The “LAST CALL! Final $ Reduction” for 1409 20th Street did not fall on deaf ears as its sale appears to have closed escrow on 6/29/09 with a reported contract price of $799,000.
Previously purchased for $860,000 in May of 2005, and originally asking $949,000 this last time around, the sale represents a 7% drop below year 2005 values for this single-family North slope Potrero Hill home.
If PropertyShark is correct, the buyers in 2005 put $110,000 down and financed the remaining $750,000. Which means the buyers turned sellers in 2009 likely realized a 100% loss (after transaction costs) on their four year hold.
And that’s not accounting for their cost of carry.
∙ Act Now (After Seventy-Seven Days On The Market) Or Else! [SocketSite]
∙ A Potential Single-Family Apple Atop Potrero Hill: 1409 20th Street [SocketSite]
Well, it’s not really fair to call it a 100% loss. You have to net out the saved cost of renting.
As I just mentioned on another thread, zombification has its advantages.
I’ll bet the new buyers are solvent, and were forced to put down at least 20%, and that’s good news. Who can resist 15% off?
The old buyers may have been solvent too, and if they stay in the area they will probably have to put down 20% too. Or prop up the rental market 🙂
Price discovery, and job preservation, all on the solvent person’s dime. Short-term zombification has its advantages.
Socketsite said, “the sale represents a 7% drop below year 2005 values”
but meant
The sale represents a 7 percent drop below its 2005 sale price.
Unless several other apples are to follow? For you know, the plural to make sense?
Jeffrey, that is not true. On the contrary they probably lost much more than the 110K down that has totally vaporized.
1 – They amortized almost nothing, which means almost all mortgage payments were interest.
2 – Their mortgage payment was higher than a rent for a similar property.
In short, they rented to the bank and for more money than a similar rental. I’d value the extra loss at ~1000/month, or 50K! I am not counting other costs that a homeowner has to support and not a renter.
Great deal indeed.
The bubble gives, and the bubble takes away. Praised be the bubble.
“Well, it’s not really fair to call it a 100% loss. You have to net out the saved cost of renting.”
It’s actually more than 100% if you count the “rent” they paid, which probably was about $4000/mo for them. 2/1 in Potrero Hill shouldn’t have been more than $2500/mo.
I think its imappropriate to blast these “apples” with owners personal losses as you have estimated. Its one thing to list purchase price and sales price, but blasting an individuals loss is not appropriate.
Further, what asset did not loose value over the past year?
I think its imappropriate to blast these “apples” with owners personal losses as you have estimated. Its one thing to list purchase price and sales price, but blasting an individuals loss is not appropriate.
Nobody’s giving any names! It’s cautionary tales like these that will help this market correct itself. Otherwise everyone would still be paying way to much for way to little house as they did in 2003-2007. Sorry, SF is still overpriced.
Further, what asset did not loose value over the past year?
Cash.
anon: “Further, what asset did not loose value over the past year?”
Answer: my $CASH$ is up 16% against the Euro since one year ago ;-). Yeah.
“2/1 in Potrero Hill shouldn’t have been more than $2500/mo.”
Well maybe for an apt w/o parking. But this is a SFR, I bet it would have gone for more and wouldn’t be subject to rent control….
editor – your posts are starting to sound more and more like LMRiM
the familiar refrain:
‘data on PropertyShark shows…
given that x dollars were put down the seller likely realized an x% loss… over x years’
not that i’m complaining, actually, I think this data is very relevant. after all, leverage cuts both ways. some liek to focus on the fact that leverage increases potential appreciation, but then forget that on the downside it can more than wipe you out.
this is a >100% loss plain and simple.
how aboutt his. don’t buy a house in SF unless you are willing to incinerate 100% of your first 20% of downpayment money. if it magically reappears, consider it a miracle.
that holds for new cars right? say goodby to 30% of your purchase price the day you drive it off of the lot. so, when buying a house, just think of it the same way. if that is not acceptable, don’t buy it.
now then, who wants to put 200k down for $1 million dollar SFH?
From the high of the market to the low and only 7% correction? I wish my 401k would have performed as well during the same time period.
viewlover –
did you leverage your 401k at 5 to 1? or 10 to 1
or better yet at infinity to 1?
if you did, the likely 30% loss your experienced would have been somewhere around the 150+ %, and then yes, you would have loved a simple 7% drop.
but i’m going to guess your 401k wasn’t levered. in that case, a 30% 401k loss would have been matched by about a 1-2% loss in home value.
sorry, apples to apples on the properties, and apples to oranges on the investment comparisons.
“Well, it’s not really fair to call it a 100% loss. You have to net out the saved cost of renting.”
Take 100% loss of prinicipal (down payment)
PITI approximately 4500 (after deduction) – Rent of similar 2/1 in Pot Hill (2500) = $2000/month x 48 months = 96,000
>200K loss. Yikes.
That’s leverage for you.
May of 2005 was not the ‘high of the market’, either the housing or the stock market. The Dow Jones Industrial Average is down 20% from May of 2005.
“From the high of the market to the low…”
Someone called a low besides Cramer & Ester?
umm…no
actually after deduction PITI was probably closer to $4000, and in 2005 this likely would have fetched more than $2500 in rent
but hey, what’s the difference either way, it was an absolute cluster***k
The outside is cute. I wouldn’t spend that much money for the place, but it is cute.
My 50K owning-vs-renting loss was calculated with pretty conservative data: ~4K/month out vs. 3K potential rental value. 1K/month X 50 months = 50K loss in addition to the downpayment that went to money heaven.
That’s the best case scenario…
100%+ loss to invested capital is about what should have been expected back in 2005 – it’s certainly what I would have expected. If the current sellers didn’t expect to lose it all, well then the market gave them a good lesson.
BTW, 7% below its 2005 price is still way too expensive.
> BTW, 7% below its 2005 price is still way too expensive.
True, but at this price government cheese is hard to resist…
>50K loss in addition to the downpayment that went to money heaven.
Really, it just disappeared? It didn’t got into the pocket of the previous seller? Or into the pockets of all the people skimming on the transaction?
I can see if the bank had to write off a loss you could say the money just disappeared to money heaven but it seems to me that in this particular case you can actually figure out where all the money went and it all went into various pockets.
“SF is still too expensive”
“BTW, 7% below its 2005 price is still way too expensive.”
But who cares? You want solvent people buying, especially in this environment. Less money for the taxpayer to have to fork over later.
If these folks put down a larger downpayment to get under conforming limits (to get a better rate), it’s possible the taxpayer will be liable for nothing here, ever. Without these transactions, the taxpayer would be on the hook for all of it.
There is a bright side to a zombified economy, at least short-term. Again, assuming the buyers have at least 20% in here.
Rillion
what if we changed the story:
2 houses, right next door from one another. Both houses start at 500k in value, and 5 years later they are worth 1 million.
One homeowner refinances and cashes out 500k in equity, and then spends it. The other holds on.
3 years later , the houses are both worth 500k again.
Now, we have no trouble understanding that that the cash out refi ‘created money.’
Why then do we not understand that the second owner watched as money went to ‘money heaven?’
If we have a fiat currency, and houses can be used as a form of credit to create currency, houses create money on the way up, and destroy money on the way down.
And yes, there is some ‘slippage’ in creation on the way up and on the way down due to siphoning, but on net, credit inflation creates lots of money, and credit deflation destroys it.
But I’m sure we should all be worried about inflation right?
“Further, what asset did not loose value over the past year?”
you would have lost only 25% investing in the S&P vs. losing 100% of your mortgage downpayment .
plus you could have rented for half the price of the monthly mortgage cost.
I would rather lose 35% than 100% anyday
Rillion, I’m going to agree with you on this one. Repudiated debt goes to ‘money heaven’; lost down payments are ‘patriotic sacrifices’ by the homeowner. Maybe LMRiM can help us with this term of art.
dub dub, I tend to to be in your camp (partial zombification) because I really couldn’t fathom the alternative last year (money market runs, commercial paper shutdown, etc). There is still a price yet to be paid, and a lot of debt to be repudiated (see the SF Fed paper that Robert posted a while back) before everyone participating in the game is a “rational actor”. Are we really better off with Citi still on the loose:
Panic in the crowd, helter-skelter, we’re brought to our knees.
Back to the darkness, back on the mountain he stands,
You can’t fight a shadow, you can’t kill a dead [bank].
Obviously this was a bad investment, but the seller’s loss should not be overestimated. Rents for a single family home with a garage on the north slope of Potrero Hill are still quite high, e.g.:
http://sfbay.craigslist.org/sfc/apa/1252993377.html
(This is for a place with no garage, but a finished basement.)
San FronziScheme:
> My 50K owning-vs-renting loss was calculated with pretty
> conservative data: ~4K/month out vs. 3K potential rental value.
> 1K/month X 50 months = 50K loss in addition to the
> downpayment that went to money heaven.
> That’s the best case scenario…
It looks like you forgot the cost of property taxes, property insurance and maintenance and repairs that probably add up to more than $50K over the past four years (The current annual tax bill is $10,773). I also don’t want to forget the mortgage interest deduction (and have anyone accuse me of only talking about the negative), but the tax savings were probably less than $50K .
P.S. The property last sold for $725K in January of 2001 so at least we have not fallen to 2001 prices yet (or as anon would say “this specific property has not fallen to its 2001 sale price”, he wouldn’t say “yet” since that implies that this property and ones like it will soon fall below 2001 prices…
Citing an overpriced ‘jwavro’ listing doesn’t help your case…
Posted by: San FronziScheme at July 7, 2009 3:25 PM
anon: “Further, what asset did not loose value over the past year?”
Answer: my $CASH$ is up 16% against the Euro since one year ago ;-). Yeah.
Reall???And where was your cash (dollars before that…) The EURO peaked at 1 Euro to $1.60 in 2007/2008 and real estate was still a decent investment.
God, this site is like the Romans watching the Christians being eaten by lions. I think each comment should note whether you are a renter or owner, what your income is and whether you live in SF or not. The diatribes on what native trees to plant was the best…and now the blood in the water over someone “loosing” 100% ….or more…of their investment. Did you ever think they enjoyed living there, had a great life, are moving East to be closer to their family and were happy to be able to sell….even at a loss…because they gained the 3 years of happiness they enjoyed there and are now starting a new chapter????? Christ on the cross! Oh wait, let’s watch him be crucified!! Yeah, more blood!!!
“Did you ever think they enjoyed living there, had a great life, are moving East to be closer to their family and were happy to be able to sell….even at a loss…because they gained the 3 years of happiness they enjoyed there and are now starting a new chapter?????”
Sure. But they could have had exactly the same stuff for much less if they had rented. That’s the point.
Unearthly wrote:
> Citing an overpriced ‘jwavro’ listing doesn’t help your case…
Does anyone know how J. Wavro works? Are they an actual property management firm or are they just a company that posts other firms property at high prices and makes a fee every time a corporation that does not really care about the rent is looking to sign a lease for an executive?
SFCharacter wrote:
Reall???And where was your cash (dollars before that…) The EURO peaked at 1 Euro to $1.60 in 2007/2008 and real estate was still a decent investment.
Tough luck bro, you picked the wrong pinata.
I was 90% RE until 2005, when I started selling. In late 2006 I was 50% Euro cash, 20% Dollar and 30% RE, all safety (CD types) after a short move into indexes (had 1 good year there). I rebalanced the currency from March to October 2008 to more USD and almost hit a 1.60 trade one time, averaging about 1.49 USD/EUR total. I stopped loading up the truck on USD in 10/2008 when the EUR went under 1.40. I will probably restart the crank if the EUR goes to 1.50. For now I am staying put on my almost perfect 3-thirds allocation EUR/USD/RE which makes me sleep like a baby (collecting income from all 3). Feeding up my tiny 1-year old 401(k) with stocks is all the risk I am taking and I am so happy about that choice.
you guys are splitting hairs, still only 7%, apples oranges, highs, lows, still 7%. Anyone buying a mutual fund at an average index would have still lost more over the same time period, average to average. The argument is over degrees and you can spend all your time analyzing that. However, you need to take into account that the selling price was only $65,000 difference than the buying price. Overall loss is more like $170K and not $200K if you really want to get more technical, assuming 5.6% interest and 20% tax break and the $2,500 rent over 48 months.
polip, simplify your life. My 401 was in a variety of mutual funds so yes, it lost about 30%. The loss of the house is greater because the investment was the down payment and not the asset itself, leverage???. However, the financing is not usually the investment, but rather a mechanism for purchasing the investment, unless of course you are investing in hedge funds and comparing those to homes. Had the property burned down and no insurance, he would have been in the hole for the full amount. It’s your fruit salad, not mine.
simplify your life?
you must not know what polip stands for…
i’m sorry, but your logic is so poor that i can’t actually argue against it!
polip: “what if we changed the story:”
Um, if we changed the story then we have a different story. What if we changed the story to this homeowner was able to walk away with one dollar from this transaction which he/she used to buy a lottery ticket and won $50 million! Then we can say this was a great investment. Or we can say a “changed story” isn’t relevant to the actual story.
Im saying that the investment of $860K only lost 7% compared to my mutual fund investment which has lost upwards of 20%. Is that simple enough for you?
Viewlover: polip’s whole point, which is pretty obvious, is that the “investment” was not $860k. It was $110k, all of which is now lost. That same $110k, invested in your 401k, would have lost only about $35k. RE Professional propaganda aside, how many $1M-range cash buyers do you really think there are here?
Sorry – I was thinking your 401k lost 30%. So the difference is even larger given that it’s 20%. $110k vs. $21k. Seems fairly obvious which is the better place for your $110k investment.
Shza,
You nailed it in very few words.
With a 401(k) you can lose only what you have. With a leveraged asset, you can lose your downpayment and more if you incurred expenses. Shelling 110K while buying a 860K house is as if you were using an 8 to 1 margin account. If the property goes up, you win big. If it goes down, you lose big (good thing there’s no margin calls in RE). This was a big casino and it is now closed for business if you don’t have 20% down.
In semi-related news,
calculated risk had an interesting piece on the current state of RE and banks:
http://www.calculatedriskblog.com/2009/07/cnbc-interview-with-bryan-marsal-ceo-of.html
I’ll copy/paste the interesting bits of the interview:
One of my partners said yesterday that we are going to call this phase the “extend and pretend” phase in our economy. Which is you extend someone’s maturity – because they are going to default – and you pretend that business will come back or that leverage factor is going to come back.
Then we’ll enter phase two, which he said is the request to extend or “amend”.
Then “send”. In other words send the keys.
That is the phases we are in right now. Everyone is trying to buy time, as opposed to dealing with the leverage, they are trying to buy time. Whether you are a banker or a company, they are all trying to buy time. I don’t see the leverage coming back, and I don’t see the consumption of good and services coming back.
Bryan Marsal, CEO of Lehman Brothers Holdings.
The whole interview is well worth the watch (~20 minutes). The guy has a great business.
viewlover
maybe i failed to explain it well
I’m guilty of that sometimes when my point is obvious. Shza stated it in exact numbers, instead of concepts. Is that easier to understand?
There was no ‘investment’ of 860k. That is the whole point.
how about this. don’t buy a house in SF unless you are willing to incinerate 100% of your first 20% of downpayment money. if it magically reappears, consider it a miracle.
You’re really giving people too much credit for using past events to predict the future. The only thing you can really glean from this is that you shouldn’t get into a time machine, buy a house four years ago, wait four years, then sell during the biggest RE slump in our lifetimes.
what does this mean for bernal?
“Dave”
I see you pulled a favorite variant of the Hoocoodanode defense. In short: Who could have known this was a bubble, hence nobody knows where it’s going, therefore do not look at the past to make your decision.
I have news for you. People who told you there was a bubble 4 years ago are now telling you the drop will go on for at least 2 years if not 5. And the damage will be beyond anything anyone has ever imagined (it already is anyways).
Listen to salesmen at your own risk.
Dave – I’m using past events to predict the future? That’s a good one. How about this one from the past: Real estate prices have never gone down and never will.
My point is that if a home purchase is desirable, and if the owner is willing to consider complete loss of the downpayment, then the prospective homeowner has adequately considered the risks to their ‘investment.’
Will they lose the entire downpayment? I have no ideas. But we must both agree that it is possible.
Now, we have no trouble understanding that that the cash out refi ‘created money.’
Why then do we not understand that the second owner watched as money went to ‘money heaven?’
In case one, through the miracle of fractional reserve banking (and possibly securitization), the bank created money out of thin air and put it in the refier’s pocket. This money was then used to buy big screen TVs and SUVs. The bank will never see the principal repaid or the interest on the loan (money heaven). In case two, no money was created. At best, homeowner two had the perception of being wealthy and may have stimulated the economy a bit more than he or she would have otherwise.
Lost down payments simply reallocate wealth from the (original) buyer to the (original) seller. Repudiated debt actually removes money from the system. I’m not sure why I’m saying all of this, as I’m sure you already know this… (it’s viewlover that I’m worried about).
I incline towards the personal view of “money heaven”.
The day before someone buys a house he imagines that his net worth includes the prospective downpayment. The moment after buying, he does not imagine that the money went “poof”, he simply thinks it’s been transformed into physical form (the house as store of value – one of the characteristics of “money”).
Similarly, the seller of the house doesn’t imagine that the sales proceeds magically “appeared” – he simply transformed his store of value into FRNs.
At some point as the market declines (cutting through all the clutter of money/credit models), that downpayment simply goes “poof” and disappears into the ether.
All this macro talk of “repudiated debt” versus reallocation has little relevance for the poor sap who is making his peace with the loss of his recently departed but presumably much beloved FRNs. As Uncle Joe said, “One death is a tragedy; a million is a statistic”.
Duh, I know the down payment was $110, and for some in the leveraged world that is the entire investment, I acknowledged that even though the logic was too poorly worded apparently.
This is where we differ in perhaps the way I view an investment. If the house would have burned down like I said, the owner would have been responsible for the $860K, he signed on the dotted line for that much liability. Just because he financed part of it does not mean that he is only responsible for the down payment. His out-of-pocket is the initial investment. If you chose to look at it that way, perhaps it fits your world, but not universal.
If the buyer would have paid cash, how would you define the loss? And you can’t discount the premise just because most people are not millionaires.
When a company builds a facility and uses credit and only a partial downpayment, if the facility is a dud and does not produce, what is the loss? Just the downpayment or the fact that the company now has a liability for the entire cost of the facility?
Perhaps I could have used a different analogy vs. a 401K but the point was that an equity investment suffered much more than the investment in this property in terms of its absolute value and not just the downpayment. Yes, my logic may have been difficult to follow but I did acknowledge the leverage.
worried about me? Come on, I’m just crazy but I’m harmless and usually ignored.
LMRiM
thanks for your .02
for better or worse, my explanations are not as clear as yours.
bottom line, it is semantics. when money dies, whether it is a patriotic sacrifice, repudiated debt, or just ‘a mistake,’ it is gone, poof, by bye, nada.
if the psf value of a house was unchanged and someone lopped off 500 sq ft of the house and demolished it, we would say that the price of the house dropped and that the slice of the house went to house heaven. if you own gold bars and someone cut a piece of it off and turned it to lead, that piece would have gone to gold heaven.
did it ever exist? that is a metaphysical question, but in our world of fiat currency, the metaphysical has left the realm of the mystical for the physical.
Viewlover,
Your attempt at trying to prove that the homeowner only lost a fraction instead of all focuses on the house. But that is wrong because the BANK owned part of the house, and the homeowner owned the rest. Unlike gold bars, where you own a set fraction of it, the bank’s ownership portion represented the first dollars in the value of the home up to the amount of the loan. The homeowner gets any excess.
The owner paid $110K to get that ownership interest and got back nada. So he lost everything.
You are correct in that the house itself did not lose 100% of the value, and he was responsible for safekeeping it, but if the home burned down and was not insured, he would not have had to write the bank a check: he could just walk away. He COULD write the bank a check to save his credit, but it would not be for the house, it would be to pay off the loan. His portion of the house would be gone and the bank assumes the risk of loss, which they pass off to an insurance company. He could also just keep paying the loan, though the bank might have an acceleration clause in that event. They might be able to sue hm for negligence in the loss due to fire, but if he set fire to the next door neighbor’s house, they could do the same thing: that doesn’t make him an owner of the neighbor’s house, it just makes him a responsible adult.
So you see, he DID lose everything. The structure of the deal was that he gets any EXCESS, and there was no EXCESS, so he loses EVERYTHING he had a right to. The bank probably got paid back, so it lost nothing.
LMRIM: “the poor sap who is making his peace with the loss of his recently departed but presumably much beloved FRNs.”
If the person that lost their downpayment had a love affair with FRNs they wouldn’t have traded their beloved FRNs for a house. Sometimes you really try to be too cute for your own examples.
“if the psf value of a house was unchanged and someone lopped off 500 sq ft of the house and demolished it, we would say that the price of the house dropped and that the slice of the house went to house heaven. if you own gold bars and someone cut a piece of it off and turned it to lead, that piece would have gone to gold heaven.”
So if I go out and trade $5 for a burrito, then I eat said burrito (which then causes me to be $5 poorer because I no longer have $5 or a burrito worth $5) have I sent the $5 to money heaven or have I sent the burrito to burrito heaven? Personally I just think I ended up with a load of…just like your other examples.
If the buyer would have paid cash, how would you define the loss? And you can’t discount the premise just because most people are not millionaires.
No, you discount the premise because it is not what actually happened in the situation that we’re discussing. Had a buyer paid cash, said buyer would have lost 7% plus costs. So what? This buyer didn’t do that. This buyer made a different (levered) investment. Just because GE stock is “only” down 40% doesn’t mean that someone who bought long January calls last September didn’t lose 100% of his investment.
But we’re really beating a dead horse at this point.
If the person that lost their downpayment had a love affair with FRNs they wouldn’t have traded their beloved FRNs for a house.
Most of the saps whom I have met in CA – and, by most, I mean 90%+ – think their housing purchases are “investments”. In other words, they think they are going to increase their FRNs. That’s why they pay so much more to “rent” the places from the banks than to “rent” them from long term owners who pay nothing in property tax. Sure, they’ll offer all sorts of reasons (“put down roots”, “paint”, “can’t be evicted”) but nothing squares if they really thought that they were going to incinerate their down payments or that the house was going to go down in value for 5-10 years (which is what is going to happen, btw).
With regard to this particular purchaser, if the FRNs weren’t important to him, he wouldn’t have tried to sell it for $949K last year, and he wouldn’t have spent almost six months trying to sell it this year, starting at $899 iirc. It looks like he wanted his FRNs back.
Instead, he got a good lesson fom the market, which I guess is worth more than FRNs. Ultimately, assuming that he at least covered the loans and there was no other sort of special expense, I think he got off pretty easy with just the approximately 100% loss of the downpayment. Presumably, there was no negative credit effect. $110K is not a lot of money in the overall scheme of things – at least it shouldn’t be for anyone contemplating paying $860K for a 2/1 (!) in Potrero Hill. (Over the life of a 30 year loan, at 6% we’re talking about $1.6M in p+i payments, and well over $500K in property taxes.)
sorry Rillion, your examples of the scatological are much more erudite.
but if we must: no, the $5 of FRNs you spent on the meal 1.) were transferred to the proprietor of the restaurant, 2.) provided much needed glycogen for your socketsite blogging endeavors and, 3.) assuming it was a tasty meal, it likely created some feelings of happiness. Thus, sorry, no money heaven here.
in our ‘cute’ PH home example, 1.) there was no transfer of money 2.) LMRiM would state that the loss was ‘tuition.’ and 3.) the owner may have derived some happiness or well being from owning the property.
Now, if we are to believe that the lesson taught by the market and the happiness derived from owning this home were equal to somewhere between 100k and 200k, then yes, I will recant and state that the incinerated downpayment did not truly go to money heaven – it was burned for the education and enjoyment of the recent seller.
I’m making the assumption that the recent seller was not entirely interested in the lesson, and that the enjoyment was not worth 100 to 200 grand. But hey, I could be wrong…
Ok, stop with the “FRN” nonsense. Please. We can just abbreviate them as “dollars” and everyone will know that you *really* mean “fiat money created by our Washington overlords.”
Whatever happened to the old Snatchel who gave us all a set of well reasoned, interesting and actionable economics lessons vs. this new guy who is just a scold?
all I initially stated was that the drop at 7% was less than the drop of my 401K, which is true.
You guys started to break it down beyond that, and ended up with the discussion of mixing up apples and oranges and that I was even wrong to make that comparison, yet comparisons about melting gold are OK.
Shza I know that’s not what happened, I’m not that stupid. Of course the guy lost 100% of his down payment plus other costs, to the tune of $170K as I mentioned before and not the $200K that was being thrown around. I even gave the variables as to how I arrived at that number. Did you bother to read that? Anyway, so we know the guy lost his shirt, what is your point?
No one was talking about leverages in 401K’s, that was polip as in anal polip, just to answer your questions as to if I know what polip means, polip.
Apparently, it has turned into a discussion about chopping off 500 square feet in a metaphysical world? I would have just called that person a fool and left it at that. But you can analyze that all you want, like I also said earlier, academic.
all I initially stated was that the drop at 7% was less than the drop of my 401K, which is true.
It’s also completely irrelevant. What is your point?
A hypothetical person with $850k cash in 2005 looking to put that money somewhere for 4 years would have done better to buy this house than to buy an assortment of vanilla mutual funds. Fine. Completely uninteresting, obvious, and irrelevant; but true.
This hypothetical person would have done even better to keep his money in cash and buy nothing.
This hypothetical person would have done much better than that if he had picked certain individual stocks and shorted others (or the market as a whole starting in mid 2007. Who cares that such foresight/acumen was unlikely–we’re dealing with purely hypothetical and irrelevant situations that we all acknowledge didn’t happen. It’s statistically extremely unlikely that any given person had $850k in cash in 2005 too. Or that, if they did, they would be purchasing an $850k property rather than, say, a loan on a $4M property.
These examples are all equally irrelevant to the situation that’s discussed at the top of this thread, which involved an individual with only $110k. Who spent it betting on this house. But would have been better off spending it on basically anything else. Including a portfolio matching your 401k.
“in our ‘cute’ PH home example, 1.) there was no transfer of money 2.) LMRiM would state that the loss was ‘tuition.’ and 3.) the owner may have derived some happiness or well being from owning the property.”
1.) yes there was, the downpayment was given to an escrow company, which in turn passed the money along to the previous owner. 2.) The house provided shelter for the time period it was owned. Now we can give our opinion of if that shelter was worth the amount he paid for it but it can be argued that $5 is too much for the burrito, that you can get a better one for $4 elsewhere, etc. 3.) The owner may or may not have had increased happiness for having owned, it is likely the end result and loss of his downpayment did not induce feelings of happiness but sometimes you end up getting an upset stomach from a meal.
I’m not arguing that this wasn’t a bad result for the buyer. I’m just saying you guys are now stretching the concept of ‘money heaven’ to include ANY money someone might have lost. If that is your definition fine just own the fact that you are using to the loss of any money, not just the loss of money in the housing market.
None of the money in this transaction disappeared from the financial system. None of it died. None of it was destroyed. This guy LOST money, but that money didn’t disappear, it’s just no longer in his pocket. Getting your pocketpicked isn’t the same thing as having the money go to money heaven in my opinion, you guys seem to have a different use of the term.
It was just a simple comment. No point, just like your irrelevant comments, you know like the one where you pay over $200,000 in taxes, or the one where you don’t like arts’ and crafts. Just like those comments.
It was ust a comment which I did’nt think I needed to qualify or get into and gloat at this owners loss and his lack of “foresight/acumen”.
The 7% drop was a surprise to me given the overall market conditions, it could have been much worse. And it has been much worse for other assets given this recession/depression or whatever you would like to call it. Or do you disagree with that too?
Well I’m glad to know I have an SS stalker meticulously noting my comments in other threads, I guess.
don’t flatter yourself, you guess wrong, I just read the comments and apparently have a good memory. I’ll make an effort to read your posts meticulously in the future and I’ll call you out on your irrelevancy, a-hole.
Wow, someone tried to minimize a loss by comparing an apple investments with an orange, got called for it, ran around the room looking for safety, showed his teeth and is now throwing insults. It’s not that bad, someone we know would already have threatened a lawsuit.
Shza. welcome to ss. there are people here who ahve been pleading your exact position for 3 yrs without any luck at getting the uber bulls to understand.
not sure why i bothered in the first place
so yeah, a 7% loss on the house wasn’t that bad, we should all be so lucky!
there, is that better?
really, is that what happened fonzi? I just made a simple comment and it got shredded by a bunch of armchair economists trying to impress each other with essoteric theories and pissing matches.
And its’ not like I’m the only one with teeth, you people bring out the claws right away and conveniently hide them when someone shows they have some too, hijacking the thread to even more esoteric crap in order give the impression that there is superior intelligence.
OK, I don’t understand the apples and oranges, so what, does that mean I have to endure your insults and condescending crap and should just take it? And not post any comments? I wouldnt call it running around the room, I was simply responding to the tangents some kept bringing up, which in hindsight, I probably should have just ignored.
Besides, have any of you been surprised by the drop of only 7%, or are you totally fixated on this sellers loss? I guess that’s the real issue, you bears can’t stomach the fact that this property has not fallen through the floor and will collectively stand back and point fingers and attack any comments that are deemed threatening to your assertions. Some point out that it really wasn’t the peak, as if that makes a difference. It lost only 7%!!!!! It really was just a casual comment, too bad you guys are way too serious, a sure sign of insecurity.
Exactly. These same 10 posters, some with names, some witout, have ruined this website with their love-ins. Same thing. Every day. They are no accounts, or they would admit how they were all talking about catastrophe occurring by now. Seven percent is hardly that. They all scoffed at myself and others who said, “yep. Change occurred. In September 2008, and the market shifted 5 to 10 percent down.” Look at any of the “apples” on here. They’re almost always within that range. What a bunch of no account zeroes. Too funny.
It’s sort of a shame tho. Look at that Bourn mansion thread. It so badly lacks some input from a point of real, seasoned experience. But nobody who has ever done that sort of seismic retrofit chimed in. They would have last year. Now tho? Too many haters. What’s the point of spending 20 minutes to share perspective when some douche who never did anything will tell you what construction numbers REALLY are like? LOL. Yay, they got what they wanted. This site is nothing but haters gassing each other up all day.
viewlover,
1 – Darn, I feel like some other debates where the other guy tries to wear everyone off with endless bickering. It’s a known tactic on SS and you know it well. Never admit anything, always counter everything and the one with the last word “wins” (in his dreams) and because he never admitted he was wrong. That’s why we get so many non-sequiturs too. Then the proudy NAR hitman can go back to the mothership and brag for having supposedly “shot a bear”.
2 – About claws and teeth. I didn’t criticize the teeth part, just that the whole discussion started from a false premise. A 100%+ loss vs 30%? Rotflmao! And then the explaining went on and on longer and more embarrassing by the minute until you checked all the escapes had been closed. Then came the “a*hole”. I could have kept the endless explaining go on laughing at a distance and let it die, but throwing insults just gives you the right for a brand new round of replies…
3 – Apples and oranges. You are obviously not serious. You have learned the good old book of debating, which is fight each and every point and say you don’t understand the other guy’s obvious idea, trying to belittle is argument and trying to bury the question. No wonder Shza must be fuming at the blatant dishonesty. Let me put it in simpler terms then:
Apple: Leveraged house that costs money on purchase, taxes, mortgage that loses 7%. The invested money is lost. Some of the mortgage payments is lost.
Orange: 401(k) non-leveraged, low entry cost, low holding cost, no taxes, maintenance, where the original 30% investment is lost.
Easy enough now?
4 – I never insulted you. But you did insult Shza.
5 – About numbers.
Hey, it’s only 7% compared to 2005! More news for you: the market went up for 2 more years until the top in SF in 2007. It therefore probably lost around 20%+ since the very top of the market. Just like a 2002 buyer will probably still gain selling in 2009, a 2005 buyer still lost 7% + costs.
Most bears here agree that the clock in prices for SF has gone back so far to around 2004 for prime, 2002 for non-prime, 2000 or less for East Bay. Therefore this 7% vs 2005 is no surprise. Last year we were talking how SF was still at 2006 prices. Early this year, it was all about the 5-10% that suddenly disappeared (it was about time to open the next page from the NAR book). Who knows what millesime we will be uncorking same time next year? 2003? 2002? I always considered the older the better…
Anyways, not worth much more of my time tonight.
Not worth your time tonight, your long post could have fooled me, but than I guess that’s easy in your eyes.
I acknowledged the seller lost money, $170K by my calculations.
I acknowledged that I probably should have used a different analogy.
So, since I had already acknowledged the $170K loss, why did I need to be reminded, repeatedly,like if I were stupid that the loss was greater than the down payment? I acknowledged that yesterday, not today. And the reminders were pretty nasty too, you may not have said anything up to that point, but SHZA was a real bitch with her condescending remarks at 2:40 about 15 hours after I acknowledged the loss. How would you have responded if she had made them towards you? And then Tipster as well, and then the whole gang. Did’nt you read that part?
Yeah, I know I dug myself into a whole, but not because I was stupid, but because I tried to reason with you nut cases and reply to your tangents. Polip was the one that introduced leverage, when you read that post, it really doesn’t make alot of sense, and then he hides behind sasha who hits the nail on the head. I should have ignored it because it really did not apply to anything that I was trying to say, but it was something he threw in there for the sake of argument.
Your still trying to put a finer point on the 7% in an attempt to make it seem meaningless I guess. OK, the difference of 7% was more than what your investments and your analysis tells you. Not stalking but I know you always brag about your short, long, euro’s whatever transactions. Stuff none of us can verify but I’ll take your word for it. And I know you probably have ever single penny you’ve ever earned multiplied many times based on that as well. So to you this whole deal was well within your targets, whatever they may be. Good on you.
To me it was pretty simple and my post a first reaction, 7% decline from a what appeared to be two exteme markets, rapidly rising prices to a climate of falling values. I tried to be a little careful with dates in my head and kept my initial post simple because I think that it’s hard to define the top of any market by district in this City, specially with so many different dynamics within each district, and also the bottom of each individual district. Both are still subject to further analysis to be able to draw much inferences, and I certainly did not want to debate this. (I see you don’t worry about these considerations, 2005 was a long year, same as 2007, seasonality, midpoints to midpoints in order to detemrine trends and real statistics can certainly be worked to support your arguments) To me, it intuitively felt that 7% was less than the 30% my portfolio was down.
That is really the extent of the thinking when I put up my post. You guys really started in on it by reading way too much into it. And when I made comments like different ways of looking at investments and what they mean to the bottom line in not just your world, but in other areas of business, you mock me. And after I fall for the bait well, I was just trying to secure the escape hatches.
In terms of embarrasments, what about some of the discussions on the other side? Talking about keeping the same price per square foot but the house gets smaller and melting part of the gold and postulating on the impact on the ethereal dollar or FRN. Please, were those not embarrasing? I know they did’nt directly address my issues, but DUH!!
I’m glad you think I’ve managed the art of debate. The thing is that I really did not mean to imply any thing about being bullish or bearish, I’m just confused by this market, and I’m in the middle of downsizing and actively looking, that’s all. You all turned it into a bulls vs. bears, and I think I’ve made it clear as to why on my last post…insecurity, that’s why you are still in this bickering debate, you’re projecting your SS tactics on me. I’m just defending myself, at least that’s how I see it.
Wow.
Viewlover, I’m a guy. You get a D- on your stalking. But don’t let that stop you from calling me a “bitch” in comments on a blog because you don’t understand basic economics or elementary logic. You can just be faux-tough instead of misogynistic.
I’m just defending myself, at least that’s how I see it.
You’ve now reacted to my impersonal arguments by calling me an “a-hole” and a “bitch” (hours later) and non-sequitur referencing comments I (and Fronzi now too, for that matter) made in separate threads (which were actually relevant to those threads and/or were responsive to comments made therein, for the record). So I guess it’s not surprising that you’d be so misguidedly self-righteous as to see things the way you do.
But somehow it’s everyone else who’s displaying “sure sign[s] of insecurity.”
BTW: You actually did introduce the leverage idea. Polip was just the first one to point out that it was implicit in your faulty “analogy.” And while you’re at it, note that the equivalent of $850k cash for a house is actually $1.1M+ in 401(k) contributions once you add the income taxes back in, so you’re not even right on your bogus comparison (1.1M – 20% = 880k).
. I rebalanced the currency from March to October 2008 to more USD and almost hit a 1.60 trade one time, averaging about 1.49 USD/EUR total. I stopped loading up the truck on USD in 10/2008 when the EUR went under 1.40.
Hey Soros, next time you make a currency move, tell us in advance, so we can trade with you, okay? LMRiM does this, why can’t you? It is not like the currency markets are not liquid enough. You don’t have to worry about us killing your trade.
NVJ,
I was saying it last year on SS if you were already following my posts. When I have the time I’ll point you to the post where I said I was rebalancing my Euro/Dollar positions.
I sold Euros because I had some and because when it seems too good to be true it probably is. That has been my main principle when buying RE (so cheap in 97-2001 compared to rents), when selling the same RE a few years later (overpriced in 2005-2006) and when the Euro shot through the roof (from 0.85 to 1.6USD). I have gotten lucky a few times in my life. No need to snide people on that. It just happens.
From my experience I do not believe that 2007 was the “top” of the market. I started casually looking at places in 2005, actively looking in 2006, and bought in February 2007. The places I was looking at peaked in 2006. I started seeing the less then perfect places linger on the market in 2006, where they hadn’t in 2005. The marginal properities and lower end stalled out first so “medians” likely still climbed due to the mix into 2007.
But that doesn’t mean that for each individual property that 2007 would have been the peak. I think it is more useful to view the “peak” as a semi-plateau during the 2005-2007 period.
I acknowledged the $170K loss way before you came into the picture. I did’nt think I needed to elaborate that a $170K loss is more than the downpayment. Granted, I don’t understand some of the crap you people throw out there, but again, I’m not convinced some of you actually know what you’re talking about. I think you just got on the bear bandwagon and are really having a hard time trying to marginalizing the 7% fall in this property. I’ve explained my reasoning, a casual comment that obviously can’t be made on this site. And like Anonn pointed out, its the same story from you guys. I’m not stalking anyone, but I do read these posts and after a while one can certainly draw conclusions from the posters, your points are the same over and over.
Maybe your a guy but your postings give me the impression of Quentin Crisp personified. Sorry, not an insult but rather an observation given your “prose” and I’m sure I’m not alone.
I may not know complex economic theories but do you know real-estate? After all, you guys only talk about macro-economic theories and gloat at the losses and say what you would have done differntly, but WHAT HAVE YOU ACTUALLY DONE? Avoided the current market and called everyone in it a fool, though some fools are laughing all the way to the bank while others are actually suffering losses. How come you are not making fun of the wall-street guys that are losing too?
It seems the market has not really followed your models of catastophe even under the biggest recession since the depression. When I made my initial posting I was not even thinking about that, but you guys have your antennas up for anything that may threaten your bear notions. In reality, the SF market is rather complex and you have not even begun to talk about that. It is quite puzzling since prices are still pretty high and qualified buyers are stil buying, and houses out in the avenues, like in the 40’s are still going for over $700K and the unemployment is higher than it’s been. And this house only lost 7%. Yet your arguements don’t address any of this, you just discount it and move on to your safety net, crap that no one understands but makes you feel like an intellectual. That’s OK, it’s a free site afterall and we are all free to post until the editor reins us all in, just don’t kid yourself into thinking you are all that.
viewlover your post just remided me to take my pills… is it time for yours yet?
chuckie, go ahead and take them, unlike you I function well without any. I don’t need 72 degrees for my brain, I can stand the heat and then some.
I was saying it last year on SS if you were already following my posts. When I have the time I’ll point you to the post where I said I was rebalancing my Euro/Dollar positions.
Sorry, I must have missed it, I don’t always have time to read every post. Congratulations on your timing, it is hard to do, especially with currency, though plenty make a living on doing exactly that. I have been lucky a time or two myself, so I understand how it can be. Some people find it hard to believe that I have worked at three start-ups in my life and two of them went public and the other got bought out.