April 26, 2009

So do you think the people who listened to a realtor and paid $500,000 for a 2-bed condo that could rent out for $900 now understand this quote?


"Price is what you pay.

Value is what you get."

-Warren Buffet






(and even though $500,000 now is $300,000, rent is still $900 at best, and after taxes, condo fees and expenses, we're still nowhere close... despite the year-round-golf and pro athletes)

23 comments:

6% of Nothing said...

Value...

Between 2000 - 2006 many Americans ignored the word while purchasing homes,cars,boats and RV's.

Now value is reminding them that it has a place in the world which cannot be taken lightly.

Great quote Warren...I will pass it along to the kids.

casey said...

Bend over and meet your new landlord!!!!!!!!!

how is working for wall street bitches?

Time to buy stocks fools!!!!!

My homes all cash flow!Thanks for making me rich.

Mark in San Diego said...

A French philospher said, "change comes one funeral at a time.". . . I think we could change that to "housing panic comes one foreclosure at a time." Considering last month broke the all time NOD (notice of default) record, this "housing panic" has a long way to go. The top of the market here in SD is now imploding, while the very bottom is now pretty flat . . .why? You can buy a foreclosed house for 150K in North County, and can rent it to a Marine family at Camp Pendelton for $1600 (the military rent allowance here). . .cash flow positive. . .BUT - try doing that with a still 450K one bedroom condo in a "luxury" building. . .lucky to get $1400, and more like $1200!

People who rented their overpriced places are now getting washed out because their rent comes nowhere near costs. They are starting the walk-away process big time.

Anonymous said...

However crazy the housing boom was in the US, it was by far way worse and totally insane in Europe.
Income to housing prices in the EU and Eastern Europe were so out of whack, that it will impact the European economy much harder and longer then the US.

Got popcorn?

mimi said...

No - people are still too stupid. They still think they need to "own" - but until the gap between what rent and "buy" is narrowed - it's still cheaper to rent (in my area anyway). Speculators probably understand now. Smart investors probably weren't stupid enough to buy something without considering cash flow in the 1st place - but an awful lot of people buy $500K condos to actually live in and probably never even consider what they might be able to rent it for. Anyone that bases a home purchase solely on the advice of a commissioned-based realtor or mortgage broker deserves to own a $500K condo that they can only rent out for $900.

greg s. said...

My realtor told me rents are going to the moon.So I went and bought a 600k condo in scottsdale.I miss the pink taco though.I am now losing 1600/ month.I am looking for my realtor to talk about things.I saw mike tyson plastered the other night promoting his new documentary.He has put on some weight bigtime.He was hooked up with two of scottsdales finest from dirty scottsdale.I wish him well.

Happy Leprechaun said...

Not much talk here about the Iranian hostage,

Mostly cause she’s Iranian herself, (with US citizenship)..

It’s a reminder that thanks to the suicide societies; general value of Muslims heartbeat is equal to the value they give it, which is zero…

Anonymous said...

If rent is $900, wouldn't $100,000 be what the condo would be worth, give or take 10 k?

grandma pkk

I think it was Donald Trump on cnbc probably Friday morning who said you can't get mortgages on condos, for the most part. If it wasn't him, somebody said it, my back was to the tv.

k.w. - Southern Ca. said...

When more and more people lose their jobs, prices will continue to plummet.

I never played the game of acting as the landlord who enjoys bending tenants over the barrel, but many do ... or at least did.

The whole housing porn game is heading straight for the gutter where it belongs.

k.w. - Southern Ca. said...

Mark -

You really nailed it - and that's what is really happening down here in the beach cities as well.

The really scare thing though is that this process is just getting started.

Those who are forced into giving back the keys to the banks house they were making payments on will find themselves renting (if they still have jobs) for a long time.

Nothing wrong with renting - it's more cost effective all around.

The era of excessive living is coming to an end, simply because we've run out of resouces to keep this wasteful game of greed going.

Mark in San Diego said...
A French philospher said, "change comes one funeral at a time.". . . I think we could change that to "housing panic comes one foreclosure at a time." Considering last month broke the all time NOD (notice of default) record, this "housing panic" has a long way to go. The top of the market here in SD is now imploding, while the very bottom is now pretty flat . . .why? You can buy a foreclosed house for 150K in North County, and can rent it to a Marine family at Camp Pendelton for $1600 (the military rent allowance here). . .cash flow positive. . .BUT - try doing that with a still 450K one bedroom condo in a "luxury" building. . .lucky to get $1400, and more like $1200!

People who rented their overpriced places are now getting washed out because their rent comes nowhere near costs. They are starting the walk-away process big time.

k.w. - Southern Ca. said...

That's very true, and I heard this first hand from two people from London who were traveling the states about 2 years ago.

People having to take 2 or 3 jobs, and still living in pretty slummy conditions.

As revolts against the establishments take shape more largely across Europe, we can learn alot - and perhaps prepare - when we start seeing more massive uprisings here.

I'm getting my popcorn.

Anonymous said...
However crazy the housing boom was in the US, it was by far way worse and totally insane in Europe.
Income to housing prices in the EU and Eastern Europe were so out of whack, that it will impact the European economy much harder and longer then the US.

Got popcorn?

Anonymous said...

Housing Price Affordability Index has not been reach yet.

Do housing prices have to go down more.

http://www.demographia.com
/dhi5media.pdf

If the median houshold income of a particular urban market is $50,000, the median house price should not exceed $150,000 (3 times earnings) and acceptable new stock should be allowed to be built at the fringe for 125,000 2.5 times earnings).

If the local median household income is $60,000, housing should not exceed $180,000, with housing stock being providd on th fringe for $150,00.

http://marketinfo4all.blogspot.com/

San Jose, Calif., Mayor Chuck Reed calls a family living in Silicon Valley earning $250,000 "upper working class." That is about what two engineers working at a technology firm can expect to make, but "a family earning $250,000 a year can't buy a home in Silicon Valley," he said.

Anonymous said...

"Price is what you pay.

Value is what you get."

---------------------------


hmmm, something is very out of whack with the amount of taxes I pay because i certainly don't get as much value out of them as others who pay very little or none (or receive a tax refund when they pay zero, now that is value.)

Anonymous said...

Let us not forget another Buffett classic:

Be greedy when others are fearful.
Be fearful when others are greedy.

Anton Chiguhr

Anonymous said...

"Price is what you pay. Value is what you get."

What does that say about the people who paid 11X their income.

http://caps.fool.com/blogs
/viewpost.aspx?bpid=185645

Oh, yes, the "everyone has to live somewhere" argument for home prices.

They don't have to own the place they live in.

There is so much excess supply on the market, plus something like 3 million foreclosures coming onto the market this year, plus 500,000 or so new homes being built, plus rental vacancies quite high.

There is no reason to buy until it is much cheaper than renting. It depends on where you are, but prices can fall a long long way in the former bubble cities.

Take San Francisco. At the height of the bubble, Bay Area median prices were $780,000 with a median household income of about $72,00. 11X median income! So what if prices have fallen 30%.

The median house is still 7X median income.

Prices could legitimately fall another 30% and they'd still be very expensive (5X median income) compared to the rest of the country (2.5X median income).

Anonymous said...

Value is what you get.

Location, Location, Location - if you did not want to buy a $25,000 house before the housing bubble why would want to buy it now.

http://www.sacbee.com
/realestatenews/story/1810481.html

Wesley Ellinghouse, a real estate agent, inspects the kitchen of a three-bedroom house that he has listed for $25,000.

Experts predict there will be more homes at that price coming onto the market.

Nimesh said...

Let me tell you, a lot of people STILL DON'T GET IT!!! Here is a dialogue I had with a co-worker:

Nimesh: "you seem down today Michelle, what is the matter?"

Michelle: "God, I am 29 years old and I feel like a total loser".

Nimesh: "Michelle, why would you say that? You have a great job, a secure job, great benefits, a family that you get along with and you are about to get married in four short months".

Michelle: "Nimesh, all of my friends bought a house or a condo and look at me. A loser. I am still renting, throwing money out the window, month in and month out".

Now, I explained all of the fundamentals, all of the logical reasons, and I even referred her to several excellent real estate websites (i.e. the old Housing Panic blog, patrick.net, Mish Shedlock, Robert Prechter's book, etc...). But after all of that, she said, "well what you are saying makes sense, but we are ready to jump in and going to buy a condo for $459,000, it's such a bargain, located near the park and a lot of bars and restaurants are around. Note- if she wanted to rent her condo, the most she would get is $1200 to $1350, any more than that is just being delusional.

A lot of people in our country are so darn enthralled by buying their own property, even though you are a home debotor. THEY JUST DON'T GET IT AND NEVER WILL.

Mike H. said...

I have nearly $400K sitting in and ING direct account. With todays low interest rates (thanks Ben) this pays a monthly interest of about $900, not too far from what the house rent is on the example 500K house.

Every country is pushing ZIRP in a desparate attempt to prop up high asset prices, or at least keep them from crashing too quickly.

You have to remember for the fucked debtor it's not about the price, it's about the monthly payment. That stupid credo is what created a generation of debt slaves and will continue to keep people indenturing themselves.

The real value and deals will be had when we are still in a recession and the FED is forced to raise interest rates because nobody will buy their treasuries otherwise.

When interest rates shoot up, 2 things will happen. First the GSE's or gov't institutions of Freddie & Fannie with all the 4-5% loans out there will lose crazy amounts of money when the interest rates are 8%+, and the gov't will have to throw more money at them.

But at the same time people trying to get into a new house won't be able to afford it. Prices will have to come back down to 2.5 - 3x median incomes. Zero interest rate policy (ZIRP) is the best attempt to keep the house of cards from tumbling but market forces will drive the agenda.

It hath been foretold.

Keep renting, get popcorn, get cash and wait.

-Mike

belchorama said...

I like this Mike H. guy. He gets it. So few out there have thought about what is going to happen to the demand side of the housing price equation when the fed is eventually forced to increase interest rates. More downward pressure!!! And if they adopt a permanent low interest rate policy, I'm positioned to benefit from the dollar going to shit, and I'll have plenty of shit-worthless dollars to plunk down on a low-interest mortgage!

Enjoying the implosion immensely. It's been about 2 years since any smug people have tried to tell me how smart they are for investing in a stucco box. The smug folks of 03-07 seem to be awfully quiet these days. And prices starting to look almost reasonable here in the East SF bay area. Almost. I'll wait till they're lower and stable before jumping in, since I'll be ponying up honest money.

Anonymous said...

To Happy Leprechaun !

You should never generalize! What you wrote is a reflection of your IQ which is zero.

George L said...

this is how they are going to make the prices go up gain.

http://www.youtube.com/watch?v=qvrc7x3Amps

banks and builders are leveling MCmansions.

Anonymous said...

that forclosed house in north county was 85,000 when uncle sams banker was selling it to the politically correct and maybe bribe slipping broker who bought it on tuesday and had it for sale on fridasy for 150,000

Anonymous said...

I have seen some very nice places fore 40,000