Is the home real estate market in the US spilling over?

[TaoJones]

Real estate always was, and always will be, worth exactly what it sells for at the moment the sale is made. It has no intrinsic value, only the perception of value.

A property is not "worth" what the seller is asking for it, that is merely an expression of the seller's desire to sell it, and an indication of what he (or, more accurately, recent comparable sales) infer as the "value" of the property. An astute potential buyer, however, recognizing that the trend is downward, will point out that those comps are dated and offer considerably less than the asking price.

So, the seller doesn't expect to get what he's asking (unless it's stated as a "firm" price), and the buyer doesn't expect to acquire the property at the amount of his offer. Both parties expect to settle somewhere in between the two prices, and further offers, counteroffers and negotiations are the usual way the interested parties arrive at a common number. That number is the "worth" of that property, on that day, as agreed by those two parties - nothing else.

The same thing is true of selling boats. Until a buyer and seller reach agreement on the selling price, the boat's "value" is unknown. And sneuman is exactly right - when it comes to boats, it's always a buyer's market!

Originally Posted by Therapy

My plan is to see what happens between now and Dec, or maybe Dec of 09. If I do not like what is happening then, I will do something pretty crazy. Everyone that might need to know has been warned.

Oooooooo . . . sounds ominous. Here's my question, Therapy, if your wife told you two years ago that it wasn't the right time to sell your house, why would you grant her any credibility now when considering whether to buy a boat?

TaoJones

[Alan Wheeler]

The same can be said for the value of a used boat. Many have unrealistic views of what their boat is worth. Often as a result of the hard earned dollars and time and effort they put into the boat while they own it. They will never realise that investment, yet many expect they should.

[JiffyLube]

Originally Posted by sneuman

this might be informative:

Boating Industry Slump Could Signal Recession : NPR

I had to chuckle at what the link said...we're alread in a recession...lol

[JiffyLube]

Originally Posted by Therapy

Yes,
I would begin low-balling if the wife would get on board.
She says, "It is not the right time yet."
She is right about selling the house now. When I said we needed to sell it two years ago she said "NO".

My plan is to see what happens between now and Dec, or maybe Dec of 09. If I do not like what is happening then, I will do something pretty crazy. Everyone that might need to know has been warned.

Two years ago was around the top of the market, and I sold a house we owned in Michigan (we missed the peak by a few months)...any later and we would have had to take a lot less. I'm sure glad we sold when we did!

[JiffyLube]

Originally Posted by sneuman

I have a feeling that home values will not hit bottom before at least the end of the year. I would guess the boat market will be in the same ball park. It's (always) a buyer's market.

I agree with you...for 'at least' before the end of the year...maybe longer.

[svrecess]

My bet is that the bottom is at the end of 2010. The derivatives mess is just getting underway, and once they start printing money, it will take a while for the the inflationary effect to appear. Not being an expert, I listen to jim sinclair, who is convincing to me -- jsmineset.com (it's one of those sites you might have to follow for a while)

[TaoJones]

Originally Posted by klawrence

My bet is that the bottom is at the end of 2010. The derivatives mess is just getting underway, and once they start printing money, it will take a while for the the inflationary effect to appear. Not being an expert, I listen to jim sinclair, who is convincing to me -- jsmineset.com (it's one of those sites you might have to follow for a while)

Bless you, my fellow CIGA, but don't bet anything you can't afford to lose on your prediction.

Along those same lines, here's a link from Jim Sinclair today that a lot of Cruisers Forum members from Florida may already know all too well:

* * * * *

"Overdue loans to Florida banks quadruple

"By James Thorner, Times Staff Writer
In print: Thursday, June 5, 2008

"The housing downturn continues to crush Florida bankers: Overdue loans, mostly real estate related, have nearly quadrupled the past year in the Sunshine State. . . "

* * * * *

For the rest of the article, go to:

Overdue loans to Florida banks quadruple - St. Petersburg Times

And once you've digested that, check this out:

* * * * *

"Primed for Trouble: Pace of Mortgage Distress Shifts to Prime Borrowers

By PAUL JACKSON
Published: June 5, 2008

"While foreclosure activity hit an all-time record in the first quarter, according to statistics released Thursday morning by the Mortgage Bankers Association, a shift of the mortgage mess towards prime borrowers appears to be taking place as well — signaling that the credit crunch that began among those with less-than-perfect credit may now be marching onward towards borrowers usually deemed better credit risks."

* * * * *

For the entire article, go to:

Primed for Trouble: Pace of Mortgage Distress Shifts to Prime Borrowers : Housing Wire

TaoJones

[DeepFrz]

Yeah, Barak Obama is going to take over one heck of a mess.

[roverhi]

Don't know if Barak is going to be the inheritor but if he's serious about his economic policies, they will make it worse.

Aloha
Peter O.

[spencer53]

When the housing market was in it's "bubble" I would guess many boats were purchased out of equity loans. The same loans that are flipped upside down now. Just an opinion. Now that we are seeing fuel costs go through the roof, I suspect many potential purchasers are now thinking twice. Funny thing though, I recently spoke with a friend of mine who is a broker. He said he is having a hard time getting inventory to sell. Figuring it's a bad time to sell a house, perhaps you could look at selling a boat the same way.

[Wayward Wind]

My son just bought an apartment in New York City. When he started looking last year, he would offer about $15,000 less than asking price, and would always be told to "fuggidaboudit". On some occasions, buyers would offer higher than asking price. When I visited him during Christmas, I read that prices were up 35% in Manhattan last year. Then this year, he noticed that vendors were actually listening to his offers, so he lowered his offer by another $5000, and ended up buying one.

[GordMay]

Originally Posted by TaoJones

Real estate always was, and always will be, worth exactly what it sells for at the moment the sale is made. It has no intrinsic value, only the perception of value...

I am a largely ignorant & callow investor, whereas TaoJones has demonstrated a sophisticated knowledge of these matters. Accordingly, the following should be considered earnest questions, not statements.

In my frail & fallible understanding, I thought that real estate had an intrinsic value at least equal to the cost of shelter.

Costs (mortgage, maintenance, taxes, etc) accrue to owning a home.
These costs are offset by the alternative costs that would accrue to renting.
Isn’t the difference intrinsic value?

Can’t investment properties also have intrinsic value, which might be calculated by income less expenses?

[David M]

Gord,
The I don't think there is an intrinsic value. It all boils down to what someone is willing to pay for the land and not what the current owner does to the land or believes the land is worth. The buyers side determines the value and not the sellers side.

David

[Therapy]

Originally Posted by GordMay

I

Costs (mortgage, maintenance, taxes, etc) accrue to owning a home.
These costs are offset by the alternative costs that would accrue to renting.

By the by, has anyone ever totaled up what was spent to house oneself if renting vs buying a home? This would, of course, keep as many apples as possible.

I have not done it because my math skills are poor and I guess I am lazy too.

<edit>

DANG!! I knew it, well........I know it now.........Dang.

Something about learning as you go.

http://www.nytimes.com/2007/04/10/bu...=1&oref=slogin#

Renting vs. Buying: The Realities of Home-Ownership ∞ Get Rich Slowly


So it is all emotional really. Like buying a boat.

[svrecess]

this is a little related, but since you said "offset" the cost of owning, I thought I'd share a real life comparison. I always get aggravated by those junk mail postcards the realtors put out, saying "no money down!" "why throw money away renting?" for one, they are totally wasting paper on unrecyclable materials (I don't think you can recycle paper with those glossy surfaces). Two, they are straight up lying!

person A buys a new house for $120K (this is texas where house prices are somewhat sane), has a monthly payment of $1010, whereby on this 5% 30 yr loan, only $190 goes to principle. Person B rents for $710, thus pocketing the $300 difference. Eventually person B will save up a bunch of money, put that down on a house, and end up paying less interest on a smaller loan too. Obviously with no money down renting is the better solution. A smaller loan that would result in interest of $110 less would make more sense if you could do it. You all may know that, but seems like a lot of people think paying back a large loan is always better than renting.

To the other point, the $190 in "equity" really isn't necessarily $190 if no one wants the house. On the other hand, you might say the $300 is always $300, but in a fiat paper money system, $300 tomorrow won't necessarily buy you $300 worth of stuff today. In Zimbabwe, the minimum wage is Z$6 billion, and inflation is 300,000%. In the US, the government says CPI is 3-4% (but have a look at Shadow Government Statistics » Home Page which will tell you it's more like 7.5% -- be sure to read John Williams' bio at the bottom of the page), but what will happen next year?

I guess the difference is you can do whatever you want with that $300, whereas the $190 is tied up in the house.