Dear Spoiled Spoiled Fools Like Les Christie: Home Prices Have Barely Dropped!

Posted by Timothy Sykes on Thu 30th of Oct, 2008 07:27:58 AM

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So now that home prices are down 17% year-over-year, people are starting to get a bit panicky.

(Barry’s got a great graphic/breakdown of the stats here)

Wannabe financial journalists like Les Christie of CNN Dummy use words like “plunge” and “record drop” in this piece of crap article don’t realize that a 1% month-over-month decline and under 20% in a year ain’t nothin’!

Hell, that’s just the monthly loss is the average daily loss of the stock market this month alone! And 17% in a year, pleassssse, when you add up the perfect economic storm, leverage and illiquid assets, 17% is a friggin gift!

Of course, it’s still probly early in the cycle…

Ex-home-flippers-turned-priests (because they go to church so much to pray for their financial souls) like to reason “everything will rebound eventually”, but they don’t realize it’s possible housing could drop 50%+ and take decades to/never recover.

Check out this scary Japanese real estate bubble graphic and be afraid:

No way to know how low we go, but I’m 100% sure housing people ain’t prepared for the potential pain.

How is this related to PennyStocking? Well, the key to successful trading is understanding the risk/reward BEFORE you put ANY money down on an investment vehicle. If you’re shorting a stock and there’s $1/upside and $5/downside, especially when the downside appears likely, that’s a good trade (like my RBCAA trade from the other day)

And it doesn’t matter if you take a loss every now and then, we make mistakes as we’re only human, but we must be sure to cut losses quickly so as not to f%^ck with the risk/reward ratio (allowing a $5/share loss with only $5/of potential reward is not a good trade), so the more transactions you make with that kind of risk-reward profile, the greater your eventual gains will be.

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Tom

Agree - a lot of the talking heads don't seem to get that we not be coming out of this for quite a while

Rod Hardener

Tim,

Your point misses the fact that most homebuyers are levered AT LEAST 5 to 1 (assuming 20% down) and therefore a hypothetical 17% loss is in fact a "plunge" in a homeowners equity. You can follow this math, no?

younggunz

Yeah, I really wished I stayed a renter. The housing market is very isolated though. Places like California, Nevada, and Florida are really driving most of those numbers. Housing prices in my area are holding pretty good. I don't know how NY area is but in the midwest it really isn't that bad. There really isn't much for appreciation but if you have a house in good shape it isn't that hard to sell it.

younggunz

I do not believe the housing prices will get back to their highs for a very long time considering they never should have been that high in the first place. I watched an episode of Flip that House once where someone was selling a fucking piece of shit 2 bedroom 1 bath with no AC for half a mill. Shit like that is just bananas.

CletusVandamn

Rod Hardener people were not putting 20% down. They were putting even less.

Timothy Sykes

oh i understand how leverage destroys but just think how bad it will feel if prices drop another 30%!

younggunz

I could easily decide to be a piece of shit and walk away from my house. Not too fond of it but I also paid no down payment. Just closing costs. Get an extra 90 day freeze from foreclosures from Obama and I could stay in my house for another year and not pay my mortgage. My credit would be trashed but I would have a nice 15 grand if I saved all the money I would have paid for my mortgage.

That scenario is exactly what many people are doing now. Their house isn't worth shit and they're paying a couple thousand a month for it. Its so easy to stop making payments and save up all that money and ignore the creditors until you finally get evicted which takes 6-12 months to happen depending on your state and if Obama gets elected they can get 3 more months.

vestor707

Let somebody rent your house and pay down the mortgage. I have several rentals
that have fallen about 10% but my renters are still paying down the mortgage.

younggunz

My financial situation is secure I was just stating the fact that I could easily do it and that for some people they are already doing it.

younggunz

I have actually considered renting out my house when I go to get a new one. Its the size and price that is good for single family rental.

:(

Stay away from economics, you have no skills there.

Timothy Sykes

forget economics, just expectations, people are spoiled, i need to unspoil them

DT

In Southern Cali its down 20%, but the fact is the homes on the market are not selling, so its much higher to get out.

You should NEVER keep equity in your home. The biggest misconception around is paying off your home, especially at these rates. Put it to use in other places, just dont spend it like so many people did (dumb). I can make 20%+ on my home equity while paying interest only to borrow that money. Thats the way I roll.

StockRake

I agree more pain ahead, but not like Japan. We have something that Japan doesn't. Considerably more Immigration. Japan is still one the most homogeneous country's on the planet and their immigration is very limited in comparison. We won't look like Japan does on the housing front even though housing prices still have not suffered the way they should have here.

WallStWarriorWatcher

Spoiled?!!

Americans who graduated before 2001 bubble bursting are all spoiled...your parents made money doing easy work on house, on dotcom stocks, etc.

You and I are in the boat where we graduated with ever higher education debts (time value of money?), never could buy a home, and now with government saving the homeowners who shouldn't be there in the first place, we can only wish to buy a cr@phole for $500MM....

Eventually baby boomer leechers will die off and we will have sanity back in this country, but I'm afraid that isn't for another 10 years and before that we will have the next big crash....all these lucky boomers living off of your taxes using social security and medicare.

Kiss good bye to meritocracy. Here comes massive inheritance. You might be able to make $1M and retire, but guess what, the idiot sons and daughters are going to inherit more than you can ever make....what a great capitalism we have!

JJ

Narf!

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