds, as has recently been the case, regulators and appraisers say.Given the decline in mortgage activity, appraisers are scrambling for work in a way that's testing the industry's moral fiber, especially in hard-hit markets such as South Florida. It's getting to the point where, says Faravelli, with unusual candor for a trade-group official, "You show me an honest appraiser and I'll show you a [financially] poor one."7) Repeat until the only way poeple can buy into the nieghborhood is with $0 down, teaser rates, interest only, negative amortization, etc. where they can only afford the house for the first two years. They are relying on the updraft to continue to lift prices to allow them to refi later, or give them HELOC room to pay the rest of their bills out of the rising equity in the home. 8) Eventually, prices stop going up. A year later, all the people that are in houses they can't afford, can't refi, and are out of room in any home equity loan, foreclosures climb. Prices start to drop. Bad loans are kicked back from the bond market to the brockerage clearing houses, who go bankrupt. The bond market stops buying risky loans. No new people coming into the market, only people getting out.... Listing soar, foreclosures soar...Here is where we are now.Let's add:5a) As old neighborhoods are inflating, people there want to sell, take the equity, and use it as a downpayment on a new home. Home builders see massive profits are available by building new homes, so they borrow mass sums of money, buy land, spend a couple years getting zoming, regulatory approval, paying inpact fees, putting in water, sewer, electrical, etc. They then start building homes, with all these costs to be spread across all houses in the development. 6a) They start selling homes into the inflated market, and are making massive profits, so accelerate the rate of construction, and put deposits down on the next chunk of land they plan to build on, upping their debt more.7a) As their projects are half complete, the market stops going up. It is harder and harder to find people that can sell their current home at a profit for the downpayment. But they still have massive debt on the land and infrastructure, so they continue to build. Fortunatly, the high market allows them to put in extras and pay closing costs and give other considerations (cash back for landscaping and such). It looks like the market is flat, but really, you're getting more house for a reduced total price of purchase.7b) They try to target lower end projects, so a bunch of condo construction and conversion projects fire off.8a) People unable to sell their current house in a slowing market walk away from their new home. Cancelations and inventory soar. But they have to keep building and selling to pay their debt on the land and infrastructure, or they go bankrupt, so they get ever more agressive.9a) They walk away from deposits on future land purchases. They drop prices greatly. They come up with gimicks, like used car salesmen. We'll pay off your current house if you are upside down. Use your tax return as your down. Whatever it takes to move inventory into the saturated market. Build or die.So, you have builders that have to finish their under construction neighborhoods or go bankrupt, people in houses they can't afford desperate to sell, foreclosures skyrocketing, speculators looking to take their profits and run.... Sharplying rising supply.At the same time you have tightening lending standards taking upto 1/3rd of the potential buyers out of the market. Sharplying dropping demand.It's been a while since my MBA classes. Can someone that has done more research than just the one article I read, please tell me what happens to price in an inflated market when supply jumps and demand crashes.... I can't remember. Does it rhyme with POP but start with a "Dr"? Add "like a rock!"I'm seriously looking forward to our mortgage broker's (who's livlihood depends on me being way wrong) take on all this.

[Balloon guy 158]

Good stuff Wrong Way, Goes along with what I've always felt, real estate people are evil....swI am building in So Cal, and have started dragging my feet since the contractors are starting to feel the pinch. Looking to get my build cost closer to $300 a square foot instead of the crazy $450 I am getting quoted right now.Of course the selling price of the upper level homes is still between $800-$1000 a square foot for new.The luxury home market isn't the same as the rest though. But I convinced my wife to sell the house we are in now, and pocket the 120% profit from 4 years living here and rent until our new house is finished.If the price does make dramatic drops, then I will seriously consider buying up good deals and sitting on them until the cycle comes back around.Hope the commercial real estate market holds though, that's where all my money is right now.

[solderz 0]

Hope the commercial real estate market holds though, that's where all my money is right now.

Most Commercial real estate is doing very well nation wide. The exception to this is warehouse space, which is having a lot of trouble in many areas as individual companies bring warehousing in-house verses out-sourcing it.

[WrongWay 0]

Of course the selling price of the upper level homes is still between $800-$1000 a square foot for new.

That is just freakin' insane.

The luxury home market isn't the same as the rest though. But I convinced my wife to sell the house we are in now, and pocket the 120% profit from 4 years living here and rent until our new house is finished.

Smart man!!!! Here in PHX it isn't nearly that much. If we priced agressivly, we could probably pull $100K out of the house. I expect a 20-30% drop. That means we could sell for $240K ($20K-40K less than all the ones areound us that have been on the market for months). If I count the 30% drop from the current list prices of $260K, that means buying back 2 years form now for $180K. Fees on both ends drops profts from $70K to clsoer to $50K. We really like the house and plan to stay here "'til death". Besides, we're locked in at 5.1%. Is it really worth moving twice and risking getting a higher interest rate later, for well under 1/2 year's income. YEP! My fiancee and I are VERY happy in a house that was purchased 4 years ago for $5K more than out combined annual incomes. Are there some improvements we'd like to make? Of yeah! Is it worth trippling our monthly house payment, adding an hour to our commute, jsut to live in the newiest, biggest, nicest house of all of our friends???? OH hell no!

Hope the commercial real estate market holds though, that's where all my money is right now.

It all depends on what the fed does. If they push rates up to stop infaltion, then the economy is going into recession and commercial real estate will take a huge hit. If they allow inflation to take money out of the savings accounts of every hard-working, wisely saving American, then you may be okay. Do they help the grasshoppers, or the ants.Since in our current economy, the grasshoppers outnumber the ants by 100 to 1, I'm afraid they'll help the grasshoppers. Allow a sizeable amount of inflation, wages rising more slowly than prices, eat away at the net standard of living until it comes down to a more acceptable level. If we can't pay off the national debt, inflate it away!

[Balloon guy 158]

It all depends on what the fed does. If they push rates up to stop infaltion, then the economy is going into recession and commercial real estate will take a huge hit. If they allow inflation to take money out of the savings accounts of every hard-working, wisely saving American, then you may be okay. Do they help the grasshoppers, or the ants.Since in our current economy, the grasshoppers outnumber the ants by 100 to 1, I'm afraid they'll help the grasshoppers. Allow a sizeable amount of inflation, wages rising more slowly than prices, eat away at the net standard of living until it comes down to a more acceptable level. If we can't pay off the national debt, inflate it away!

Here's hoping

[Balloon guy 158]

Most Commercial real estate is doing very well nation wide. The exception to this is warehouse space, which is having a lot of trouble in many areas as individual companies bring warehousing in-house verses out-sourcing it.

Tha'ts what I got; warehouse space. Two 5,600 SF warehouses with 900SF office space. But since I rent to myself I have a good tenant. Hopefully in the near future I can retire, and rent these out to generate about $10K a month in passive income, that I can donk off chasing gutshots and overvaluing top pair no kicker.It's all a circle

[WrongWay 0]

Here's hoping

I think that is why the stock market is up. Insiders know the recession is coming, and hope the fed will stop worrying about inflation and push rates down to stop the recession. Stocks are good for inflation becasue the debts of the company inflate away while their profts rise in dollar to original purchase price ratio.There is lots of "hoping" going on, but the fed is still officially saying they are more worried about inflation than recession. Today's disapointing manufacturing numbers and consumer spending numbers (recession) don't seem to be enough to overcome the continuing inflation numbers.I've already seen stories about economists trying to justify the fed raising its inflation target from 1-2% to 2-3% or maybe even 4-5%. Great. Let's push down interest rates while pushing up inflation and holding down wage growth..... Great for billionaire with their money all in the stock market. Not so great for the workers that see their savings eroded, their assets eroded, and their wages eroded.

[WrongWay 0]

At least Chicago is a bright spot....Oh, wait.http://www.chicagobusiness.com/cgi-bin/news.pl?id=24771++++++++++++++++++++++++++++++++++++++Home sales fall even faster in 1st quarterNo bottom in sight as new-home slide acceleratesResidential developers in the Chicago area sold 5,341 homes in the quarter, down 35% from a year earlier and the weakest showing in more than 11 yearsExperts predicted the new-home market would hit bottom this spring after six straight quarters of falling sales. But recovery now appears further away, particularly in the city, where developers continue to build despite the precipitous drop in sales."We've seen continued softening in April," says Dan Star, Illinois division president for Dallas-based Centex Corp., which sold 1,150 homes in the Chicago area last year. "Traffic is down. Contracts are down. I think this will go on for another six months or year or longer."+++++++++++++++++++++++++++++++++++++++++++++Yeah... the Real Estate industry has been saying "we're at the bottom" for the last 6 months.... But all indications are that we're still just cresting the hill and headed to the steep part of the drop.

[Dogpatch 2]

It's all a circle

It's circular. It's like a carousel. You pay the quarter, you get on the horse. It goes up and down and around. Circular. Circle. With the music. The flow... all good things.

[mk 11]

why are you posting all of this?

[strategy 4]

It's circular. It's like a carousel. You pay the quarter, you get on the horse. It goes up and down and around. Circular. Circle. With the music. The flow... all good things.

at least link the video.

[WrongWay 0]

http://realtytimes.com/rtcpages/20070430_foreclosures.htm"Our condominium is in trouble. Many of our owners obtained those “favorable” interest only rates a couple of years ago, and now that their monthly payment has increased, their units are being foreclosed upon. This is putting a burden on the rest of us, since those owners are no longer paying their condominium fees. We are a small association with a tight budget. The developer left us with very little reserves, and now we are struggling to keep alive financially. What should we do? "Answer....Having moved past denial stage and anger stage, you are now in the bargaining stage. You're looking for a solution.You're locked into an overpriced condo, with overpriced condo association fees, and as more foreclosures hit, you're going to have to raise the condo association fees, pushing even more people into foreclosure. To get soe of those units to sell, you're going to have to agree to give the new borrowers reduced fees. Meaning not only will you have paid more for your unit, but you'll be paying more for association fees as well.Or, you can walk away like all your neighbors.The next stage of grief will be depression. Hopefully you'll escape this phase without throwing yourself off the roof of your overpriced condo with overpriced association fees.If you do survive the depression phase, eventually you'll reach the acceptance phase. By then, there will be a new portion in the market that is again a bubble. Could be stocks. Could be bonds. Could be commodities. Maybe something else. You'll quickly forget the lesson of real estate, and quickly throw assets at that bubble, sure it will be the way to get rich quick.

[leftygolfer 7]

why are you posting all of this?

must be short some REIT's

[WrongWay 0]

why are you posting all of this?

Why not? Maybe a few people can get out. Probably not since teh bond market has already shut off the spigot of easy money, driving out buyers, and inventory is already soaring. Still, if you WAY undercut the market, you may be able to get out. Cut 10% now to save 30% later....if it isn't already too late.Maybe a few people won't get in..... Maybe.Back in 2000, when I was prediciting tech pop back for 2001, most people ignored me. As 2001 came and went, people pointed out how wrong I was. By 2002 I had a few people thanking me for getting them out. Hey, as a computer programmer inside the tech business, I could see it coming, just missed timing by a bit. I underestimated the stupidity of people willing to throw money at the top of the market.Back when the tech bubble was popping, there was a story of a guy that got out at the top. They asked him how he knew it was time to get out. He in turn referenced an article he'd read about a guy that got out at the top abck in '39. How did the guy back in '39 know when to get out? He stopped on the street to get a shoe shine. The shoeshine guy asked wat he did. He said he was a stock broker. The shoe shine guy then started talking to him about which stocks he was buying. "Once I heard that even the shoeshine guy was in, I knew there was no one left to get in. So I got out".Back in 2000, I had a friend named Rod. Rod was a truck driver by trade, but had changed to operating machenery that pulled fiber optic cable. Rod, being in his upper 50s with no savings to speak of, took out a second on his house, and started playing the IPO market. Holy crap!!!! I SOOOO tried to talk him out of it.Few months later I ask him how he's doing. Lost a few thousand. IPO was just too shakey. He'd be up one say and down the next. He was now in Cisco, than that was nly going up, so he'd made his few thousand back and was actually up several thousand.Having had other people try to talk me into Cisco, I knew more than a bit about the stock. I asked him why Cisco? It is the biggest company in the world say him. By what measure asks me??? Sales I guess says him. Oh no says I they are not even in the top 500 in revenue. In profts then, says him. Nope says I. Again, not even close. In fact, the stock is trading well over 100 to one p/e, meaning it would take well over 100 years for the company to make enough money to buy your shares back from you.So what measure then? says him. Market Cap says I. Market Capitalization. That is simply number of shares multiplied by the price of each share. It is simply a foactor of being a big company, and also WAY overpriced!!!!!!But they are splitting again, says him. Yeah, says I. So, they are swapping $10 bills for 2 $5 bills. Does that jsutify paying $100 for a $10 bill, or $50 for a $5????He ignored me.He lost 80%.Now the point.I work as a computer programmer still. I work with tech guys. Last week, a guy I work with mentions to another that he found a renter that will only be a few hundred below his mortgage. So, he'll only be a few hundred a month negative cash flow while he waits fr the market to recover.I get some details. 3 years ago he bought a house for $300K. Last year he got an appraisal at $375K and took out a HELOC for $75K. Only spent about $25K of it. Seems the major incenties the home builders are offering convinced him to take the $50K equity he thought he had in his house, and use it as a deopsot on a new $500K house. Sell the old to pay off the $375K in loans against it.Well, with his home on the market for 3 months, and having to take possession on the new house or lose the deposit, he HAD to sell at a loss (actually, the builder of the new house would buy it from him and pay it off, then resell it, and add the loss to the loan for his new house. That is how they are cutting down their cancellation rate.) Or, he could find someone to sign a long term lease. Well, he found someone to rent for less than his payment, that will be a smaller drop than selling at a loss, ASSUMING the house is worth $375K again in 2 years when the lease expires.The people he is renting to are 26, 3 kids, 2 big dogs. How much damage can they do?Anyway, the other guy he was talking to has 3 houses. One bought every other year for the last 6 with $0 down. He buys, lives there 2 years so he's not lieing when applying for the loan as an owner occupant, then rents it out at a slight loss so he can buy again as an owner occupant again. When rents go up, which they are SURE TO DO, says he, he'll be making money hand over fist.How do you afford the slight loss (couple hundred per month, per house) and still survive. Oh, I've been using the equity in the first places. Doesn't that actually increase the amount you are losing each month? asks I. Oh no. Equity is rising faster than I'm using it. When rents go up I'll e able to easily pay off the equity loans.Another guy I work with chimes in that he's doing the same thing with his condo in Salt Lake. He looses a bit every year, but when rents go up, he'll be rich.The next day I sent them the link to the story that showed vacancy rates are at an all time high.Guys.... I only work with about 18 poeple in this office. If 3 of them are now "real estate magnets", how may more people are left to get into the bubble?Answer? NONE. Even if someone wanted to get in, the tightening of loan requirements has now frozen them out.