With fewer people being able to afford homes, Freddie Mac seeks widespread expansion of 3% down mortgages.

Low down payment mortgages are creeping their way back into the market like a cat sneaking up on an unsuspecting mouse.  The only difference here is that the mouse is a million dollar crap shack with a 30-year mortgage attached to it.  People forget that Freddie Mac and Fannie Mae, the massive Government Sponsored Entities were nationalized U.S.S.R. style during the Great Recession.  Now that times are good all caution is being thrown into the wind and we are setting up the stage for Irrational Exuberance Part II.  The U.S. economy is built for boom and bust cycles.  Massive credit expansion is occurring and while people are working, their dollars are not stretching as far as they would expect.  In San Francisco, you are now considered “low income” if you make less than $117,000 a year.  That makes sense when a standard home sells for $1.5 million.  So now we have Freddie Mac attempting to push 3% down mortgages on a much larger scale since many people are priced out.  What can possibly go wrong?

Who needs a down payment?

There are costs associated with buying and selling a home beyond the mortgage or the down payment.  You have closing costs and in many cases, there are commissions to pay out once escrow closes.  These may range from 3 to 5 percent.  So when you purchase a home with a 3 percent down payment, you are essentially putting yourself in a zero or negative equity position from day one if you needed to sell.  Any little dip in the market can put you in a tough spot.  Say prices drop by 10 percent and we have a modest recession.  Then say you want to sell.  Now you find yourself underwater and will need to pay to sell which was the case when we had our foreclosure crisis.

Housing values soared in practically all major US areas.  Yet household incomes are simply not keeping pace and that is why affordability is so low.  That is why California is becoming a renters paradise.  So of course it is no surprise that Freddie Mac wants to make it easier to purchase homes with less money upfront:

freddie mac

Now the FHA already backs up low down payment mortgages but these are constrained to lower to middle income areas.  Freddie Mac is looking to go even bigger:

The big difference here is that there will be no geographic and income limits.  This is really interesting and shows how quickly we forget about financial prudence.  The sentiment is clear that people want to jump on the bandwagon and purchase homes even if it means they will go into massive mortgage debt.  They rationalize that home prices have soared and don’t want to miss out.  At the same time, the stock market has also soared.  Why not go back in time and buy Amazon or Apple stock?

The middle class in California has been slowly cut down and you view this through more and more households becoming renters.  Housing prices continue to be high because of low inventory, NIMBYism, foreign money, investors, and a variety of other factors.  But all of these hinge on a stock market and economy that has been in a bull run for nearly 10 years.

Look at US affordability:

The last time we saw numbers like this was in 2009.  But look at the L.A. metro area:

Buying a home is very difficult and so is renting.  So it is difficult for many households to save a healthy down payment to purchase a home.  In comes Freddie Mac with a potential solution.  And since everyone wants a piece of the pie, here we go.

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352 Responses to “With fewer people being able to afford homes, Freddie Mac seeks widespread expansion of 3% down mortgages.”

  • Rent costs always appear to be the hidden driver to force people to make irrational exuberance decisions when buying crap shacks. Renters are doomed to become foreclosure candidates when the SHTF.

  • Low down mortgages are a good thing … as long as the borrower has better than average credit. Otherwise, generations of regular folks would never have a shot at the American dream.

    • I thought mortgages provide for exorbitant prices, without them houses would have to be cheaper? Or allowed to be smaller?

      • I heard a while back that in South America, it’s custom to pay the entire price in cash for a home when buying, rather than getting a mortgage to finance your purchase, and that this is why houses in South America are priced so low relative to, say, the United States.

      • Laura Louzader

        A cash- only regime, or at least one that required a substantial down-payment, would certainly keep prices low, and did so until until the post WW2 era was well-advanced. I grew up in the 50s and 60s, when low-down payment mortgages were available only for those who got FHA & VA loans, and those were mostly available only for new houses in the brand-new lower middle and middle class “bedroom” auto suburbs that were springing up around all our older cities in those years, and which were probably THE major factor in the decimation of our older cities. Most people still went “conventional” with a 20% or more down payment, which you had to if you bought an older house, or in an older city or suburban neighborhood. House prices stayed low relative to incomes in the 50s and 60s, and houses, new or older, tended to be much smaller, mostly 1200′ to 1500′ sq ft. Only affluent buyers bought houses with 2000 sq ft or more, or even multiple bathrooms.

        Sadly, our population and the corporations selling them goods from houses to cars, boats, and other “aspirational” consumer goods, discovered the dubious joys of revolving credit during those years, but at least you were prevented from tapping your home equity to buy consumer goods that outlived their use long before they were paid for. The result was the massive credit expansion of the past 50 years, and especially the last 30, that has swelled real estate and other asset prices to levels unrelated to dwindling real productivity of the underlying economy and created the biggest overhang of consumer, corporate, and government debt as a percentage of GDP in history.

      • LOL. Yes by all means let’s emulate the great economic successes of Argentina and Brazil. Jezuz people, do you ever listen to yourselves speak? You know where houses are super duper cheap? Somalia. I guess that place my be a paradise, right?

      • Laura Louzader


        The difference between Brazil now, and the U.S. in the 50s, is that here in the U.S., housing and other necessities remained cheap, while productivity and wages soared. The 50s and 60s were a true economic golden age in this country, and it was underwritten by SAVINGS, not easy credit. The same little cottages that are now 70 years old and cost $500K in the Inland Empire, were spanking new and cost $8,000 to $12,000.. and were inhabited by working-class and lower-middle class people. There was also almost no homelessness then- the only homeless people were “hobos” or “bums”. But people then also had more modest expectations across the board- one bathroom and one family car was considered sufficient for most people, and people saved a higher percentage of their incomes, greatly to the benefit of their baby boomer offspring.

        Now we are truly becoming like Brazil. I never in my life saw so many homeless people, especially so many homeless families, or so many working people who work two or even three jobs but can still barely afford a 2 bed apt in any neighborhood, let alone a little “starter” house.

        Sadly, the prosperity of the post-war era bore the seeds of our economic destruction. That is when we began to become complacent and careless. That is when we started to live on revolving credit, and when American manufactures, fat and complacent from their blazing success in the previous 30 years, started resting on their laurels, turning out ever shoddier products while comfortable in the belief that their defense contracts would keep them fat forever with no further need for improvement or innovation. American cars were becoming jokes by the early 70s, known for their short lifespan and shoddy manufacture.

        Since that time, and since our departure from the gold standard, we’ve suffered rampant inflation, our money losing about 90% of its buying power since 1970, when you could still buy a comfortable, well-built house for $25K- $30K in most locales, and not too much more than that in CA. We were a creditor nation before then, and were a debtor nation by 1976, with a trade imbalance that has yawned wider every year. Before 1970, almost everyone was housed, if not very well, and we had a broad middle class that lived in modest comfort with one breadwinner’s wages, but by the 80s, housing and living costs were soaring, as was household debt, with more people living in deeply substandard conditions despite government housing assistance of various types, while still more others were grossly overpaying relative to their incomes to buy large, expensive homes that went way beyond necessity. Yep, we are becoming Brazil.

      • Mr, Landlord,

        To a certain extent you are the one not listening. Debt has made every single thing more expensive since nobody shops price but monthly payment. Just look at the cost of college tuition which reveals in stark detail the reality of how once you can borrow to buy, the price skyrockets. Another thing that forces prices to rise is insurance. That’s why heath care costs for things you need as gone nuts while things like eye surgery and other cosmetic surgeries (those things NOT covered by insurance) have been dropping like a stone.

        this insanity may last longer than I will be around BUT at some point what people actually earn will matter again…..I suspect that the grand kids of the boomers will bear the brunt of that reality. Since all the kids of boomers are getting their free house and they are going to squander that head start they have been given……I see it all around me ……….and there’s a lot more $35K a year earners then the $200K a year “professionals” you keep talking about

    • Since low down mortgages allow more people to buy homes, and remove more homes from the market, the effect is to increase the price of unsold homes. If I was a buyer who could actually afford 20 percent down, I would be against this handout to the real estate industry. But then again, people who can’t save, and want to buy a home they can’t afford, should be able to do so with the full backing of the American taxpayer, right?

      • @ JEM

        Its a regulatory issue. Both at the banks and in the RE industry. Bubbles like this only occur when the regulators are incompetent or, more frequently, in on the scam.

        What we have today is a sickening combo of both. Many of the regulators can’t wait to get their sinecures in industry once they leave office. They also, to extent, truly believe that the govt. shouldn’t get involved in the industry since somehow govt. is always bad at everything.

        Its absolutely stunning to see the mistakes of the previous bubble get repeated in such a short time frame, everyone in charge lived through what happened back in 2004-2008 after all, but here we are I guess.

  • I just bought a home below market value south of the blvd that needed some work. We had 20% down but put down 10% and used the other lump of cash for renovations. We’ll see if it was right move.

    • @RE cheerleaders: we got another one who bought during the peak. Get your gear on and start formation. Let’s all cheer and congratulate this fellow to buying the American Dream!!! Great job buddy! Congrats! Don’t listen to the PermaBears! Go out and buy!!

      • Unless you have a crystal ball and also know everything about thiis persons situation you can’t really judge if this was a good move or not. Yes prices will go down eventually, but it could be years from now and maybe only drop 20% over a few more years after a 20% rise. By the time it hits bottom it could be 2025 and prices will be the same as they are today. Not everyone has the luxury to live with their parents until they’re 35 and speculate in declining crypto currency with their excess income.

      • Yes, i agree. Prices will collapse. 55-75% by 2020ish.

        I wish my in laws or parents would live closer to work. I would move back in in a heartbeat. Renting a cheap apartment close to work and close to the beach is a great option too. Let’s me save a ton of money each paycheck.

    • @ Les.
      South of which blvd? I assume that is the term used for South of Ventura Blvd? if so, does that mean Encino or Sherman Oaks?

    • Good move, considering you have to live somewhere, and rents on a 2 bedroom house are @ 2,500 and up. I bought S. of the Blvd in 2004 and LOVE it. Hills, trees, views, wild animals, etc. I’m in Woodland Hills, work in Sherman Oaks, so the drive is a breeze. Beach is 15 minutes away, and I swim in the ocean as often as possible. The west side folks rag on the Valley, but they have no idea how nice and quite it is here. Not to mention the tax deductions we have by owning. So no matter what happens to housing, you made a great decision. Congratulations !!!!!!!!!!!

      • My homes are all beach close … but I always liked Woodland Hills and some of the other cities south of the blvd. Frankly, I am surprised they are not much more expensive. That is the nicest spot in the valley. Very nice.

      • How much more of a tax deduction are you really getting now that the trump tax cut is in effect? The answer is not much.

  • Housing to tank hard!

    • There you go!!! You got it Jim!

    • Seen this all before, Bob

      Thanks Jim!

      I am glad you are back! After 5 years of the same post, I think you are correct now.

      Your prescience is guiding us all now.

      • Seen it all before, Bob

        Except, it used to be “Housing to tank hard soon!”

        Did you forget the soon?

        We all want to know.

    • Lord Blankfein

      Jim, today is July 1, 2018. The year is already half way over and there is NO TANKING IN SIGHT. Given the strength of the economy, stock market, housing market…your next good buying opportunity won’t come until some time in the 2020s. I hope everybody on the fence who didn’t buy is saving vast amounts of money for the next down turn.

      • Buying opportunity in 2020 is also my prediction. We are finally on the same page blankfein

      • When a market crashes, it is first unseen. Existing home sales fell 2.5% in April to a seasonally adjusted annual rate of 5.46 million and were 1.4% below the year ago level, the National Association of Realtors (NAR) Chief Economist Lawrence Yun.said. From January through April, home sales are down 1% from the same period a year ago.

        Greenspan said in mid-2005 that “at a minimum, there’s a little ‘froth’ (in the U.S. housing market) … it’s hard not to see that there are a lot of local bubbles”. David Lereah, former chief economist of NAR, distributed “Anti-Bubble Reports” in August 2005 to “respond to the irresponsible bubble accusations made by your local media and local academics”.

        It didn’t fall all at once, but national home sales and prices both fell dramatically by March 2007 — the steepest plunge since the 1989 Savings and Loan crisis. According to NAR data, sales were down 13% to 482,000 from the peak of 554,000 in March 2006, and the national median price fell nearly 6% to $217,000 from a peak of $230,200 in July 2006. Nonetheless, it wasn’t until June 16, 2010, that Fannie Mae and Freddie Mac would be delisted

      • son of a landlord

        In 2013, Jim promised a HARD TANK in mid March 2014.

        Then he promised a HARD TANK before the end of 2014.

        If we have a HARD TANK now, we’ll at most be reverting to 2014. Maybe 2015. Which would be no tank at all, from a 2014 perspective.

      • Son of landlord,
        That doesn’t make sense. 2009-2012 was the buying opportunity. (Bust) followed by a boom. Now we are in the peak phase. Boom and bust cycles more in ten year phases. The market will crash soon and we will have a buying opportunity around 2020-2022.
        Just have some patience!

    • Did you give up on the ‘soon’ part, Jim?

  • “Fewer people can afford to buy? freddie-mac-3-percent-mortgage-income-limits?”

    Impossible!! Our real estate cheerleaders have told us that pretty much everyone makes 200k!!! Houses are cheap! Buy now! But for some reason our real estate cheerleaders don’t buy….they want YOU to buy!

    Weird isn’t it? If they all make above 200k why not add to your RE portfolio? After all, buying means the grass gets suddenly greener. All problems vaporize and happiness will overflow you. Just buy (now) and get richer!

    Buying is the path to great riches…..but when it comes to prop 13 these 200k boomers who sit on all this wealth quickly flip the switch…..all of a sudden they hide behind poor grandma! We can’t afford to pay our fair share in property taxes! It will force us to move.

    By the way….if everyone makes over 200k how come the median household income suggests otherwise? You see, realtards, lenders and RE cheerleaders hate date and statistics (unless it’s manipulated BS like inventory is low or any statistic coming from the NAR).

    That’s the reason re cheerleaders don’t talk about rental parity and median household income. They rather make up fake stories and tell you it’s just YOU that can’t afford a house. Everybody else owns at least one. Lol. This blog has been so entertaining. Thank you realtards!

    • Millie,

      I can’t speak for others but I have never said “pretty much everyone” makes $200K. What I have said is plenty of people do make $200K. And you should try to meet those people and learn from them instead of wallowing in your misery.

      What’s happening in CA is the Brazilification of society. You have a small % of extremely wealthy white people that run things. Then you have a small chunk of mainly white upper middle class people that are the administrators for the rich. Those earning $200-500K as lawyers, doctors, IT execs, etc. And then the vast majority is non-white and dirt poor.

      We’re not quite at favella style poverty in LA but we’re a lot closer to it today than we were 5 years ago. And it’s coming sooner or later. When you elect communists and import millions of illiterate peasants from Centra America, this result is inevitable.

      • Red state (when it was nice) – > Blue state (things fall apart) -> Brown state (collapse into failed state)

        The poor saps in Clownifornia are in that last phase change. Smart folks without oodles of $ are gtfo’ing.

      • @Mr, Landlord

        “I can’t speak for others but I have never said “pretty much everyone” makes $200K.”
        You didn’t use those words but you tried to make the case that yes $200K/yr salaries were common and easy to get therefore housing prices are sane and sensible which is indeed BS.

        And its BS because only around 7-8% of the population in CA makes $200K/yr or more. You can’t have a housing market that is sane and sensible when only 7-8% of people can afford it.

        “What’s happening in CA is the Brazilification of society….. And then the vast majority is non-white and dirt poor.”
        No duh. People have been saying that for years. Its as obvious as the housing bubble. And its more of a thing for the entire US rather than just CA right now…but what is your point?

        Like if you know the US/CA are getting “Brazilificized” than how in the heck could you EVER possibly believe that housing prices over the last few years have been even close to sane?????

        “When you elect communists and import millions of illiterate peasants from Centra America, this result is inevitable.”
        Hhahahahahahahaha CA’s economy has been doing better than nearly all the states in the US right now and the current Dem leadership in CA are anything but Communist!! Most of them are essentially Clintonite Third Wayers still!! They’re pro-big business as all get out.

        There are too many illegals in CA but that is more of an issue with the farmers and restaurants hiring practices at this point. If those illegals would stop getting hired they’d stop coming here you realize that right? Yeah the farmers/restaurants would have to raise their prices if they raised wages but other countries don’t have a issue with that and there is no reason to believe it can’t be done here either.

      • Oh FFS not the “if we stop hiring illegals lettuce may increase by 2% and that would mean the end of the world” argument. Somehow farmers hired American workers up until the 70s and 80s and people somehow managed to afford to eat. It’s a ludicrous argument. Same for restaurants. I know this may seem like crazy talk but there are places in this formerly great land of ours, where – GHASP – American citizens still work in restaurants. They bus tables, cook, clean, take out the trash, etc. They even work at McDonald’s. They work as landscapers too!!

        It’s amazing how many Americans do the jobs Americans supposedly won’t do anymore.

        And if you don’t think CA is becoming Brazil you’re either blind or not paying attention. It is exactly becoming Brazil….good weather, nice beaches, small minority of ultra wealthy white people with a somewhat larger but still relatively small administrator class, with a vast majority of poor brown peasants. And just like real estate is astronomically high in the nice areas of LA or SD, they are also astronomically high in the nice parts of Rio and Sao Paolo. Try finding an apartment under $500K in Rio that is in a livable area. Hint: you can’t. And if you want a house, better have 7 zeros in your bank account to even think of buying.

      • tts is a totally delusional slave living on the Democrat’s bankrupt Commiefornia plantation.

      • @Mr, Landlord

        “Oh FFS not the “if we stop hiring illegals lettuce may increase by 2% and that would mean the end of the world” argument.”
        That isn’t my argument. That is the argument the farmers and business in general uses when someone tries to shut down their access to illegals by actually enforcing the rules on the books and punishing the businesses doing the hiring too.

        I’m perfectly fine with paying a little more for my veggies and I think most would people would be too once they saw how minimal the effect of higher wages on pricing of end products would have on farm labor and workforce labor in general.

        Right now farmers would rather let crops rot in the fields and try to use expensive automation, which just a few years ago many would’ve claimed was too expensive to buy too, rather than raise wages.


        “And if you don’t think CA is becoming Brazil”
        Where did I say that in my reply to you? You didn’t even read it if you think I did. Or you’re imagining something that isn’t there.

        Personally I don’t care too much about the color of the people’s skin there though, brown white yellow or red is fine by me, that was a odd tack for you to take on this subject.

      • @ samantha

        Heh you don’t know a thing about me.

        I don’t even live in CA and haven’t for years. I also happen to live in one of the most Republican states in the US too though my own politics are quite different.

        Next time at least try to read up on a given posters previous posts and put some effort into your trolling otherwise you just come off as lazy and knee jerk in your posting.

      • “And its BS because only around 7-8% of the population in CA makes $200K/yr or more. You can’t have a housing market that is sane and sensible when only 7-8% of people can afford it.”

        Only a relatively small portion of California has truly crazy prices. You don’t need to make $200k to buy in most of the state. $500-700k virtually anywhere except the major metros, tech centers, and within a few miles of the coast will get you a decent place for a family:


        That’s San Marcos, CA, with good (if not great) schools, a college town with tons of great suburban neighborhoods, and a 10-15 minute drive to the minor tech hub that is Carlsbad and the beach. With 20% down, that’s a $3,200ish PITI, which a $100k household income would (barely) qualify for. Overpriced, yes, but nothing like LA or the bay area and attainable by a young white collar couple who spent their 20’s being smart with money (and were maybe gifted the down payment, so blame the parents too). It also isn’t undesirable the way people imagine living “inland” to be. If you’re okay with an hour commute, or work from home, your choices are amazing at that price point.

        People seem to be nearsighted about prices, or intolerant of anything except their idea of the ideal human culture (metro sardines). If their area has crazy prices, then “prices are crazy”, period. No thought of moving to places that are frequently far nicer and cost far less money. I’m thinking that what they really want is their stock option payday without having to live 4 geeks to an apartment. I guess it doesn’t work that way.

      • John, that house is 635k plus closing costs in an area where the median household income is 80k ish. But hey, you got schools there and the sun is still shining!

        What a steal, the house is only 8X the median household income!!
        Since everybody makes over 200k (except the 18year old fry cooks) this house should go quickly: Call today or it will be gone by tomorrow.

        Wait, I am wondering why its sitting on the market since 82 days. You must have been the only gold digger discovering this treasure.

      • “John, that house is 635k plus closing costs in an area where the median household income is 80k ish. But hey, you got schools there and the sun is still shining!”

        You can twist my words all you like, Millie. Everyone else got the point.

      • John,
        “You can twist my words all you like, Millie. Everyone else got the point.”

        Exactly! Your attempt to make this house look reasonably priced can easily be ridiculed by breaking down your points and showing some data (median household income).
        My point is that this house is massively overpriced. I’d buy it in the 300’s.

        Only an idiot would think that buying at 8x the median household income is justified because of good schools.

        And yes, we know your answer. Everybody makes 200k except 18year old fry cooks. And if a millennial thinks this house is overpriced he probably got a useless 250k degree or eats too much avocado toast.

      • “Your attempt to make this house look reasonably priced…”

        On the contrary, I admitted it was overpriced, but I understand that reading comprehension isn’t your strong suit.

        I also never mentioned median income: “…which a $100k household income would (barely) qualify for. Overpriced, yes, but nothing like LA or the bay area and attainable by a young white collar couple who spent their 20’s being smart with money…

        Keep trying, Millie.

        What’s that like? Always being the dumbest, most obnoxious person in the room?

      • What you always do John….when cornered you start with insults.

      • Cornered? You blatantly twist the words of anyone you don’t agree with, because it’s the only way you can “win”. That’s insulting.

    • Do you even know what the term “Freddie Mac income limits” means? I’ve explained it more than once.

      I’m beginning to think you understand less than a quarter of what you read, and to make up for it, you cherry pick sentences from people who don’t agree with you, put them wildly out of context, insert massive amounts of sarcasm, and voilà, there’s your “argument”. You make yourself look foolish every day, Millie. Every day.

    • Good point M…Its funny how people mistake luck for knowledge and fail to realize THEY are the ones forcing unsustainable market conditions through THEIR greed.. They’re the smart ones until it implodes, then its everyone else fault..

      • Ya, ya i know I nailed it again.

        Conversation between RE cheerleader and a millennial regarding affordability:

        Millie: I keep reading about affordability issues in California, historic low sales and historic low homeownership rates. Must be because of the huge disconnect between low income and overpriced crapshacks.

        RE cheerleader: low income? Everybody makes over 200k here! Don’t count the illegals they are not part of the statistic. Fool!

        Millie: but nobody I know makes over 200k.

        RE cheerleader: son, you need to meet new people! You have loser friends!

        Millie: so what kind of friends do you have and how do you even know how much they make?

        RE cheerleader: son, you gotta learn a lot. Yesterday, I had dinner with ex-president bush, a surgeon named helga, an Astronaut (Sergei) and a 5 star general (Smith).
        The conversations are normal: hey George, how are you, I make over 200k, haven’t seen you in a while! George: I make over 200k. I am good, just playing a lot of golf and bought my 30. House. Me: oh cool! So same old same old. How are you helga, do you know what you gonna order? Helga: I am going to get the steak. I make over 200k and I will get a beer! Me: sweet! Sounds like a plan. What is Sergei ordering? Sergei: i am ordering pasta! I love their pasta. I make over 200k. Me: great! Good choice! ….And so it goes…

        Millie: but that doesn’t reflect like the normal circle of friends does it? If we all had these friends why is the median household income only 68k, or 75k?

        Angry RE cheerleader: dude, just because you are a loser does not mean everyone is a loser!

        Millie: okay, okay. I got it. You are doing well.

        RE cheerleader: damn right! I bought real estate a long time ago. I made a killing!

        Millie: that’s great. Don’t you think prop13 seems outdated? Boomers who bought a long time for a very cheap price have locked in property taxes based on that cheap house price from 20 years ago? Millie’s who buy today based on the highly inflated price have to pay 1.2% property taxes of that inflated price. Why should we finance these government subsidies that only benefit older people? It screws us and it seems you could easily afford to pay your fair share?

        Very angry RE cheerleader: Poor grandma!! POOR GRANDMA!!!! POOOOR GRAAAANDMAAA

        Millie: I don’t understand. All of you make over 200k, you sit on highly inflated houses but you can’t pay your fair share in property taxes because of poor grandma?

        RE cheerleader: yes, yes, yes!!! You fool!!

      • Nice Mille. RE cheerleader = Mr. Landlord.
        Anyone making less than 200K is a Loser in his Trump-loving eyes.

      • NoTankinSight

        Millennial has no freaking clue what property taxes pay for.

        Try paying property taxes for 30 years that build a community. That were at market rate and went up 2% per year to build the community.

      • “RE cheerleader: son, you gotta learn a lot. Yesterday, I had dinner with ex-president bush, a surgeon named helga, an Astronaut (Sergei) and a 5 star general (Smith).
        The conversations are normal: hey George, how are you, I make over 200k, haven’t seen you in a while! George: I make over 200k. I am good, just playing a lot of golf and bought my 30. House. Me: oh cool! So same old same old. How are you helga, do you know what you gonna order? Helga: I am going to get the steak. I make over 200k and I will get a beer! Me: sweet! Sounds like a plan. What is Sergei ordering? Sergei: i am ordering pasta! I love their pasta. I make over 200k. Me: great! Good choice! …And so it goes…”

        Things change in your 40’s, for some people. A more relaxed attitude about income when you’re comfortable with your life. It remains a taboo subject at the office, but I know what nearly all of my friends make simply because the wives all talk about it. The only exception being the wealthiest ones, but their net worth is obvious and I can make an informed guess – e.g., the head of cardiology at a chain of so-cal hospitals – $600k? 700? Enough that accuracy doesn’t matter. Not counting her engineer husband’s salary. They throw great parties.

        “Millie: but that doesn’t reflect like the normal circle of friends does it? If we all had these friends why is the median household income only 68k, or 75k?”

        The median includes 18-year-old fry cooks. We don’t hang out with 18-year-old fry cooks.

      • “The median includes 18-year-old fry cooks. We don’t hang out with 18-year-old fry cooks”
        That’s so perfect! I’ll build that in next time! Thank you!

      • @John D

        “Things change in your 40’s”
        Millenials are rapidly approaching their 40’s and are all still much much poorer in general than their parents were at the same age.

        I don’t think you and others really understand just how bad the situation is at all.

      • John D,

        Even if the wives don’t blab about the income – and not all do – it’s not that hard to figure out. If you know someone’s profession, employer (or if they own a business), age and location you can make a pretty good educated guess about their income.

        And also people over time self segregate. If you make $200K, chances are everyone you know socially also makes around $200K. People who make $200K don’t hang out with people who make $40K. Yes I know there are exceptions, but generally speaking your friends are a version of you.

      • circle square


        you forgot the racism.

        otherwise spot on.

      • tts,

        I know they’re poorer. But it’s also their choice to take out outrageous and necessary student loans for useless degrees, move to a coastal town, and then complain about the price of real estate there. Meanwhile, in my neck of the woods (one of the nicest cities in the state, as far as I’m concerned) a nice condo goes for $330k-ish. Two people making a combined income of $70-75k would qualify for a 3% down loan on that including PMI. That’s $17-18/hour full time. A waitress makes that. So do construction workers and mechanics. No, a lone fast food employee would not qualify. Should they? The payment would not be as affordable as it was several years ago, but I just don’t see it as a huge problem. If a millennial in a coastal metro can’t afford it there, they need to either stop complaining and wait for a downturn, or move. The day they can’t afford a home in Ohio or Florida is the day they have a legitimate gripe.

        I’ve got guys in my department who are single, in their 30’s, own property, and drive $70k cars. It’s all about how you choose to educate yourself and where you choose to live. People need to stop telling high school kids that they need a $250k education to be successful, and start telling them that living in a “hip” city is more likely to lead to disaster than anything else.


        It’s mind boggling how kids spend $50K+ a year to go to a no-name, never heard of it college for a teaching degree, or nursing or “general studies”. The same degree that can be had for $10K at a State U. That generic degree has the same value in the job marketplace. Unless you get into a top 20 college or major in something really specific that only a few schools offer, find the cheapest college option you can and go there.

        As for the hip city, I’d advise the yuuutes to spend a few years in NY or LA or SF out of college. At 23 and single it’s a good place to be. I spent the first 10 years of post college world in coastal cities. But at some point in my early 30s I realized walking distance to 21 Ethiopian-Asian fusion restaurants kinda loses its appeal after a while.

        The smart play is live on the coast when young, save money, get established in a career, then move somewhere cheaper. Either work for an employer that allows remote work or work for yourself. For in demand professions, employers will accomodate those situation. Give me a high speed connection, a cell phone and a reasonably sized airport and I could live anywhere in the world.

        And the other thing I will never understand is why a teacher or nurse or what have you would ever want to live in a high cost city. Those jobs can be had anywhere as well. Yeah pay is somewhat higher in LA vs Topeka, but relatively to cost of living Topeka teachers are much better off. As are nurses, cops, firefighters, etc. You read all these sad stories in the MSM about the poor teacher in LA that can’t afford to buy a home. Easy solution…MOVE OUT OF LA!! Problem solved.

    • Great points Millenial!!!

      • Hey mr landlord have you tried to enroll in any classes at one of theses “affordable” schools lately? The minute open enrollment starts the classes are full like a Black Friday sale! Every other school is $200,000+.
        I know and interact with A LOT of people in the real world and never meet theses large populations of $200,000+ earners. The only people under 40 I know “getting” houses are literally having it all sorted out by mommy and daddy or granny and Grampy. Then they just rent out rooms just like they already did as renters and still have the same shit income jobs as before. I know multiple millennial “winners” who do exactly this. Basically same scenario as when they rented but now landlord doesn’t get to decide to just fuck them over whenever and impose their personal bullshit on them.

      • Oh yeah and most people I know can’t even get a home in antelope valley much less LA. So the whole “all the under 40’s are trying to live in expensive cities” is a bullshit false story. Try again.

        Millennial gets it.

    • debtisslavery

      I know plenty of dual income with close to $200,000 annual income since I’m in the medical profession. Most already over leverage to buy 500k-$1 million dollar home with little down payment and high monthly mortgage rate. I can’t imagine paying 30 years mortgage $3000 to $4000/month for 30 years.

      My wife and I make combined salary of $300k+ with $300k for down payment living rent free. We refuse to buy in this market. I’ll wait until there is a market correction to buy.

    • Debt-Is-Slavery

      I know plenty of dual income with close to $200,000 annual income since I’m in the medical profession. Most already over leverage to buy 500k-$1 million dollar home with little down payment and high monthly mortgage rate. I can’t imagine paying 30 years mortgage $3000 to $4000/month for 30 years.

      My wife and I make combined salary of $300k+ with $300k for down payment living rent free. We refuse to buy in this market. I’ll wait until there is a market correction to buy.

    • Bay Area Girl

      It just feels like a Ponzi scheme. Everyone is using their inflated housing to buy more inflated housing. Our neighbor is crap – cars everywhere, people liking three families to a houses, schools that are threes. Yet the condos are 800-1.2 million and houses are 1.6 million or so.

      We can’t afford a house with a 325k income and 400k in savings. Who is buying the houses is beyond me. I never see anyone move into the recently sold houses.

      We are easily the top 1% of income in our neighborhood. Most people are undocumented (earning 50k) or H1bs (earning 80-100k). I have yet to meet a single person who could buy the houses on income alone in this neighborhood. How can this be sustainable?

  • The 20% down payment in the old days was proof of the ability to save and mange money. Now it is not required. People with no savings and no ability to live within their means are given mortgages. If they break a shoelace, they default. If the market, which is now at the peak, drops back one iota, they are underwater, owing more than their house is worth.
    This is wrong on so many levels.

    • Amen Roddy. I never bought a piece of property without having to endure a wide scale anal alien probe and 20% down even with a gold standard FICO, savings and 10 years at the same job.

      Plus having to write a letter declaring fealty to my debt vehicle.

      I did, however, buy what I could afford over the long term and as something to live in, not as an investment play and never used the equity for anything but improvements in the structural aspects of the house like windows and electrical.

      Grateful to be off the credit, mortgage and automobile debt wheel.

      Being prudent with money takes a little skill, a lot of delayed gratification and some luck.

    • “The 20% down payment in the old days was proof of the ability to save and mange money. Now it is not required.”

      I wouldn’t exactly say “not required”. At the $453k loan limit, 3% down with closing costs could be $20-30k+. Their credit and length of employment is proof of the ability to manage money, and their income allows them to qualify.

      The changes now allow people with higher incomes in more areas to use this program. It doesn’t allow poorer people to buy. They still have to qualify. The only problem here is having a larger number of buyers speculating because they don’t have as much skin in the game. However, losing $30k is still a tough pill to swallow. We’ll see how it plays out.

    • You’re not wrong but you have to remember the old saying, “If I owe you a thousand dollars and can’t pay, I have a problem. If I owe you ten thousand dollars and can’t pay YOU have a problem.”

  • I read that $117,000/yr story on cbsnews. The article also goes on to illustrate that teachers, police, firefighters, emergency responders, etc. will no longer be able to afford to buy in the Bay Area and are beginning to fill those positions closer to their homes outside the immediate Bay Area vicinity. But I’m sure cbs news is fake news right? 🙂

    • son of a landlord

      But I’m sure cbs news is fake news right?

      Well, yes. CBS is full of fake news.

      People insult Fox News. Yes, it’s trash. But no more so than CBS, the New York Times, or any other mainstream news source.

      • Nice attempt at false equivalency. But if you actually read the New York Times, or any newspaper for that matter, you’d pretty quickly see the difference between them and Fox News. But you’re probably not interested in learning anything outside your narrative.

      • Barnie Panders

        Chris, you are a brainwashed goofball. The NYT is partisan trash owned by a Mexican billionaire who hates Trump and staffed with liberals who are masters at propaganda. At least Fox owns their conservative bias; The NYT is WILDLY biased towards the left and LIES about it. Anyone who reads it is a complete dope.

      • Fox News: Gives both sides of the story with a slight right tilt

        CNN, NYT, WAPO, CBS, etc…gives only one side of the story with a communist tilt.

    • CBS isn’t lying but they are forgetting that the average firefighter and cop in SF makes 1.5% of his yearly salary in OT. If they are getting 100K they are getting an additional 1.5 in OT.

      I know many cops/paramedics/firefighters in Chicago also earn at least 100% of their base yearly salary in OT as well.

  • 3 to 5 percent commission….for the BUYER? I’ve bought close to 20 houses in my life and I have never paid a commission as buyer. Typically closing costs on the buy side is 1-2%, which includes pre-paid items which aren’t really costs since it’s still your money just in an escrow account.

    • I think he is referring to cost to sell; so, once the buyer is in with minimum down they are upside down on day 1 due to the selling costs. Of course that assumes you sell immediately or value drops as opposed to considering some appreciation and principal pay down.

  • This is so funny. Every day here and elsewhere we are told how incredibly rich Californians are. And as I have been saying forever, it’s all BS. $100K in coastal CA is barely middle class. Turns out I was wrong. It’s not even middle class, it’s working poor. Someone making $100K in SF has a lower standard of living that someone making$ 40K in Indianapolis or Cleveland.

    And not only is your standard of living barely above a burger flipper, you also are taxed as if you are “rich” (according to Democrats anyway). So you are effectively paying $100K taxes for a minimum wage job.

    But hey man, 5th largest economy in the world and stuff!!!! LOL

    • Mr. Landlord,

      Yes, and a big problem nowadays is that our federal and state systems assume that the cost of living is roughly constant around the country. In CA 100k income means you can barely get by. But you are taxed as if you are wealthy, because in most parts of the country that would be true.

      • $100K isn’t wealthy anywhere in the US. But yeah, the tax system is kind of messed up when $1 earned in SF is treated the same as a $1 earned in Cleveland. Ideally there should be some cost of living adjustment for tax rates. But if that were to happen, there’d be so much fraud, you’d have everyone “living” in Cleveland somehow.

        Next time you see an RV on the highway, look at its license plate. There is a good chance it will be from S. Dakota. Why? Because SD has nod/wink attitude that allows people to claim residence there in order to register RVs at a fraction of the cost of their home states and pay a lower sales tax. So magically 1/2 the retired people in America with RVs “live” in South Dakota. I have an uncle who did this. He’s got one of those $250K RVs and he saved $10K in sales tax and saves about $1K a year by having it registered in South Dakota. Of course he’s actually only ever spent about 2 hours in the state, but details, details, he “lives” in SD technically.

        I can only imagine how many millions of people would suddenly “live” in South Dakota or Wyoming or middle of nowhere New Mexico if the feds started taking a cost of living approach to income taxes.

      • The tax system isn’t assuming anything about the cost of living, not at least anymore since the personal exemption was eliminated.

        If the standard of living relative to the cost becomes a poor value–as is currently the case in coastal California–people vote with their feet and leave.

        The tax system shouldn’t need to account for this as the market will take care of it.

        *As a side note, some claim it’s only the poor leaving California, but that is a lie.

    • That is the reason I always repeated on this blog that what you make is irrelevant. Those in Zimbabwe are all billionaires (I always use this example to create a clear picture for those who do not get it). What counts is purchasing power after ALL the taxes. By that metric, most in coastal CA a dirt poor. Yes, there are few pockets of super rich people, but those are in the top 0.01%.

      High income means very high taxes at state and federal level (tax donkeys). With the crumbs left, people fight incredible high cost of living. That is a sure recipe for poverty and a miserable standard of living.

    • 5th largest economy with the highest supplemental poverty rate in the nation.

      It’s sort of like crowing over the 5th largest turd in a toilet. It’s just a number.

      • California is not the fifth largest economy. It only looks like that because CA is part of a much larger economy. Should CA be independent it’s economy would decline greatly as it would have to pay for a lot of needs it now receives being part of a larger government.

        It’s like bragging you make a million dollars a year as CEO of a company, when in reality it’s your father’s company, and similar jobs would go for a lot less.

  • Moving to SOCAL next year, hurry up and tank realestate, otherwise im a renter till it does.

  • I think the doctor is getting a little ahead of himself with the doom and gloom thing. While more people putting 3% down is not a good thing, it doesn’t mean those buyers can’t afford the loan. And implying that people will be putting 3% down on $1m+ homes is misleading – for most of the country, the Freddie Mac loan limit is $453k. Those people also still have to meet strict income requirements. In other words, at the time of purchase, they can afford it. What they do with it once they discover they’re underwater is another story. Those who considered the purchase an investment may walk, but I don’t believe that those who consider it a home are much more likely to walk than someone who put down 20%.

    We are still a far cry from the loose lending standards of the last bubble.

    In my area, $467k (highest you could go with the loan limit) gets you a very nice 4/3 home in a great neighborhood, with a PITI of around $2,700, for a house that would rent for $2,400-2,500. That’s not ideal, but not exactly what I would call dangerous.

    • EXACTLY John D.

      He’s got it.

      Stop with the scare tactics of lending to everyone and ohhhh only 3% down on a million dollar home. THIS IS A LIE!

      That is NOT the case. Absolutely correct as I posted below; the MAX loan amount is 453,100 on these 3% down mortgages which translates to 467k price point. Anything above requires 5% down. Don’t forget these have higher rates and higher PMI factors which means a higher overall payment BUT the buyers still have to qualify with the debt to income ratio.

      This isn’t PRAVDA or CNN; let’s stop with the mis-information please.

    • And of that $2700, around $2K is interest/property tax which means it’s tax deductible. For someone in the 22% tax bracket, that $2700 PITI is really $2300 after the deduction. . And the other $700 is principal payback, ie equity. Which makes the effective payment is in the $1600 neighborhood.

      $1600 to own vs $2400 to rent.

      • “$1600 to own vs $2400 to rent”

        I’ve owned a house that is basically just renting from the bank and the fucking payment is only half the fucking battle………talk about cherry picking numbers……I’ll take that $2,400.

      • LOL, what battle? It’s simple math. $2400 is more than $1600. I guess you mean maintenance and repairs? Not sure where you lived, but nobody is spending $800/mo on maint/repairs for a $2400/mo rental.

        I suppose if the house is 200 years old or something, maybe $800/mo can happen. For a typical division tract house built in the last 20 years, it’s more like $80/mo.

    • My credit union does a 100% loan up to 1 mil.

      • Name please?

      • Dan,

        Navy Federal. 100% no MI (non VA). There is a 1.75% funding fee but you can roll it into the loan (101.75%LTV).

      • So Cal Guy,

        Thx; I did check it out and you are right they do offer that program on a case by case basis. No set guidelines, but, essentially looking for the strongest borrowers; high ficos, stable employment, low DTI’s.

        1mil @6% (which is what it comes to with a good credit score and buying out origination fees) PITI = $7,100

        So, you need to make around 250k/yr to get in the game on this loan. Guess it’s been around for awhile, just the 1st time I have heard about it so they must have a pretty high decline rate. In any case, good heads up as I always like to keep myself informed on all available credit options in this market.

      • Dan,

        It’s definitely not for weak borrowers. I have my loan through Navy Fed (not the 100%) and the underwriting was really smooth. They actually allow up 40% DTI on the 0 down program plus give you a rebate if you use their real estate purchasing program. Rates have gone up but they were around 5% just a few years ago. The advantage is you can deduct the interest versus PMI. Not a bad deal in my opinion if you can afford the higher payment.

    • Best post on topic, hands down! Everyone, back to topic!

      That being said, I’ve always maintained that the real estate crash was three teired.: A working class debacle, a middle class bad slump and a wealthy adjustment. This news won’t lead to a new crash in Beverly Hills, just Riverside.

  • No wonder people will risk it all to buy a house with a low down payment.

    After all, you too can rent a 2 bedroom apt for only $2500


  • I have no problem with low- or even no-downpayment mortgages, as long as that mortgage isn’t backed explicitly or implicitly by the taxpayer. That’s where the problem comes in, having the taxpayer subsidize risky mortgages and hold the bag whenever there’s a downturn. That’s just bad policy.

    • Sounds like a Dumbacrat policy

    • Laura Louzader

      Almost all home mortgages have been at least implicitly backed by the taxpayer since the 1930s, when the GSEs (government-sponsored enterprises) like FNMA, and later, FMCC (established by the government to keep FNMA from becoming a monopoly) were founded by our government, to buy mortgages from lending banks and S&Ls, to free up their capital for more mortgage lending. Without Fannie Mae and Freddie Mac, as they’re called, 30 year mortgages would almost not exist and mortgages either would require 50% or higher down payments, as the did before 1938, and longer term mortgages for 25 years or more would scarcely exist. The government guarantee was always implicit, else this type of lending would have been judged to be far too risky for most investors.

    • Actually, the entire financial system is backed by the feds. Trust me. If any financial problem ever appears that is large enough to damage the financial system, the feds will show up and carry the water needed to fix it. That is life in America and you have to accept that because the alternative is a disaster.

    • Seen it all before, Bob

      The fact that there are 30 year fixed rate loans that exist is scary. The rest of the world does not lock in that long.

      What will the banks do when all of the sane people who refinanced down to loans between 3% and 4% and Savings accounts are paying a 6% savings account rate.

      Our Millennial will have missed out but all of us GenX, Late Boomers, and sane Millennials who bought a house will be safe and secure until we retire and pay off the loan while collecting 6% in savings and only paying 3% on our mortgages.
      Don’t laugh, that is what my parents did in the 70’s and 80’s with their 6% loan while banking with CDs reaching 15%. Now we are at 3% for loans??? Crazy.

      I am waiting for my bank to offer me a deal I can’t refuse to give up my 3.5% 30 year mortgage

      • your parents home cost 10,000 dollars…..strike….

      • Seen it all before, Bob,

        “The fact that there are 30 year fixed rate loans that exist is scary. The rest of the world does not lock in that long.”
        Total BS. Look at Europe, 30y mortgages are common.

        “What will the banks do when all of the sane people who refinanced down to loans between 3% and 4% and Savings accounts are paying a 6% savings account rate.”
        Sell the loan. collect the fees. Behind Fannie/Freddie stands the taxpayer.

        “Our Millennial will have missed out”
        Missed out on what exactly? On buying at the peak? You probably not know that it is better to buy a lower priced house at a higher interest rate instead of buying an overpriced house at a lower interest rates.
        Since this probably confused you already, just remember, its all about the price of the house not the interest rates. Interest rates change and you can refinance later. You cannot change the price you paid for the house.

        “but all of us GenX, Late Boomers, and sane Millennials who bought a house will be safe and secure until we retire and pay off the loan”
        Yep, just like last time when we had 7Mio foreclosures.

        “while collecting 6% in savings and only paying 3% on our mortgages.
        Don’t laugh, that is what my parents did in the 70’s and 80’s with their 6% loan while banking with CDs reaching 15%. Now we are at 3% for loans??? Crazy.”
        I am looking forward to higher interest rates. I am sitting on cash and wouldn’t mind parking some at a higher paying CD.

      • Seen it all Before, Bob

        Millennial, everything I say is true.

        Canada, Europe, and Australia have longer term loans but they are more like longer term ARMs since the interest rates adjust after 5-10 years. Unlike the US where interest rates on fixed loans are locked in for 30 years. It is almost impossible to get a fixed rate 30 year loan for a low rate anywhere other than the US (unless you pay an extremely high rate). Look it up.

        I don’t know how the bank is going to sell my 3.5% 30 year fixed mortgage when savings rates hit 6%. Maybe they will sell it back to me for the true amount of the worthless loan. I’ll have to be prepared and figure out what my 3.5% loan is worth when I am making 6% with an insured bank account.

        Unless you have a lot of cash and can avoid a mortgage, taxes, housing prices and interest rates control the cost of housing PMI. In 2007, interest rates were over 7% and housing prices were almost to the same level as today.

        Here is what wiped out renters who wanted to buy in the early 1980s. Interest rates went from 6% to 15%. Inflation led or followed so housing prices were flat with a slight increase. Housing prices followed inflation. Housing prices rose with inflation but incomes lagged. Housing never crashed. People who bought were lucky to pay 15% for a mortgage and were later lucky after 10 years to refi as rates dropped. It could happen again. Or maybe not. In summary, houses were rising with inflation 15%/year and interest rates were rising also. Not a good time to buy a house. Great if you already owned a house with a leveraged 6% mortgage. It could happen now if inflation increases.

      • Bob,

        “Millennial, everything I say is true.

        Canada, Europe, and Australia have longer term loans but they are more like longer term ARMs since the interest rates adjust after 5-10 years. Unlike the US where interest rates on fixed loans are locked in for 30 years. It is almost impossible to get a fixed rate 30 year loan for a low rate anywhere other than the US (unless you pay an extremely high rate). Look it up.”

        Lets play a game. I provide two websites from Europe referencing 30+ years of locked in rates and you provide one website in return saying that it is not true what my websites are referencing?

        here we go. I picked Europe’s largest economy so this is in German:

        This is a private lender.
        “Wir können Darlehen mit einer Zinsbindung bis zu 40 Jahren vermitteln.”

        Darlehen=loan, Zinsbindung=fixed interest rates. They even exceed 30 years and add 10 on top!

        Die Welt is one of the main newspapers i believe:

        “Zinsbindungen von bis zu 40 Jahren sind möglich”

        means: fixed rates up to 40 years are possible.

        once you come back with a website saying this is all baloney i will come back with two websites from another European country.

      • Seen it all before, Bob

        Hey Millennial,

        Good Challenge. Especially when your post is in German.

        means: fixed rates up to 40 years are possible.

        Are possible? Are you kidding me? Everything is possible at a 15% mortgage rate.

        Here are some of the rules of Fixed Rate for Europe but in English.

        Borrowers will need to be prepared for some less-than-appealing loan terms as well. In many countries, repayment periods tend to be shorter, often ranging from three to 15 years. With interest-only mortgages, borrowers are often able to renew the loans—which often have repayment periods of five to seven years—at the end of the term, although most lenders in Europe require mortgages to be repaid by the time the borrower is 70.


        My statement is correct. NOBODY in the world offers an affordable 30 year fixed mortgage other than the US.

        You could also look at the Wikipedia site.


        I can keep going until you wave the white flag.

      • Bob,

        “Until I wave the white flag”…obviously You don’t know me. Have a feeling this will go on for a while.

        “Are possible? Are you kidding me? Everything is possible at a 15% mortgage rate.”

        I am not kidding. Yes, it’s in German….which is no problem I can translate it for you. But numbers don’t need to be translated. If you open that first website you see that they offer 2.25 % for 40 years.

        I went straight to the source and provided the detail and you are still sticking to your story because you read a marketwatch article?! You want more proof? Here you go. This is Sparda bank, from what I researched and learned while I was in Germany this is similar to a credit union here. On the conservative side:


        Even that “union bank” is offering 25 years fixed rates at 2.49%.

        Yeah, I know. The US is soooooo amazing with 30 year 4.5% loans. Nobody in the world is offering it. Except europe is offering almost half the rate. So your point is….America is great, buy now?

      • Seen it all before, Bob

        Dear Millennial,

        Please post your backup in English so we can all read the fine print.

        You are correct, on the English sites, there are loans available at 15% rate for 25 years.

        All of the others have 25 year loans with 4% rates BUT with a loan that adjusts after 5-10 years.

        Please provide backup that we can all read.

      • Backup?
        Dude, don’t let the facts go in the way of a good story! After all you have done all the research! You read Wikipedia! Just stick to your story. America is great. Buy now because we have 30year loans at 4 percent. Everybody else in the world has 15 year loans and 15% interest rates. That a great line. We need to buy now to secure this deal! It’s a gift!

      • Seen this all before, Bob

        Millennial, if you don’t have any English sites to prove your point, I’ll take that as a white flag.

        My point was actually related to 30 year fixed loans in the US at ridiculously low (below 4%) rates.

        My Silent Generation parents won the lottery with their 6% mortgage rate in the 60’s while they kept their cash in the 80’s Reagan era 18% CD’s . Same incentive not to sell or move as now. Prop 13 was just icing on the cake.

        If you don’t buy now and inflation repeats like the 80’s, you will miss out.

        Or as you predict, housing will crash 70% and you win as all of the recent buyers in this blog panic and foreclose. It is hard to see 50% of your net worth disappear in a year and then continue to fall for the next 3 years without panicking and dumping a bad investment. You and all of the other rental REITs out there are waiting.

        If only my crystal ball hadn’t fallen off the shelf during the Northridge Quake.

  • Sorry Doc, but I need to clear up a lot from your article as someone who writes Fannie Mae and Freddie Mac mortgages on a daily basis.

    There is NOTHING new about this Freddie 3% down program! NOTHING. Fannie has had this identical program for the past few years. It’s just that Freddie is catching up and Freddie’s version used to be 3% down was tied to income limits in certain geographic locations.

    I.E. Corona = 90k max income limit

    And it would vary by census tract.

    All Freddie did was lower the income limit on this program to be inline with Fannie version (called Home Ready) and create this other “new” Freddie 3% down program without limits. This new program literally does NOTHING for homebuyers nor does it extend credit to really any new buyers. Actually; since the other program Freddie had (which was 3% down but tied to income limits) was cheaper (lower rates and lower PMI) the reverse argument can be made that the lowering of income limits on that program (called “Home Possible”) has actually REDUCED THE AVAILABILITY OF CREDIT to potential buyers.

    Furthermore, let’s talk LOAN LIMITS!

    All the 3% down conventional (Fannie and Freddie) programs, cannot exceed a LOAN AMOUNT LIMIT OF $453,100. So, that means that in order to ONLY put 3% down on a purchase; the MAXIMUM PRICE you can go to is $467,000! Anything above this price point will require 5% down on a conventional loan.

    So, for those readers that think these buyers can go out and only put 3% down on an 800k house, that is simply NOT TRUE.

    Don’t believe me? I can send you links to Fannie and Freddie guideline books and you can see for yourself. Or, call a (good) mortgage loan officer.

    Also, remember you must qualify with certain debt to income ratios and the PMI on these loans become astronomical if you do not have good to excellent credit.

    So, ask yourself, how much house can you buy at $467k? B/c if you want more house, then you need 5% down conventional or need to go FHA.

    Now, on to FHA; you say” Now the FHA already backs up low down payment mortgages but these are constrained to lower to middle income areas.”

    I am unsure what you mean by “constrained”? FHA does not have income limits whatsoever and plenty of people use FHA that have higher than “middle incomes”. There are times where FHA is cheaper and makes more sense than a conventional mortgage.

    Doc what you may be referring to is the max loan limits calculated for FHA per county as calculated by FHFA’s income survey. I.E. Orange county loan limit = $679k vs Riverside county loan limit = $406k

    The loan limits are derived from median income county surveys so I am guessing that is what you were referring to; but, to clarify; FHA does not have buyer INCOME LIMITS for qualifying purposes.

    I love the reading different viewpoints and debating on RE; however, hate when I see mis-information or lack of education on lending, so, I hope that I can provide some clarity in that arena as that is my main business and what I do each and every day.

  • What is not being mentioned is with a 3% down payment your going to have to pay mortgage insurance which will increase your monthly payment anywhere from $167 on up depending on the price of the home.

    • If your credit score is below 700 there is no point in taking a conventional 3% down loan due to the PMI cost one would rather go with FHA.

      FHA interest rates are lower and the FHA PMI rates will be lower than conventional with an under 700 credit score

  • It is just not realistic for a family putting 3% down to then have a $4k monthly mortgage, especially since you then have to pay PMI due to not having 20% down. We lost our home in 2008 and have never recovered. So sad what’s happened to the American dream.

    • A lot of people with good financial planning lose their homes in a recession, especially when an unfavorable life event hits during a recession. You can not take it personally. Often, it is a case of bad luck. Don’t let it get you down. You have to move on. Remember, if you are alive, and you have good family and friends, you are winning at life. Material things are secondary. Good luck.

    • They wouldn’t have a $4k monthly mortgage with 3% down these days. Limits wouldn’t allow a loan that size. Maybe it’s possible with horrible credit and a high enough rate and PMI, Dan would know better than I.

      Just curious – if you’re willing to tell, why did you lose your home? Variable rate reset? Job loss?

    • You didn’t lose your home. You signed a contract with a lender agreeing to pay back a loan. The penalty for not paying it back was forfeiting your home. Your home wasn’t lost or stolen or taken away. I hate it when people who willingly broke a contract they agreed to play the victim card.

    • Heather,

      Your #’s are way off. As i’ve said, max price point with 3% down (conventional) is 467k and therefore with 3% down even with terrible credit (assuming you got approved) wouldn’t get to $4k.

      To say the mortgage (without PMI) would be $4k shows you don’t know what you are talking about.

      Anyhow; if the credit is not very good it’s flipped to FHA where 3.5% down is needed and the PMI is cheaper than conventional anyways.

  • son of a landlord

    Doctor, you should do a story about IRS 1031 Exchanges.

    This allows the owner of a business property (e.g., a rental) to sell it, use the assets to buy a “like kind” business property (another rental), and defer all capital gains taxes on it.

    I’ve come across two sellers who, I was told by the realtors, are doing 1031 Exchanges. One listing said that “buyer cooperation on a 1031 Exchange” was a requirement for any offer.

    I suspect this program is ripe for abuse.

    You own a house. You convert it into a rental, for the required period of time. Exchange it for another rental, for the required period of time. Then convert back into a home for yourself. Home for home, all capital gains tax deferred (i.e., not paid).

    I’m wondering if you can get away with renting to a relative? Your kids? Your spouse? Or even to yourself? You place the house into trust, then you rent it from from trust, which is technically a different person.

    I’ve done searches and discovered that maybe half the condos in my building are owned by family trusts.

    • As long as you live in a primary residence for 2 out of 5 years, you get a $250K (single) and $500K (married) capital gains tax exclusion. This has been the case since the 90s. For non-investors, capital gains taxes on real estate is almost non-existent.

      • son of a landlord

        I’m well aware of capital gains exclusions. But …

        I saw a house in Santa Monica this year that’s listed at $1,150,000 over the previous purchase price in 2013.

        A capital gains of $1,150,000.

        That’s one of the sellers planning a 1031 exchange.

        I remember another Santa Monica house last year that was sold at a capital gains of over $1,000,000.

        And those aren’t the only examples. I’ve seen many Santa Monica and Brentwood homes that were purchased during the recession, whose current list prices are well above the capital gains exclusions.

  • Dan, you said:

    “A week ago …, you said that there are for sale properties everywhere in Mission Viejo …. Now one week later you put your house on the market as a for sale by owner not even on the MLS and had an open house with interest and one day on the market already receive an offer! I don’t know Gary, it kind of sounds like there is buyer demand and it seems like if there were so many properties for sale on your street and in your neighborhood you wouldn’t get an offer on the same day your property went on the market.”

    “What are your thoughts?”

    “Care to share the approximate price range you have it listed at?”

    “Furthermore you stated that all five of the couples were professionals which to me sounds like they can afford to purchase your property and make good money which doesn’t jive with a lot of the Perma Bears on this site that say they don’t know anybody that makes more than 50 to 100 thousand per year.”

    “As I have said before you really have shown courage to put your money or property where your mouth is and I think you are getting a taste of a strong buyer demand what are your thoughts on all of this?”

    Dan, I got two offers within 24 hours of my open house. One was low, the other was good. However, my potential buyer is having trouble closing his current home’s escrow so it doesn’t appear that the deal will go through. If the deal falls through, I may take my home off the market and wait until next spring to sell. I now believe that prices will be at least 5% higher next year.

    In an case, I am still impressed the strength of the market and now believe that the real estate top is probably about a year away. The low inventory of homes for sale and the quickness with which homes appear to be selling suggest that the top is not real close.

    Also, my nephew, who is the CEO of a small California home builder, currently sees no sign of a real estate top. He said that 80% of the new homes being sold in Orange Co. are being sold to Asian buyers. However, he worries about what those buyers might do if prices turn down. Are they speculators or long term investors? Will they run for the exit at the first sign of a downturn?


    • I think you just made Millennials head blow up.

      Surprisingly high demand and low inventory
      Professionals who are the buyers that make good money
      And gasp, Asian buyers!

      All three are myths according to mr. Millennial.

  • Not one “Taco Tuesday Baby Boomer” comment? I don’t think this was written by the Doctor.

  • Mitch Stanley

    Hi, Enjoy your Columns / Articles. Even if we do see home ownership increase , people are still
    limited by the increasing , ” GIG Economy” where people are having to accept non – full time , single employer . I feel this will still limit people whom can buy a SFH since society is moving away from this
    and at this time , no provisions for society to purchase a home .

    It should be interesting to see how GSE ( Fredie, Fannie ,ect) adopt to qualifying buyers in the GIG economy >

    • Mitch,
      Gig economy?
      You permabear! America is great again and the housing market could not be hotter! I am a RE cheerleader and everyone in close proximity makes over 200k, easily!
      People keep talking about teachers, firemen, policeofficers not be able to afford a house?!? First off all, who needs these low-income people anyways?? If you don’t make over 200k don’t even talk to me. I am so fed up with these freeloaders and the whining. All of my friends own many multi dollar homes and pay next to nothing in property taxes!
      That’s what you get when you have your MBA!
      People who don’t have a doctor title or MBA should be grateful they don’t have to live in containers like in the good old Soviet Union!
      Stop whining, go back to school and get your MBA. Next thing you know you make 200k and buy your first two houses. Once you bought ten houses you might get a chance to join my club! And I swear if I hear rental parity or median household income one more time Iam going to explode!

      • LOL.

        The only thing I can say in mild defense of the pro-housing crowd is that more people do have the option of working from home now, and rich people who can work from home will choose coastal CA.

      • Is this all you have left, Millie? Taking pieces of other posters’ comments out of context and surrounding them with your own lies and sarcasm, all with third grade grammar? It’s funny, but not in the way you’re hoping for.

      • John,
        All I have left? I am just getting started!

        Yep, it’s pretty funny…..just not to everybody…..unless you can laugh about yourself.

      • Oceanbreeze you have it backwards. “Rich” people who can work from home are increasingly moving out of high tax areas such as coastal California. It’s those who have to come into the office everyday that are being forced to stay.

  • One man’s foreclosure is another man’s opportunity for a flip.

  • There is this myth out there among the perma bears that anyone can walk into a lender’s office with $0 in their pockets and walk out with $1M loan. This is a fantasy. I was talking to my lender earlier this week about lining up a mortgage for another property I’m looking to buy. Keep in mind this is a bank I’ve been doing business with for years and have several mortgages with already that has never had even so much as a day late payment. And my FICO score is in the high 700s with income well above $200K (which according to Millie doesn’t exist, I know). And this is a small local bank, where I know the mortgage broker personally. It’s not like BoA or Wells Fargo where I’m one of 20 million customers and deal with some call center rep from India who doesn’t know me from Adam.

    And still, for this new property I have to go through the same rigorous underwriting process as always…tax returns, bank statements, proof of assets, the works. And I need to put 25% down as I have had to do for all the investment properties I’ve purchased.

    So one of those things is happening…1. I need to find a new bank since this bank is the only one that has lending standards anymore. Or, 2. the idea that lenders just hand out $1M loans to anyone with a pulse (as Millie and Co. seem to believe) is nonsense.

    I’m leaning towards #2.

    • My bank started giving me my FICO score, and my Wife’s credit card company gives us her score. We haven’t been below 800 yet. And our total income is nowhere near $200K/yr. You must be in hock up to your eyeballs.

      • I say Apple and you say Orange! What does your reply to do with Landlords factual statement?

        He is referring to purchasing another investment property and everything he stated is correct. 20% minimum down payment and income verification via tax returns, w2s, pay stubs, verification forms etc…

        So bc your bank says you have a high credit score you get to skip the rest when purchasing a property? Haha. Too funny

        Another lending assumption akin to the sub-prime is back crowd where you can now buy a million dollar house with no income verification, 0 down and a 500 credit score. Laughable.

      • My reply was mostly tongue in cheek. I am not planning to buy any more real estate (I own property out of state that I’m stuck with in the current market). He mentioned his FICO score, and I found it funny that mine with half his income is way higher. I can only suppose that it is due to my lack of debt. Can you think of another reason?

        I don’t doubt his description for financing rental property, nor do I doubt his honesty as to his financial condition.

      • Your bank gives you a fico score, therefore I am in debt up to my eyeballs? LOL. OK I guess, whatever you say man.

      • Joe,

        Sorry I didn’t read the reply to Dan.

        As you probably know, lenders use all 3 credit agencies and then take either the average or the mid point. I think last time they ran all 3 highest was 810, lowest was 775 and the middle one was 790. Why one is 810 and one is 775? Who the hell knows. I don’t really care since 760 is essentially the best it can be as far as lenders are concerned. 760 or 790 or 810 gets the same interest rate.

        And no, other than mortgage debt I have no other debt other than credit card debt which is paid off every month. I use that cc for everything for the cashback. So on paper, I have a lot of credit card debt, even though in reality I have zero credit card debt. One of the many reasons fico scores are kinda dumb. Someone with $15K spread out over 5 credit cards at 15% interest, who only makes the minimum payment has the same “debt” as someone who spends $15K a month and pays of $15K every month and pays 0% interest.

        No car loans/leases, no student debt, nada. Just a ton of rental properties with LTVs averaging 40-50% and my primary home’s mortgage. I took out that loan in the doldrums of the crash where loans were practically free. You wouldn’t believe me if I told you what my fixed loan interest rate is on that house.

        I will say though that owning rentals is addictive. They’re like that commercial for Lays chips. You can’t just have one, before you know it, the whole bag is gone. I’m always looking for opportunities. I have my real estate agent looking for me as well. It has almost become a full time job, but it’s fun and very profitable.

      • Owning out of state real estate in a remote area isn’t addictive at all, but is a slow moving nightmare. If I put the place up for sale, it is hard to keep it rented and an empty house miles from a big town is a tempting target for druggers. So I’m stuck with a rental agency until I retire and can move there for a Spring and Summer while I fix it up and sell it, probably at a loss. When my other family members lived way out there, it was more manageable, but death and economic necessity moved them on. People in this generation are not dropping out in massive numbers and moving to the sticks. Own rentals where a lot of people want to live, and own a mountain cabin for yourself as a hobby.


    you too can live in the coveted ‘Mid Cities’ for a mere $950K dollars.
    why not buy the most expensive home, in a lousy neighborhood?

    Sold in 1996 for $150K
    Sold in 2010 for $458K
    Sold in 2011 for $295K
    Sold in 2012 for $390K
    listed now (remodeled) for $950K


    • Looks like someone missed a 2006 payday.

    • Seen it all before, Bob

      We have a house guest this week who lives in Silicon Valley. She’s a teacher and now very proud and secure that the house she bought in 2011 for $280K is now worth $1.3M.
      A millionaire public school teacher within 6 years. It is better than the lotto.

      I think there are many people like this. As many as there are houses in coastal CA.

      Maybe it is just me, but I would sell and actually be a millionaire instead of just one on paper.

      Since I’ve seen it all before in 2007 when houses dropped in half or more in 2 years, I’d take my million and run.

      What goes up 5X in 6 years will more than likely fall 10X in 2 years. Crazy

      • +1
        The market in California will easily fall by 55-75% during the next crash.

      • I wouldn’t personally remotely consider selling that house. With the high rents she could undoubtedly charge, it’s a cash cow that will give her stability for the rest of her life, without the hassle of owning the equivalent in flyover rentals.

      • Seen it all before, Bob

        John D,

        I agree but only as long as Facebook and other Tech stocks are flying high.

        My lesson learned with Lucent in 2001 is that both the Chicago and NJ Lucent sites became relative ghost towns when Lucent stock plunged from 120 per share to 3 per share in 2001. Good luck selling a house.

        My co-workers also commented in 2010 that Silicon Valley traffic was pleasant during that time and my friend the high school teacher picked up a house for 280K that is now worth 1.3M. That was only 8 years ago. Both scary and highly profitable times if you own a house in Silicon Valley.

        It is true with a 240K mortgage, anyone is likely able to make money there by renting it out. I hope.

    • From the ~million dollar crap shack listing: “In Real Estate location is everything… This is the perfect house no family should miss.” In today’s other news from literally down the street: http://abc7.com/1-person-shot-killed-in-robbery-at-mid-city-gas-station/3696859/

      “Hey honey, the baby needs some diapers can you run to the convenience store”…. better get some life insurance….

    • Ugh. Bowling alley style remodel with all the designer cliches. Surprised it wasn’t painted Soviet grey.

  • In this article, you’re speaking of a 10% correction during a recession. Sounds normal and manageable. We bought 18 months ago with 10% down, and we are up $50k on property value as well. As long as we stay employed, and give our tax return to loan principal every year, home will be paid off in 19 more years. That’s not bad. Dont care what happens to the markets, I care about my monthly nut and retiring early as well.

    • Some RE experts (me included) believe there will be 55-75% correction. It will be sweet, I should be able to buy my dream home in all cash at that point.
      55-75% drop makes sense because than you have rental parity. Why buy now and waste your money if you can rent the same box for a bargain?

      • LOL. You are about as far from an RE expert as it is possible to be.

        And we’re still waiting for one (just one) source quoting an actual RE expert who thinks a 75% crash is possible.

      • Too bad “experts” such as yourself won’t pinpoint the timing of said drop.

        Oh that’s right, you don’t know what’s going to happen. That’s why you won’t put a date on anything. You saw how moronic Jim Taylor looked putting random dates on things and decided it’s better to promote unprovable rhetoric by leaving out the most important metric — timing.

      • Mille is an expert in RE? Now I’ve heard it all!!!

      • “Millenial” is 22 years old and lives at home with his parents. He owns 5 litecoin that he bought at $200’s per coin after his friend jimmy told him to. He bought the 5 litecoin using the money he earned working at Walmart last summer. It was originally meant for new tires on his monogoose road bike but after seeing 25% returns on his litecoin investment in 2 months he decided he would wait for RE to crash and hope his 5 litecoin will appreciate 15,000% by 2020. What a silly little billy.

      • Mille, are you really a 22 year old poser/liar? Is your whole being a sham? Have you been punking us and trolling us this whole time? Be truthful now…

      • Seen it all before, Bob

        Of course Our Millennial is semi-trolling us. What he says could happen and did happen only 10 years ago.

        “Those who cannot remember the past are condemned to repeat it.” George Santayana

        I admire him for his willpower to follow the sage advice of buying low and not buying high.

        However, both Our Millennial’s and my crystal balls are broken. Since housing is a long term investment that has always paid off over 10 years, his retirement clock is ticking and in order to live a rent-free retirement, Millennials who are approaching 35 now will have to buy soon to retire rent free at 65.

      • Lordt B,
        i dont even remember Jim Taylor used to put dates on his posts. For the past years he has been saying “soon” which i agree with. He is actually spot on. 🙂
        “Soon” means for me within the next few years. I understand some people must be anxious about the timing. To me it doesnt matter if it crashes next year or the following year. Waiting to buy for a few years or decades means you live a flexible, debt free life.
        You can save a ton of money by renting, make a killing by investing and just buy when the market crashes again. Its all about boom and bust cycles. Just have some patience and have your war chest ready when the bubble pops.

        If you really want a date, how about this one: August 21, 2020, 3pm?

        Let me ask you, are you in a hurry? If so, why? The last few years (especially 2017) have been very profitable (crypto, stocks). Not a bad thing.

      • Charlie Lee?? THE Charlie Lee? Why do you always take so long to answer my twitter questions? 😉

        Seriously though, i am forever grateful for creating LTC and your post (6month ago about selling your LTC’s) so many were upset about. LTC went up over 5,000% in 2017 and when the founder of LTC sells his stake i decided it was a great time to follow suit. (I know it was for very different reasons).

        Unfortunately, i am not able to talk about the amount of LTC i am still holding on my nano s but here is a little fun fact:
        I own more Litecoin than the founder of Litecoin!

        (in all fairness, all LTC holder can say this)

      • Jed,
        “Mille, are you really a 22 year old poser/liar? Is your whole being a sham? Have you been punking us and trolling us this whole time? Be truthful now…”

        Well, I sometimes wish I still had the body when I was 22years old. I am still very active but back when i was 22 years i could eat whatever i wanted and would not gain a pound. Now, that has changed. Especially with all the good micro breweries around me.

        I would describe myself as a RE expert who shares his knowledge for free on this blog. I found this blog a few years ago along with other, similar blogs. I almost bought and i am very thankful that educating myself with the help of these kind of blogs prevented me from buying high. That allowed me to save a lot of cash by renting a cheap apartment and investing in the stock market and crypto market. I am sitting on a very large cash balance waiting for a buying opportunity in real estate. If i would have bought high, i would have missed out on these investing opportunities. My cash would have been tied up in an overpriced condo that is doomed to lose half of its value during the next bust cycle.

        While I do make a little bit of fun of RE cheerleaders and their hilarious statements (“price doesnt matter”, “buy now or be priced out forever”, “be a man,take the risk and buy”, “this time is different”, “Everybody makes 200k except 18year old fry cooks”, “Interest rates will never go up again in our lifetime”, “If you dont buy soon you will never own”, “Bitcoin will go to zero”, “your downpayment is making you 10%”, “paying principal is paying yourself”, “rental parity means paying 200k down AND 1,500 more a month as a renter”, “15 dollar avocado toast is the reason you dont have a downpayment”, “this is the year when millennials will go out and buy in droves” etc.) I am also here to return the favor to others who are on the edge of buying.

      • “I found this blog a few years ago along with other, similar blogs. I almost bought and i am very thankful that educating myself with the help of these kind of blogs prevented me from buying high.”

        But a few years ago wasn’t ‘buying high’ now, was it? Look at the horizon, see that boat you missed? No worries, the next one will come around ‘soon’.

      • Goudey, if I would have tied up my cash a few years ago in massively overpriced real estate I would have missed out on great investment opportunities (stocks , crypto). These are more favorable investments than real estate. You can sell stocks and crypto with very low fees and very fast. There is actually a word for it. Opportunity costs. You can google it and find further explanation. But don’t worry about it, you just keep buying real estate. Someone has to.

        As far as buying high goes. A few years ago was a terrible time to buy real estate. 2009-2012 was a good time. Since 2013 it’s overpriced. Right now is a great time to watch and enjoy the show. The great crash is coming fast and I can’t wait to invest my cash in real estate once the market crashes by 55-75%.

    • The coming correction will be more than 10%. This “correction” will the 4th I’ve witnessed in California and it has NEVER ever ever ‘only’ corrected 10%.

      every single time it’s been over 50%……no exceptions, this will be no different.

      • Many coastal areas only dropped 30% (nominal) in the last one. The bay area dropped 27%. Los Angeles metro dropped ~42%. San Diego metro dropped ~43%. Orange county as a whole dropped ~45%. Of course there were examples in all that dropped more, or less.

      • John D,

        I just looked up on Zillow the house I sold in ’05, it dropped ~58% by ’11 AND the best part…….or the worst depending on your perspective is it just sold again this year BUT for LESS than in ’05.

        BTW that bottom price was within $20K of what I paid for it in 1991……..the price in ’11 is WHAT THE PROPERTY IS REALLY WORTH……not this bubble 2.0 price it sold for in Feb ’18……..$440K…….in ’05 it sold for $459K

        It’s going to be another blood bath.

      • Interesting,
        dont waste your time.
        I mentioned a nearby condo complex. same thing, over 50% discount during the last bust.
        John D, who believes everyone makes 200k except 18year old fry cooks says this is just one data point and not valid. You cant fix …..

      • “I mentioned a nearby condo complex. same thing, over 50% discount during the last bust.”

        So you understand the concept of a single data point, with no understanding of the uselessness of it. You both picked single properties to show how bad the drop was. That only shows how bad the drop was for those properties. The median and averages show the big picture. See the difference? Properties are above or below those lines, and rarely by much for a given area. I’m sure if I looked hard enough, I could find a property that went for a 70% discount in an area that averaged 50%. It would probably be a ghetto teardown with a massive unpaid tax bill, but regardless, it doesn’t mean “that area dropped 70%”. That would be a really stupid thing to say. But here you are.

      • We could post examples all day long. It won’t matter. A RE cheerleader is unable to accept the facts and will come up with some bogus answer/explanation. That’s why arguing is a waste of time. Making fun of the cheerleaders is entertaining though. Especially, because there seems to be a never ending stream of hilarious lines you guys come up with.

      • “A RE cheerleader is unable to accept the facts…”

        So you’re saying the median housing price data is all a giant lie, and the only “facts” are single properties that you pick out. LOL. Do you ever read the garbage spewing out of your keyboard? It’s wildly out of touch with reality.

      • “So you’re saying the median housing price data is all a giant lie, and the only “facts” are single properties that you pick out.”

        That’s right.

        You can’t believe anything the NAR, lenders or RE cheerleaders publish.
        If buying would make sense financially you wouldn’t need the propaganda and the made up stuff.

      • Housing market data isn’t just based on MLS (realtor) numbers. When you sell a house, the law requires the specifics of that sale to be sent to the county assessor and recorder offices. Freddie Mac, the Census Bureau, and S&P/Case-Shiller all compile and report on that data. It would be awfully strange if the MLS data didn’t match it, but of course it does. Your conspiracy theory doesn’t hold water.

      • You can’t believe anything that is published by the NAR. They got caught lying countless times.


        When you meet a realtard, the only words that are not lies are “how are you”. Well not even that. He doesn’t care how you are doing, the only thing he cares about is to sucker you into overpriced real estate.

  • You guys will appreciate this article:


    More and more people renting homes instead of owning.

  • Millennial, Prop 13 actually amount to very little if the property tax rate is 1% or less. Whether one pays $8,000 taxes on a $800.000 home or $4,000 is he bought the same house 15 years ago is insignificant compared to the costs of buying a $800,000 home. There is only about $100/month difference in property taxes.

    • Yes Gary but remember that that the owner bought that 800k home for 150k. They likely don’t make enough to buy an 800k home, so if property tax increases significantly they will probably have to sell.

    • Gary, I agree! But that’s not what I am talking about.

      What about my relative who inherited a multimillion dollar home (3mio) and pays 2,300 dollars per year in property taxes since it has been in the family for a while?

      If i buy next door for 3mio my property taxes would be ~36,000 a year!

      What would be so bad if we change the law have him pay 18k for his and I pay 18k for mine? If that would make him move due to increased taxes….great. He can sell and make 3mio minus transaction costs and taxes!

      I do love this guy but use him as one of the examples how prop13 pulls in from the wrong side and favors the rich and boomers.

  • I’m starting to realize that people in California will be in for a rude awakening early next year when they realize the new SALT regulations kick in. Married professional couple pulling in 220k, paid 15k in state tax and 6k property tax on their new 600k house, with 22k in mortgage interest the first year. Instead of a 43k deduction, they will get a 32k deduction (only can deduct 10k of state and property tax, so missing 11k in deductions). Maybe these people can afford this with such high income but it is quite a difference. No additional deductions for automobile (property) taxes either which has risen in California so can add that in too…

    • Losing 11k deduction in CA for a couple like that is an increased payment of 3-4k… significant but I don’t think it is enough to make a huge difference in housing prices.

    • That’s the point I’ve been making since I started posting on this site. I’m trying to get my sweetie to wait at least until next April, when people in California actually see how little their write-offs are going to be worth, to buy a house. Already in my county (Sonoma, CA), prices in the range we’re looking at are down approximately $75,000 on average just in the last 4 months. Sellers are up here adjusting quickly, and dropping their prices. If they don’t, their house sits.

      • I hope your right, we are looking to move to socal, dana point, san clemente around april next year, i’d love to see a drop in prices by then. Ive notice on zillow, plenty of houses for sale, and some are dropping prices, just not enough to justify moving now.

    • son of a landlord

      Yet you’re aware of the new SALT regulations. Why do you assume that others won’t be aware until next year?

      • Son of a Landlord~

        It’s one thing to theoretically understand the new tax law, yet quite another to get your actual tax bill. My sweetie knew, for example, that he might get hit with the AMT last year, but when he actually calculated the amount of his penalty, there was shock, dismay, and quite a bit of cursing that ensued. It went on for days.

    • Some will lie by either claiming the amounts don’t matter or AMT negates the difference.

      It’s not a matter of being able to afford it. Relative value is what matters.

      The truth is that nearly everyone cares about the value of their own dollars spent. In fact, many wealthy people demonstrate an extreme amount of concern over value received.

      Another fact is that the value of living in California is objectively reduced by the new tax regs for those who are snared by it.

      Add a soon to be tax and spend socialist governor–we will quickly see how people who can “afford it” will be voting with their feet to other states.

    • yeah, but there is a significant tax break that will negate loss of deduction.
      And if you were under AMT, then you win even more.

      • Seen it all Before, Bob

        Surge is correct.

        I posted a calculation awhile back as a comment to Surge.
        You can go to an online tax comparison calculator between 2017 and 2018 and check your situation.

        It is true that state income and property tax deductions are capped $10K but Trump lowered the tax brackets such that even if you have more than $10K in taxes paid, most will still pay less taxes next year. Eliminating the AMT will also lower taxes for many this year.

        In summary, losing the property tax deduction will have no effect on most current homeowners. They will pay less in taxes compared to last year. No homeowner will be forced out their homes due to higher taxes.

        However, owning a home is less of an advantage compared to renting since renters will have the same tax brackets as homeowners so renters will pay even less in direct taxes next year for the same income. Of course, renters will still pay the landlord’s property taxes indirectly along with the landlord’s profits.

  • the day they put Mel Watt in and replaced DeMarco, this was easy to see coming. Mel Watt is a crook of crooks, Banker shill. Time to shut down both agencies, they are in receivership. He is another of the politician banker shills from congress that was fed money to enable debtpushers…

    What a crock all of this is. So many plates spinning in the world, US and in Real Estate its unreal. When are they reinstating FASB-157?

    Debt pushers are much worse than drug pushers.

  • I would really appreciate it if some of the older/more experienced commentators that have lived through downturns/recessions could offer me some advice. What did you do and have in place to survive those times? Maybe you were unlucky. What do you wish you had in place that would have made things better?

    • NoTankinSight

      The best piece of advice I can give to survive a downturn:

      1. Work hard and show your value to your boss. As long as you are the most valuable on your team you likely won’t be let go.

      2. Have at least 6 months in living expenses saved. 1 year is better. I am conservative and keep 2 years in cash.

      3. Have your resume ready to go and keep your interviewing skills sharp.

    • We rented and stayed in the stock market – didn’t panic sell. It paid off. Regardless of the state of the real estate market, the best thing you can do is buy what you can easily afford. Don’t stretch to the maximum debt-to-income ratio that you would qualify for. When we bought in 2009, we only used one of our incomes to qualify, in case of job loss in what was still an uncertain economy. Similar with our 2016 purchase – we put $200k down, and that plus the rental income from the casita means our effective housing expense is only $1k/month for the 3,200sf of the main house. We would actually be worse off in a 1-bedroom apartment, which go for $1,500/month in our area.

    • Crom: get out of debt and stay out. Forego gratification. Pay yourself first [put money into savings as if it was a monthly bill]. Buy what you can afford when the time comes. Keep reading and learning.

    • Seen it all Before, Bob

      Exactly what NoTankinSight and John D said.

      1) I would stress the having 1-2 years cash available so you aren’t forced to sell if you lose your job.

      2) Don’t overextend yourself now so you can have the cash to ride out a downturn.

      3) Don’t EVER panic and sell low (Our Millennial is waiting for you to panic). I have a couple of coworkers who did not panic and did not sell in 2010 when their houses dropped to half their values. They had jobs and could pay their mortgage but advice from many at the time was to walk away from their houses because of the 300K-400K losses. The temptation of falling rents at the time was hard to resist. They held in there and one is selling at this peak and is a lottery winner, the other is comfortable to ride it out again even if Bubble II pops.

      • Thanks for the comments everyone.

        I am going to build up a 6 month emergency fund.

  • https://www.attomdata.com/news/market-trends/foreclosures/foreclosure-starts-jump-153-percent-in-houston-increase-in-43-percent-of-local-markets/

    A shadow inventory of homes for sale is increasing. This is just another sign that the end of this bubble is near. The bubble will likely pop in another year.

    Foreclosure starts decreased nationwide in May, but 43 percent of local markets posted year-over-year increases in foreclosure starts, counter to the national trend, according to an ATTOM Data Solutions analysis of record-level foreclosure data.

    Markets with increasing foreclosure starts included Houston, Texas (up 153 percent from a year ago); Los Angeles, California (up 14 percent); Miami, Florida (up 4 percent); Dallas-Fort Worth, Texas (up 46 percent); and Atlanta, Georgia (up 7 percent).

  • Prop 13 is not a factor in these crazy home prices.

    As I posted years ago, of what was to come, what’s driving the insane pricing is Red Chinese flight cash.


    The Red Chinese government has created the world’s most astounding credit bubble — larger than EVERY other central banker on Earth. Yet its economy is not remotely of such a scale.

    At some point there will be a fantastic credibility implosion radiating outwards from Beijing.

    It’s the way of the Chinese. The Mandate of Heaven will be lost.

    A trade war with the USA figures to be the most likely trigger, for Red China is quite addicted to exports. America is not addicted to imports. (eg Crude oil.)

    Such a credibility implosion will trigger a currency crisis and credit implosion.

    It will take all other markets down, too.

    That’s the fundamental problem with Globalism.

    Every economy starts to behave like a school of fish.

    • Blert is back after a several year absence. Didn’t you insist that Obamacare would implode the economy? How did that prediction work out?

    • Prop 13 is absolutely a factor. You’re wrong.

      FULL STOP.

    • It’s a combo of many issues. Dirty money from overseas, zoning laws preventing construction, prop 13, weak state law mandating housing construction, desirability of coastal CA…

    • I agree with you, blert. I bought a cookie-cutter Plan 3 house, with pressboard siding and a tiny yard, in 1998 (a 3/2 with 1525 SF) for $285,000. The Chinese took the area over, and now that same house is worth over a $million.

  • For those looking to survive downturns, etc.. First, buy smart. Buy for the long term, and don’t stretch the old finances too thin. Always keep a good reserve stash for unexpected expenses. Put your mindset into patience and persistence mode. You’ll need it. Lock in a good rate on a 30 yr. loan to fix your mortgage costs. If you’re a newbie only sign up for a cosmetic fixer, nothing too extensive. Learn how to do basic maintenance yourself. And be able to stomach the ups and downs of the market. It can be both exhilarating and depressing. Most of all, stay in the market over the long term. That’s where you’ll make your money. Timing short term cycles is almost impossible and generally not too lucrative for the small investor. This is general investment advise you’ll get for almost any asset, stocks, bonds, and RE. Easy to say, more difficult to execute.

    • Seen it all before, Bob

      I 100% agree RickA.

      Buy your long term house in the location you want to live.

      The key to happiness is never look at the value of your house for the next 20 years. Just enjoy it.

      Patience is power; with time and patience, the mulberry leaf becomes a silk gown.
      (Chinese Proverb)

  • Dan said’

    “It’s always next quarter, next year, next decade etc…..”

    “After awhile they started disappearing, I mean you can only be wrong so many times before it becomes embarrassing. I will hand it to you though, at least you had the stones to pick a date unlike delusional millennial who is waiting till next decade and beyond to buy or inherit. Hope it doesn’t get too the point where he is seen on Dateline in a Menendez type story.”

    “In any case desirable parts of the state are still in very high demand, and no matter what China does with capital controls, the money flows.”

    Yes, I have changed my mind recently and decided that the evidence suggests that the California real estate top is now likely to occur in 2019–at the earliest. What is missing is real evidence that the top is occurring like increasing inventory, increasing interest rates, a major crash in the Housing Index and an inversion of interest rates (i. e. 2-years Treasury rate is above the 10-year rate).

    If the major stock market averages go to new highs, which I now expect, that would suggest that a recession and housing crash are at least a year away. There are hints of trouble coming but no real evidence of a real estate top. It was wishful thinking on my part to predict a real estate top in the Fall of 2018. I will go by the evidence from now on.

  • Left Los Angeles

    I have been an avid reader of this blog since 2006 when I pined to purchase a property in Los Angeles, but, knew it was overpriced and waited instead. Since then I have kept up with this blog, mostly to read the comments. This is my first time commenting and I wanted to tell my story.

    -2006, 27 years old, had my first high paying job, wanted to buy a home, but, knew it was overpriced and something felt off and so I waited.

    -2009, got married and the Great Recession just happened, was told not to catch a falling knife. Tired of living in the valley and commuting to Santa Monica, moved to Marina del Rey and rented. Lots of bank foreclosures and short sells, looked at a lot of condos on the westside, but, nothing felt right.

    -2010, found a town house in Playa del Rey for $525k, 2bed 2bath, 1300 sq ft. Airport noise was atrocious, but, decided that it wasnt too bad for a young married couple in their 30s, plus lots of cool bars and eateries around. Put in an offer at $500k and it was accepted.

    -2014, first (and only) kid is born, itching for a backyard.

    -2015, SILICON BEACH mania starts, found a nice newly remodeled from studs up house (4bed and 3bath, 2300sq ft) in Hawthorne Del Aire area, Wiseburn school district taking off, decided to buy at what I felt was the peak and transfer my equity from my PDR townhouse. Sold PDR townhouse for $630k and bought new house for $940k. Rates still low, but, man did the property taxes hurt…

    -2017, husband laid off… Still have my job though.

    -2018, got sick of Los Angeles with its high taxes, homeless population and never ending liberal rhetoric. Plus, husband was never able to find another job, but, doing okay with one income. Husband originally from Mid-west with family still there, kid now 4 years old and starting kindergarten soon. Private school is so expensive in LA and hard to even get accepted, local school district is okay, but, wanted a better place for my kid to grow up. Got a decent paying job in mid-west, but, current job countered and said I could work remotely from mid-west at the same pay!!!

    -Present day, bought a beautiful 4 bed 4 bath house in mid-west for cash with proceeds from previous house. Sold Del Aire house for $1,076,000. So far happy with the decision. Life is good here, so much green, love the community feel. Best part, still get to go out to LA every quarter for work!

    – Ask me in January how I am doing with the winter…

    I tell my story just so you can know one person’s experience with the LA housing market. I know I was/am very lucky, to have a high paying job (over $200k my all in alone), get the timing semi-right on the sell of previous houses and getting the hell out of Los Angeles!

    • Left, thanks for sharing. Welcome to the mid-west. Take it from a lifetime Minnesotan: the winters are worth the (relative to CA) stress-free living.

    • Congrats you did well. I wish I had bought 2-3 yrs earlier than last summer bc I would’ve had an extra 10% equity and a rate 0.5% lower.

      Mortgage free life must feel pretty awesome! Hoping to be there soon.

    • Can you share you recent experience on selling your property?

      How long did you have it listed? What initial price point and final sales price? Amount of offers? Any cash offers?


      • Left Los Angeles

        Experience with selling previous property: First we were greedy and priced it way too high for the neighborhood, had two open houses with tremendous traffic, but, no offers. Didn’t wait long to cut the price by 12.5% and had multiple offers on the house (including 1 all cash offer), accepted an offer 25k over reduced asking price. I wish we would have reduced the price earlier, but, it took 30 days on the market to go pending.

        Almost all of the offers that we received were married couples in their 30s with kids that had money given or lent to them by family.

    • Lord Blankfein

      Wow, I didn’t realize Del Aire was that expensive! I think Del Aire and Holly Glen get a lot of overflow from the South Bay beach cities. One of my big gripes for both Del Aire and Holly Glen would be proximity to both the 405 and LAX flight path. You are literally a few blocks from one of the busiest freeways in the world, that can’t be healthy.

      The South Bay and Westside beach cities have become almost unaffordable in a very short period of time. I remember in the mid 90s you could buy crap shacks in Venice (Abbot Kinney), Manhattan Beach, Hermosa Beach for 250K all day long. Now these are considered wealthy enclaves. Save your money for the next buying opportunity!

      • “Almost all of the offers that we received were married couples in their 30s with kids that had money given or lent to them by family.” THERE IT IS!!! It’s all mommy and daddy’s money. This is reality. This is the ONLY scenario in which I see first time “home receivers” getting their new homes/toys they want in their 30’s.

        In childhood they were the types that needed air Jordan’s to play basketball at recess. Then they needed new ford mustangs in high school. Then they needed condos that their mommy and daddy’s paid the rent every month on while they partied in college. And now… they want their houses in order to store their new toys (kids).

  • Seen it all Before, Bob

    I’ve posted this before but since my crystal ball is broken and all I have is historical data that we all have seen before, here is what may happen.

    1) Since housing has gone up 5X in 6 years in Silicon Valley, it is likely it come crashing down 50%-70% within the same time frame or faster if the economy turns. That is what happened in 2008-2012. The economy does not look like it is turning down imminently.

    2) The alternative might be what happened from 1974-1994 when inflation rose prices and wages 3X and housing rose 4X. If inflation gets out of control (it is already rising), we may see housing prices flat (or slightly rising) for many years and no crash. There were slight ups and downs from 1974-1994 (20 Years) but no major housing crashes. Even the housing recession in 1990 caused a price drop of about 3%. From 1994-2018 (28 years) inflation pricing has only risen 0.7X but housing has risen much more and we’ve already seen one 40-50% crash.

    Inflation is a homeowner’s friend both with payments and CA property taxes. That 50K house purchased in 1974 was worth $200K in 1994. The loan was locked in at 50K and the Prop 13 taxes would have been only increased to $750/year by 1994 due to the 2% cap. Wages were keeping up with inflation during this period so all of those Silent Generation and early Boomers who bought houses in 1974 were making out like bandits. Thanks to inflation and the Prop 13 cap.

    • Seen it all Before, Bob

      One more note.

      If inflation rises as fast as it did from 1974 to 1994, that 1M house today will be worth 3M-4M in 2038.

      If Our Millennial buys that 1M house today, his Prop 13 taxes will be 10K per year. By 2038, the Prop 13 taxes will be capped to about 15K.

      If he waits and Carter/Reagan era inflation happens again, that same house will be selling for 3-4M in 2038 and the taxes will be 30K-40K per year.

      If the same inflation happens again, our Millennial should buy now so the Gen Z’s and Gen Alpha’s can complain about him not paying his fair share when he paying 15K-25K less per year in taxes.

      • son of a landlord

        Millennial doesn’t worry about the dollar losing its purchasing power, because his currency is in crypto.

      • Son of landlord, i sold an enormous portion of my crypto last year. That cash is sitting in the bank/cds. Dollar cost avg. is your friend, so I am investing in crypto and stocks on a regular basis.
        As far as inflation goes. It’s a nothing burger. The house that’s 1mio today will be less than 500k during the next crash. That’s when I buy.
        Of course you need a back up plan.
        No crash no purchase. My in-laws and parents own several houses. 2/3 of their real estate was obtained through inheritance. This will all be handed down to me because my parents don’t live forever (unfortunately). I am not Mormon so I don’t have to share with 18 other siblings.
        You see, there really is not one single reason to buy high. I know RE cheerleaders are coming up with a lot of reasons but it can be categorized as funny or BS.

      • Seen it all before, Bob

        Millennial, I know you are having fun semi-trolling usyou may end it .

        Millennnials are stereotypically ironic so being piled on to buy while having the belief to not buy now while in an enormous bubble while on a Housing Bubble Blog is both ironic and humorous.

        However, if tax laws and Prop 13 change before your in-laws pass into the great CA sunset, you may end up with nothing. Hope is not a strategy.

        And shame, shame for being racist against those hard-working extremely conservative LDS people. 🙂

      • Bob,

        You seem like a nice guy. I read your post twice. Either I am too tipsy to understand or you were drunk when you posted it. Can you simplify it for me? I have no fuckin clue what you are saying. 😉

      • Seen it all before, Bob

        Darn Smart Phones with small buttons. I am traveling this week.

        Us Boomers haven’t evolved like Millennials yet to use them.

        My point is that don’t count on your parent’s inheritance with Prop 13.
        When the tax laws change when Millennials elect Bernie in 2020, he will MAGA by moving us from the inheritance tax laws of Feudal Europe. I hope you parents live a long time but don’t expect a large inheritance like Prop 13 and what the US tax laws allow today if Millennial voters have their way and Prop 13 and estate tax laws are revoked.

        Buy your house when you can afford it in a location you want to live for 20 year.s.

        Don’t count on Prop 13 or tax laws for your future.

    • Housing going up 5X in 6 years in Silicone Valley? Bull. Actually super bull.

    • Try “stagflation” in your equation. Different than inflation with a whole different outcome regarding housing and asset prices.

      • Seen it all before, Bob

        Please describe the outcome of stagflation. I haven’t seen that before.

      • But….you’ve seen it all before?? investors like you you’ll fall the hardest..

      • Seen this all before, Bob

        JHK II,

        The only time according to Google when we had stagflation was under Carter when inflation rose and wages were relatively flat. Carter called it a Malaise.

        Housing did not crash and remained relatively flat. Our Millennial won’t like this.

        If you make a statement and you don’t know anything about it, you should probably hold your opinion.

  • Question to the Perma Bears….

    Let’s say your fantasies come true and prices drop 50% back to 2010 levels. What have you really gained by renting all this time vs having bought in 2010? You could have built up equity over that time and had the tax deductions too.

    The problem with being a perma bear is no matter what you will always think more bad news is coming. So if prices fall 10%, you’ll wait for 20%. If they fall 20, you’ll wait for 30 and so on. So even if prices do fall 50, you’ll wait for 60, and miss out on buying yet again, only to show up on a blog like this in 2029 predicting a 50% drop in 2033 when you will finally buy.

    Meanwhile your landlord(s) will have several paid off house sin 2033 that you paid for all these years.

    • That’s the problem and the advice I tried to give Millenial. I know a successful investor and this is what he told me, “I bought when prices were high, I bought when prices were low and I bought when prices were normal. I kept buying as long as the numbers worked for me and that’s how I accumulated my porfolio”.

      Millenial could have bought a property in the past 5 years, then refinanced and bought 2 more when his crash occurs and in 10 years he could own 10 properties using leverage and be a landlord and retire comfortably. Not easy to do but it’s doable.

      • Johnny,

        It’s ironic that Millie talks about dollar cost averaging a few threads above, but doesn’t realize that doing the same works with real estate. Buy high, buy low, buy medium. Eventually it evens out in the long run and you end up a paid off portfolio of real estate.

      • That’s a decent line:
        Just start buying now, you will own ten houses soon!
        Not a top ten candidate but decent.

    • Mr. Landlord, I have recently become less bearish on California real estate. I have stopped trying to guess when the top will occur and am waiting for some evidence to appear that the bubble has popped. So far, there is no evidence of a top.

      The inventory of homes for sale is low in most parts of the country including Orange Co. where I live. In April 2018, the average days on the market before a homes sells was only 64 days in the U.S.–the lowest since the housing recovery began. It was 137 days in April 2010. Interest rates remain near record lows.


      • Interest rate on a 30year fixed went from 4.15% to 4.65% this spring and the perma bears acted as if it had gone to 15%. By historic standards, as you say, we’re still ridiculously low. And that’s what the perma bears never seem to realize. Interest rate on a mortgage is what counts, not the amount. A $500K mortgage at 4.5% is cheaper than a $300K mortgage at 9%. And all those “conventional wisdom” things like home prices should be 3X income are from the 9% (and in many cases much higher than 9%) mortgage era of the 70s-90s. They have zero meaning in today’s low interest rate environment.

    • Let me give you a real life example. I sold a house in 2005 for $720,000. In 2010, 5 years later, the identical house (it was a development with 4 prototypes) had dropped to under $500,000, a drop of just over 30% (much less than 50%). During those 5 years, I was renting a townhouse for $1700/month, and so paid out $1700 x 12 x 5 = $102,000 in rent. That included my landlord’s property taxes, HOA dues, maintenance, and mortgage interest. If I’d bought it back in 2010, right off the bat I’d have an extra $220,000 – $102,000 = $118,000 sitting in the bank, plus I was spending an average of $5,000/year in maintenance (= $25,000), $135/month in HOA dues (=$8100 over 5 years), $4400 in property taxes every year (which rose a lot every year). So I’m already ahead almost $175,000, and that doesn’t even include the mortgage interest I was no longer paying.

      You also have to remember that the lower price you buy at, the lower the starting point is for your property taxes, which helps a lot in a high tax state like California. You get locked into that base number until you sell your place.

      And before you ask why I didn’t buy back in 2010, I invested my profits in something that went up even more than my house had, so there’s also the opportunity options you lose when all of your money’s tied up in a house. Now I AM waiting for a downturn, and in my area in Sonoma County, CA, asking prices in the type of house I’m looking for have dropped approximately $75,000 in the last 4 months. I’ve never seen prices drop this much this quickly in the previous two busts, but it may be because of the decreased write-offs under the new tax law. Who knows, but it’s worth waiting for. The trick is to buy at the right time. You can’t buy at exactly the bottom, but a good way to get close to that is to wait until it’s a buyer’s market again, and houses aren’t moving. Then you get in when you start seeing a firm uptrend again. Houses aren’t like stocks in that they don’t drop in value overnight, so you’ll have plenty of time to figure out when the situation looks good to jump into.

      • “Then you get in when you start seeing a firm uptrend again.”

        That’s a good time to buy, but a miserable time to shop. The really good properties will have dozens of offers, many all cash and well over asking. You’re forced to either compromise with a less than ideal property, or make an offer they can’t refuse on a gem.

      • Seen it all before, Bob


        You have a great story.

        You are very much like Our Millennial who is waiting for his first chance. You took advantage of your first chance and did well. You missed the second chance and are now waiting for your third chance.

        I wish you both well.

        However, investments in 2008 crashed in tandem. The stock market crashed 50% with “safe” index funds. The speculators lost 90% in some cases.
        I couldn’t even look during that time at my 401K since I know I was burned in 2001 because I owned JDS Uniphase and Lucent in 2001 when they went from $120 per share to $3 per share. I had bought at $6 per share and thought I was very wealthy until I was not. Stocks crash harder and faster than houses. Houses historically come back. Stocks may not. Lucent and JDSU never went above $20 after that.

        Some of the people in the book “NomadLand” were speculative stock investors in 2008. They lost everything in the market and then lost their houses. Living in a van at 60 is not where I want to be. It happened fast due to the market plunge for them and then it happened slowly as they foreclosed.

        That is why I have a nice cash reserve and I don’t pay too much mind to the wild Trump stock market gyrations.

        Paranoia is a bad trait but it has served me well since 2001.

      • Seen it all before, Bob


        Also, my brother lives in Healdsburg and refi’d to take some money out to add an addition to his 2 BD house.

        He must of got lucky since the house he bought for 200K in 2003 was appraised at 850K 3 months ago. He was happy for the easy refi. I was shocked that values were 4X from 2003

        It means that you may be waiting for a 75% drop to restore sanity

        Go Millennial (and Jim Taylor)!

      • Lord Blankfein

        Karin, Millenial and all others waiting for the big crash:

        My advice regarding home buying is buy when you can comfortably afford it. Trying to time the market is next to impossible. We have people on this blog who have been waiting for the big pullpack for 5, 6, 7 years. How did that work out? Unless you have the most accurate crystal ball in the world or you have plenty of dumb luck, timing markets is usually a no win situation. Proceed at your own peril.

      • John D ~ the key word here is when you START seeing a firm uptrend. We had bottoms in our area (East Bay in CA) from around 1994-1997, when most were too scared to buy. I bought that same house in December 1998, when the market had been heating up for a year. It was starting to get hard to find listings, but the prices had not yet really taken off. Again, housing is not like the stock market, in that prices do not crash or skyrocket overnight. You have plenty of time to notice a trend, especially when you look at the cookie-cutter developments where floor plans are identical. As for multiple offers, I sold a house I inherited not long ago, and received 17 offers on it. Most of the bidders waived inspection contingencies, took the house ‘as is’, took the mandatory sewer inspection and upgrade (in a buyer’s market, I would have had to pay up to $15,000 to do that), etc. I vowed never to be in that position, because you as a buyer are helpless. When the highest bidder on this house issued an addendum asking for $10K back at closing, and for additional repairs of items called out in my inspection report, I had 3 firm backup offers waiting. I gave them a 24 hour notice to vacate the contract, and said ‘next’. The high bidder quickly got back in line. I’m waiting for a cooling off in the market because I never want that to happen to me as a buyer. And a cooling will happen, as RE is highly cyclical.

        My second chance was what I invested my house proceeds in, which took off even more than my house had. I did NOT invest in stocks, but in hard assets which have never gone to $0. I had previously invested in stocks the same year I bought that house back in 1998, and I closed my account right after I sold my house. I’m still writing off the losses, $3000 per year. Never again.

        Anyway, none of this is like Millennial’s strategy. To wait for RE to drop 55-75% means that basically you are never going to buy.

      • More to Bob (I just saw your next comment)~
        Healdsburg is unique. From what everyone up here tells me, it was once a peaceful and small agricultural town. It has, in the last few years, exploded with the trendy set, and prices have skyrocketed. It’s more like the East Bay than any other town up here, including the town of Sonoma, which is a tourist magnet. The restaurants are exceedingly overpriced, the traffic is heavy, and parking is impossible in downtown Healdsburg. It is also the only town in Sonoma County that fluoridates its water. In short, it’s exactly what I was escaping from when I left Oakland/Alameda behind. I can’t stand Healdsburg, but it attracts East Bay types with too much money to throw around. Your brother got lucky, but if I were him, I’d sell and move to a more sane town.

      • Market Realist

        Hi Karin + Other Perma Bears, not to be a downer on your perma-bear parade, but I figured I would chime in with some market data. I often read these posts which reference heresay, opinions or zerohedge articles. Check out Redfin Data Center (https://www.redfin.com/blog/data-center) for close to real-time data on Sonoma County. A few facts for those citing opinions and anecdotal evidence.

        – Prices have never been higher. Median price in Sonoma County $650k in May vs. $585k in May ’17 vs. $530k in May ’16.
        – Inventory has never been tighter. Inventory of new homes in Sonoma County in May (956) down from 1,299 in May of ’17 and 1,375 in May of ’16.

        One of the largest tax cuts in our nation’s history was just pushed through which will be large-scale fiscal stimulas for the next two years (ending 2020).

      • Hi Market Realist~

        I’m tracking houses that are 3/2, 1500+ SF, and 7500+ SF total lot size in Santa Rosa, Sebastopol, Forestville, Windsor, and a few other neighboring towns. Since March, the average asking price of comparable houses has gone down around $75,000. That’s in 4 months. I visit the open houses, instead of just looking at photos. I’m also working on my third ‘fixer’ (my sweetie’s house), and I know what I’m looking at. For example, there’s a gated community in Santa Rosa that I like, except for the fact that it has an HOA. These houses were mostly built in 1987/89 (and are well-built), and the community is prestigious. In January of this year, one of the properties, a 3/3 with 2272 SF on 0.66 acres listed for $939,000, and closed for $1,010,000 two weeks later. It had old wallpaper on nearly every wall, and the kitchen and adjacent living room had built-in bookcases that had been painted Forest Ranger green. But they had a bidding war. Now, just last month, another property, a 3/2 with 2118 SF on 0.72 acres was listed. The walls were stripped off paper and textured, had many updates throughout the house, and it has a killer back yard. The asking is only $834,000, but it’s still sitting there. It’s astounding to me how fast asking prices have been dropping around here – I’ve never seen anything like it. But perhaps the memory of the last bust is still fresh, and people want to get out while they can.

        As for the tax bill, go back in our discussions. It may be a boon for the economy, but not for real estate in states with high state income and property taxes like California.

      • Seen it all before, Bob


        Both Healdsburg and Windsor are within 15 miles of Santa Rosa where 5,000 homes burned down last year.

        I sure the 5000 former homeowners are also driving up demand and prices. For now.

      • “Both Healdsburg and Windsor are within 15 miles of Santa Rosa where 5,000 homes burned down last year.

        I sure the 5000 former homeowners are also driving up demand and prices. For now.”

        Bob, then why are prices going down in the past 4 months? Also, very few homeowners have been able to start re-building. As in the Oakland Hills in 1991 (which I also experienced firsthand, with the fire stopping 4 blocks from my house), most people were underinsured. Here it appears to be worse, as the many new codes and regulations have added enormous costs to a re-build. Most of what I’m seeing is contractors buying up lots for sale, and then building several at once within the same tract. However, their pricing appears to be overly optimistic, as the houses remain sitting.

        Here’s an example. I fell in love with 250 Darbster Place in Santa Rosa a year before the fire. I have never before or since seen a floor plan I liked better, but the yard was too small (we grow a lot of veggies, and have several potted fruit trees and berry bushes that need a permanent home). A year after we reluctantly passed on it, it burned to the ground, so we dodged a bullet there. Every other house in that development also burned to the ground. Over 8 months after the fire, all the owner has done is have the lot cleared. However, the lot next door (260 Darbster) was bought by a contractor who is currently putting the finish work in. It’s been listed for 32 days with no offers:


        Where are those 5000 homeowners? Most are still in temporary housing, or have left the area. Why aren’t they buying this house? The facts speak for themselves.

    • In 2010 perma-bears either had no cash/job or were too fearful to buy. Not just perma-bears, but general populace.
      If prices drop again by 50%, same thing will happen…our perma-bear friends just won’t buy because well they won’t be able. (Remember, prices will drop because buyers are wiped out).

      • I was one of them. In late 2008, I was convinced it had much further to go, and did what Millie is doing now, which is ignore the long term trend. Luckily my wife was nesting at the time. A lot of lessons learned.

      • Actually, it’s about boom and bust cycles. Right now is the peak phase. Mentality of “price doesn’t matter”. Once we crash and enter capitulation (people buying high losing their homes or walking away because they are seeing how they massively overpay ) it will be the right time to buy.

        My educated guess is a drop of 55-75% compared to today’s prices.

  • One issue nobody ever talks about when it comes to housing costs is materials. When material prices increase, finished product prices increase as well. Right now building materials are skyrocketing in price. Which means new home prices will continue to increase in price for at least the rest of this year and probably into 2019. Sorry Mr. Taylor, your hard tank just got postponed another 6 months.

    “The U.S. Bureau of Labor Statistics producer price index for construction materials increased 2.2 percent from April to May, marking the largest monthly price increase since May 2008, according to a press release from the Associated Builders and Contractors. Similarly, a press release from Associated General Contractors of America says those price index figures rose 8.8 percent from May 2017 to May 2018—the steepest price increase since July 2011.”

    • Yes, the real estate crash does appear to have been delayed until at least next year–at the earliest. Coming months will give us a better idea of when the bubble will burst, but there is no evidence of a top at this moment. It appears that the powers that be (TPTB) may want to delay the next recession until after the November 2020 election. If that recession began in the last quarter of 2020, no one would know it until Jan. 2021.

  • My husband and I recently started looking into purchasing our first home. We have wealthy parents, but they will not help us with the down payment, so we were going to get a 3% conventional mortgage. As we started looking for a new home we quickly realized the only thing we could afford was Corona and further out. We immediately got spooked because #1 Anytime we tried to put an offer on a house they had several offers over asking price, basically asking for a bidding war #2 The neighborhoods we could actually afford were really bad! We rent in a nice area near Yorba Linda and we do not want our kids going to a school with 2 or 3 ratings. #3 Everyone seems to be in this sort of feeding frenzy, where they are pushing you to buy houses that are clearly not worth the price. It just didn’t seem right to us. I don’t want to pay $450k to live in some crappy house in a bad area just so I can say “I’m a homeowner”. I will wait my turn until the housing market corrects to a more decent level.

    • Seen it all before, Bob


      In My humble opinion based on experience:

      1) Buy in an area you plan to stay for at least 20 years. Housing is a long term investment My first house I sold after 6 years and broke even for taxes but likely would have come out ahead renting.

      2) Don’t buy if you don’t have 1-2 years of cash in reserve for any downturn like we saw in 2008. It happened and may or may not happen again Ride it out and don’t walk away or sell and you will be OK. Our Millennial is waiting for you to walk away with a 500K loss. That should be enough incentive.

      • Perfect weather

        That’s outdated thinking. Suggesting someone plan for 20 years is foolish advice. Hardly any home buyer today is going to stay in a house for 20 years.

      • Seen it all before, Bob

        Perfect Weather,

        You really should read the book “The Perfect Storm”.

        That is what is coming.

        If you don’t buy for the long term, you will drown.

      • Perfect Weather


        You should put down the stories and try reality.

        That’s what’s already here.

      • I’m with Bob on this. The real estate market is cyclical, but you cannot predict when the cycles will happen unless you are part of the manipulation. What I’m referring to is the insiders with the Federal Reserve and their cohorts in crime. My parents bought my childhood home right after the JFK assassination, for less than $20,000 (I think it was $18K, but I can’t find the records for it). Its current estimated value is $800,000. It’s not that the house is worth more, though. It’s because the dollar is worth less. But that’s a whole other topic.

      • Millie is actually not that far off Bobby Boo..markets and actions are complex. Next down turn will be more complex in scope and depth than 08-09. Butt you probably haven’t seen that either. Here is a taste of what may happen Eyes Wide Shut Bobby-


      • Seen this all before, Bob

        But JHK II,

        If we have stagflation like we did under Carter in the 70’s, housing won’t crash at all.

        You should know that.

    • Racoomes – this is an easy one. Don’t buy in a bad area or stretch yourself too far for a good area. Either could lead to heartache. So wait and rent. And whatever you do, don’t put your kids in a bad school. That’s just one more thing to beat yourself up about in the years ahead.

    • Damn it, so close! If you would have said you are looking to buy soon the RE cheerleader could have gotten their gear on and start their favorite cheer. Last thing they want to hear is a potential buyer waiting for a correction! What a disappointment!

    • Yeah people just buy a home and worry about schools later on. Most people in bad areas are thinking charter school or something like that. The thing is for the kids the schools will make the biggest difference since they will be spending a huge amount of time there. Either than or sleeping. Awake time at home isn’t really that much, even for adults if you are planning on being active and not just sitting at home all day.

    • Well said.

    • Perfect weather

      Why wait when you can move out of state? California is an overrated bad deal and there’s no guarantee of a significant price reset.

    • You able to save more money for a larger down? Remember, closing costs are on average 2%.

  • son of a landlord

    The “expert” Millennial will laugh at this, but others who also claim to have some financial expertise predict that Bitcoin is doomed to become worthless: https://nypost.com/2018/07/04/why-bitcoin-may-be-soon-worth-nothing/

    • ROFL
      For the 200. Time we have heard bitcoin is dead. Meanwhile they are working on getting Crypto ETF’s approved. Keep dreaming.

      • It’s interesting (if that’s the right word) how Millie is convinced real estate is in a bubble but thinks a worthless “currency” worth $6K per unit is a great investment. Worst case scenario, your house drops 50% in value, you still have a place to live. Worst case scenario, Bitcoin goes to $0…..you just lost all your money.

        Each to their own I guess.

      • That’s right landlord. I see huge upside for crypto the next few years but a big correction for housing.

      • It’s also interesting how Millie justifies Bitcoin as a sound investment because Wall Street is pushing Crypto ETFs. The same people also sell REIT ETFs that will crash and burn if his real estate collapse prediction comes true. You think they care? They see suckers dying to part with their money and they’re designing a vehicle to make it happen. They make commissions off the fees just like the “realtards” he vehemently despises.

        Millie, Bitcoin could go to the moon or it could go to zero. It could be Google or it could be AltaVista. It’s so high risk I wouldn’t even call it an investment. I suppose if you loaned a crackhead a hundred bucks that says he’ll pay you back double next week that could be considered a investment as well.

        You are a gambler, not an investor. You scratched off the winning ticket. You have no skin in the game, therefore you are part of the peanut gallery.

        I equate this to a hot table in Vegas a couple of weeks ago. The shooter was on fire. People were screaming and yelling across the casino. Naturally, it got my attention. I put down a few bucks, let it ride a few throws, then took my earnings. The guy craps out a couple throws later and wiped everyone out. This is essentially your Bitcoin “investment” story. I won that day but I’m not dumb enough to think that makes me a great “investor” when I gambled on some plastic chips that have no value outside that casino’s doors.

        As Landlord said (and what I tell everyone) your primary home is not an investment per se (unless you treat it like one)- it’s a place to live. Having a roof over your head is not likely to go out of style. You can’t live inside a crypto coin, or a stock, or a bar of gold. If my home drops 50% tomorrow guess what? I don’t plan on selling so who cares. Do you really think in 20 or 30 years from now you will lose money?

        If you really believed in the nonsense you spew, why would you ever buy a home? Prop 13 will eventually go away and the home you bought at a 50% discount will drop even more. You should just reinvent your “fortune” in that new Crypro ETF and go play golf with Elon Musk on the weekends in a couple years. ROFL!

      • Crypto is becoming another asset class. Don’t believe me? Wait and see.
        Buying a house is likely your biggest purchase. Putting money on a monthly basis in stocks or crypto is just part of the diversification. Housing is extremely high at the moment. I got cash and will buy during the next crash for a large discount.

        Crypto: dollar cost avg. is your friend.
        We have seen nothing yet. They will blow the crypto bubble up like a motherfu….
        I don’t need to provide more reasons for it. Marketwatch and co will do that for me with their headlines. Once that thing is set up the masses will chase the profits.

        The whole you need a roof over your head argument is invalid. What about renting and saving a ton by doing so? Nobody ever needs to buy an overpriced house?

    • Son of a Landlord, Interesting as I do not know who created this currency; or what metals are used to mint it.

  • Karin, you are omitting one big detail…for how much you bought your home initially (<300k). Once you include all that detail, all your further "analysis" is just noise. You will never be able to buy a home for that price, not even close. Good luck.

    • Surge~
      This is true, but 1) since my profits were invested in something else that then more than doubled, I’m way ahead of where I would have been had I held onto the house. And 2) I never wanted to stay in that area. Once I retired (i.e., now), I would have sold anyway and lost the lower property tax, which is not transferrable due to the fact that my situation doesn’t fall under Prop 60. I can buy a better house up here for what I sold that house for (and on a much bigger lot), and have tons of cash left over.

      • I live in the Cloverdale Dell Web development and the prices are way up and the houses appear to be selling quivkly. With 8,000 structures burned to the ground last year and the big increases in lumber prices boomer are taking their insurance money and down sizing up here paying all cash. I don’t look at data but anecdotally prices seem to be up 20%ish since the fire, not that I care.

      • I live in the Cloverdale Dell Web development and the prices are way up and the houses appear to be selling quivkly. With 8,000 structures burned to the ground last year and the big increases in lumber prices boomer are taking their insurance money and down sizing up here paying all cash. I don’t look at data but anecdotally prices seem to be up 20%ish since the fire, not that I care..

      • Dan~

        I’ve noticed Cloverdale going through the roof, and figured it was due mainly to the fire refugees, as housing up there is much cheaper. Cloverdale, though, while being a very nice town, is super hot in the summer, and it’s an hour’s drive to the coast. My sweetie was seriously thinking about moving there, but I told him he’d do it alone. I couldn’t handle the heat. Plus, we judge every house by how far it is from Andy’s Produce in Sebastopol, and forget Cloverdale.

  • Update on my bay boomer inheritance;
    (I am 58 yrs old and my mother was 86 when she died a few months ago)

    My sister, brother and I inherited a house, in the ‘North of Montana Ave’ neighborhood a few months ago. the home was last sold in 1955 to my grandparents for $16.5K. My siblings and I decided to rent it out. We rented it out in under 1 week for approx $9,000 per month. Tenant had good financials and paid 6 months rent up front on a 1 year lease.
    All 3 of us will split the $9K per month and keep some on reserve for the inevitable repairs, taxes, etc.

    Because of Howard Jarvis (aka: Prop 13) the tax base which we inherit is $3.5K per yr.

    I recall the following market prices for our inherited home as follows
    1975 value was approx $70K
    In 1990 value was approx $700K
    In 2013 value was approx $1.8M
    Land value today is $3.3M and we plan to sell in 1 or 2 yrs.

    Home price escalation as you can tell in this neighborhood is significantly higher than the normal ‘westside’. We have decided to take the ‘risk’ that home prices will continue to increase in this neighborhood for a couple more years, but are willing to risk that values drops as well. in the meantime, collect rent.

    There must be tons of other boomers out there (age range 40’s – 60’s) who are inheriting homes with enormous value over what their parents paid for in the 60’s and 70’s.

    • Seen it all before, Bob

      Congratulations again on winning the CA Prop 13 and US tax system housing lottery.
      As long as she didn’t have over $11.2M in assets including the house, you can avoid the US Estate Tax.

      I am very sorry about your mother.

      If you haven’t already, get an appraisal for value of the house when your mother passed away. That 3M will be the new basis when you sell. You’d hate to miss out and have the basis stuck at 16.5K and pay Capital Gains on the difference

    • Perfect weather

      Sorry about your mother but no one cares about your inheritance.

    • QE,

      Wow, that’s amazing!

      Curious; can you expand on the “good financials”? What does someone make where they can afford 9k/mo. in rent? That’s a serious outlay.

  • For our Bay Area friends: you are number one! You run the biggest shithole in the country!

    Read it and enjoy the pictures. Can you imagine the smells? Does that not increase your appetite to buy a 1mio crapshack in the midst of the biggest crap hole?

    • That’s also true about Oakland. People just squat on the streets in broad daylight and drop one. It seems that the more crowded and trendy and disgusting an area is, the higher the home prices. Go figure. You couldn’t pay me to live in the East Bay anymore.

      • son of a landlord

        It also happens in Santa Monica, another very wealthy, liberal town, full of homeless.

        One morning, around 6 a.m., I was walking along Wilshire Ave. I passed an alley, and saw a big, black woman squatting to take a dump. She gave me a big grin.

        Another time, early one morning, I passed a homeless man lying on the sidewalk, on 5th Street. He tossed a cupful of urine past me. It missed me, thankfully.

      • +1

    • Millenial,

      Yeah it does seem like just a matter of time before reality catches up to perception here. Yeah you still have the nice weather and diverse culture, but you also have homeless literally everywhere defecating, getting into fights, stealing, chasing people, screaming, etc.

      Quality of life is higher where the weather is worse but you do *not* have homeless camps everywhere.

      • One would have to assume at some point Common Sense would Prevail and the voters would elect someone willing to roll back these ridiculous protections and actually do what is needed to clean up the streets. Crazy liberals that supported these ideas are now facing the consequences and I’ll bet they’re not very happy. On paper it may have seemed like a good idea (to their ideology) but they’re also some of the worst NIMBYs around, so, maybe, hopefully, something can be done to clean up this major problem which is now a health hazard.

      • I’m waiting to see if Gavin Newsome wins the governorship. If yes, he will be Jerry Brown on steroids. White people not welcome, unless you’re the ruling class. So great, just see what happens when we all leave. Where’s your money gonna come from then, fools?

      • Yeah Dan…. I really feel badly for these people though. I think we need to build shelters quickly and then require them to go there and also get mental help and services.

    • It’s so sad; I used to love going up to the bay area on weekends. Have lots of friends that lived there, but, most have now gotten married and moved out to the suburbs.

      One of my friends just closed on a property in San Jose; I did the loan. Went way over asking price (1.2mil), waived appraisal contingency and we had a 7 day lonly loan contingency. Crazy competition up there from Asians (this is NOT a myth). I wouldn’t want to live up there if you offered a million dollar house to me for free; I love socal too much.

      • Boooring!

      • well being that I grew up up in S. Calif and own in the city, I can tell you honestly that Los Angeles is a shithole without culture and now has litter filled beaches and water. The beach is the only thing LA has….the mountains are a bunch of deserts with bark beetle trees and the desert.

        Knowing RE real well by being a market timer based off economic data. Enjoy your gains but 19-20 will be a different story all together. I tell all my friends down there to enjoy your shit hole, its just getting shittier…

      • cd either provide details or your predictions are as useless as Millennial’s

  • The biggest mistake long term homeowners admit to making …. when they purchased their home, they should have purchased a more expensive home in a better location. If they would have stretched their fiances a little farther, they would be in a much better financial situation today.

    • 95% agree. This strategy requires belief in yourself, but will reduce want/need to move in the future and doing all the unnecessary selling/buying.
      5% of my disagreement is because I never agree 100% with anyone on anything…there are always special cases, and there always people that stretch their finances way too thin…
      But generally, this is a great way to approach buying a home.

  • I am a new buyer in Orange County. I have about 200k to put down but am scared of the market. Are interest rates going up? What would the value of a 1 Million dollar house be worth if rates go to 7% ?

    • $812,455.69, unless you were born during an eclipse. Then all bets are off.

    • Looking to move myself, just waiting for the correction to hit, possibley by Spring 2019. Rates going up will definately make home values go down, higher payments shrinks the buying pool which makes sellers lower the price. Irvine, Dana Point, San Clemente, Lagua Nagel, watch these markets closely, aready seeing home lingering on the market longer, and some small price drops, just to reduce the perception that the house is over price and newly listed to fool dumb buyers.

    • Be afraid–be very afraid. Orange Co. real estate is still going up and will likely go up for another year, but look out below. By 2020, prices will likely going down hard. The top and bottom will not be that hard to identify despite what Mr. Landlord and others say.

      Baron Rothschild, an 18th-century British nobleman and member of the Rothschild banking family, is credited with saying that “the time to buy is when there’s blood in the streets.” Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon.

      Buy when you are scared to buy because of falling prices rather than scared to buy because of rising prices.

      • Gary~

        Yes, Rothschild did make a fortune after Waterloo. In fact, that was the seed money that catapulted the Rothschild family into being one of the top capos in the evil empire of families that control the world. But what you neglect to mention is that Rothschild manipulated the panic. Napoleon lost at Waterloo, and Rothschild sent one of his agents back to England to spread the rumor that Rothschild was selling bank annuities, implying that England had lost. A panic developed, and as British annuities plunged in price, Rothschild began buying them back for pennies on the pound. He made a fortune, and wiped out many. He probably had a good laugh about it too, the evil bastard.

        Anyway, don’t just buy when no one else is buying, because there might be a reason they’re not buying. For example, a neighborhood such as Detroit may have gone terminal, and may not turn around again in your lifetime. Instead, wait for the bottom, then buy when you start seeing a firm turn-around. You don’t have to buy at the absolute low, as long as you buy near the bottom, or somewhere on the way up.

      • “Yes, Rothschild did make a fortune after Waterloo. In fact, that was the seed money that catapulted the Rothschild family into being one of the top capos in the evil empire of families that control the world. But what you neglect to mention is that Rothschild manipulated the panic. Napoleon lost at Waterloo, and Rothschild sent one of his agents back to England to spread the rumor that Rothschild was selling bank annuities, implying that England had lost. A panic developed, and as British annuities plunged in price, Rothschild began buying them back for pennies on the pound. He made a fortune, and wiped out many. He probably had a good laugh about it too, the evil bastard.”

        What is your source on this? Genuinely curious. When I look into it, all I find is a vast conspiracy theory that gets nuttier the more I read.

        This is from his wiki page:

        “Research by the Rothschild family [yeah I know – I wouldn’t call them a good source either] and others [Niall Ferguson] has shown that this story originated in an anti-Semitic French pamphlet in 1846, was embellished by John Reeves in 1887 in The Rothschilds: the Financial Rulers of Nations, and then repeated in other popular accounts like that of Morton and the 1934 American film directed by Alfred L. Werker, The House of Rothschild. Many of the alleged facts are clearly untrue. For example, the size of the market in government bonds at the time could not have supported a gain of anything near one million pounds.”

        And then there’s articles like this:


        …no surprise that there are many mentions of the Illuminati. When I try to research the crazier pieces of it, nothing pans out, or it turns out to be 99% fiction with a tiny grain of truth. Like the quote:

        “I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls Britain’s money supply controls the British Empire, and I control the British money supply.”

        Turns out there is no evidence whatsoever that he ever said that, and it flat out isn’t true anyway, but it’s repeated ad nauseam on the web. Sorta like Dan Quayle quotes being attributed to George Bush. May as well just make stuff up.

        Interesting, at least.

      • “You don’t have to buy at the absolute low, as long as you buy near the bottom, or somewhere on the way up.”

        I’d also add somewhere on the way down near the bottom. It’s virtually impossible to time a top or a bottom of any market. Which is why the perma bears never capitalize. In 2010 housing in most parts of the country had stabilized. Let’s say a house that was $500K in 2006 could be had for $400K in 2008, $325K in 2009 and $300K in 2010.

        At this point, investors started buying at $300K. There was no way to know if $300K was the absolute bottom. It could have gone to $290K or $280K. But the general trend could be seen that $300K was more or less the bottom. No sane person thought it would go to $150K. The rate of decrease had flatlined. And there was huge upside potential. And sure enough by 2012 that same house was selling for $350K. And in 2018 it’s worth $600K.

        But the perma bears, being perma bears, didn’t buy at $300K. They were convinced it would fall forever and ever. I remember people predicting $100K beach houses in CA and Dow Jones under 1000. Just insane stuff like that.

        Smart investors risked losing another $10-20K in order to potentially make $300K. From a risk/reward perspective that deal is crazy good. And that’s how you make money, whether in real estate, stocks, art, collector cars, annuities, whatever. You look at trends and buy/sell based on those trends, not trying to squeeze out every last dollar from a deal.

      • Mr. Landlord~

        Yes, but you never know when you have hit bottom. People have lost fortunes thinking that something can’t go lower, which is why you need to make sure you’re seeing a firm recovery before you buy.

        I bought I don’t know how may shares of Calpine at $12- $14 right after 9/11. It had come down from 70 (maybe higher, but that’s when I started watching it). I had put in a buy at $14, and my sweetie said I’d never get it at that price. It kicked in by the next day. Years later (and not many), I sold at $0.22/share. I’m still writing off the losses. With stocks, they call it ‘averaging down’. I call it complete stupidity.

    • Guys,

      Don’t start looking for reasons not to buy. Don’t listen to the perma-bears who are saying there will be another downturn. It’s all about maga now. Also, there is an upcoming pot boom in California. Legalizing pot means housing will skyrocket. This time is different. The Asians are coming with buckets filled with cash ready to buy. This is also the year when millennials will go out and buy in droves. We have rental parody. I meant parity. Just make your down payment x in your equation and it will always match your rental rate!
      Contact your local real estate agent and lender. My bet is they will tell you right now is a great time to buy. Because it is! Interest rates are still low. Rates will never be this low again. Take advantage! You are also a man if you buy and no longer a boy! Be a man! Buy now, take the risk! Wait, what risk?? There is no risk. Just look at it long term. Who gives a flying burrito if the market goes down after you purchase a home? After all you have a home! The grass will be greener and happiness will start overflowing you. Don’t waste your time looking at rental rates, median household income, days houses sit on the market and political stuff. Just buy. You will be fine. Prices don’t matter that much after all. I probably forget a lot of reasons why buying is a great idea. Why? Because the reasons to buy are endless. Also, if there is a good school nearby you must buy. Why? Cause good schools are a great reason to buy. They are rare nowadays. Maybe one day we won’t have any good schools anymore? No way! There will always be a school that’s a little bit worse than the school that’s in close proximity to your house. Is the house you look at unique? It’s is??? A unique house? Holy guacamole! If you have the chance to buy a unique house you must buy! Again! Rare!!!! Hope my tips help. If not, I have many more!

      • son of a landlord

        You have a LOT of spare time on your hands. Always retyping empty phrases that you’ve typed dozens of times before.

      • And don’t forget

        A) Everyone wants to live here.

        B) The entire states of Michigan and Ohio are preparing a mass migration.

        C) Weather here is always great.

        D) There may be a bubble in ______, but not here.

        E) California population is growing.

        F) USA economy (based on RE market and equity-fueled
        consumer spending) is strong. – 1,000 maids are
        being hired in hotels each day.

        G) They aren’t making any more land.

        H) Housing had reach a new permanent plateau.

        I) Prices are reflection of buyer’s demand.

        J) You had to buy now or be priced out forever.

        K) Prices will rise 20% for ever.

        L) Foreign buyers will keep buying.

        M) Low interest rates will stay low forever.

        N) Renting is for losers.

        O) Real estate NEVER goes down in value.

        P). David Learah said………

      • lol.. this is so true… there’s always some reason they say prices will stay high or go up.

        An asking a real estate agent whether it is time to buy is like asking a used car salesman if the car is reliable.

      • Millie,

        You are a national treasure. Don’t ever change.

      • Ha! Good one, oceanbreeze. And Millie, you’re getting a little boring. Come up with something new. Please!

    • Last time average 30 year fixed mortgages were 7% was in March 2002. Anything can happen of course, but the probability that after 18 years, suddenly mortgages will spike up again is very unlikely.

      The only way that happens is if inflation starts going up. And there is no indication that is happening. Wage growth is 1-2% right now, even with full employment. People don’t appreciate the tech revolution we’ve had in this country (and the world really) in the past 25 years. We are so much more efficient at everything, that the old rules of inflation simply no longer apply. What used to take 100 employees to do can now be done by 10 employees. That’s a huge factor in the economy and it’s never mentioned. And I’m not just talking robots taking over assembly jobs. I’m talking logistics, marketing, customer service, health care. Everything we do now is done much more efficiently that in was done even 15 years ago. And that efficiency is the thing that has kept inflation in check and willc continue to do so for the foreseeable future.

      All that being said, if you’re scared to buy, don’t buy.

    • Jonathan,

      You ask an impossible question; nobody knows what rates or prices will do tomorrow, next week or next year.

      What is your motivation for buying a 1 mil house? Urgent family need? How are your finances? PITI on an 800k loan will be around $5200/mo. After the 200k what’s your reserves looking like?

      There are so many moving parts to this simple question; it’s impossible to know. If it makes sense for you financially based upon your income and assets; and not looking to speculate (i.e. flip or short term buy) then go for it. If it drops 10% in the short term do you really care on that “paper loss” if you are playing the long game? On the flip side; every month you are paying down principal.

      Lots of variables to consider and don’t listen to the extremes on both sides.

      RE will crash 75% vs RE never goes down (although very few on here say that).

      If it makes sense for you and your family, I say go for it.

  • Perfect Weather

    5th largest economy! Perfect weather! Oh wait. . . Heat wave sparks major power outages around Los Angeles, officials say . . . http://www.latimes.com/local/lanow/la-me-ln-ladwp-heat-outage-20180707-story.html

    • I enjoyed it; waded in my pool all day with my kids and had quite a few beers.

      • That’s the same thing people do in the rest of the country. The California lifestyle really isn’t anything special.

      • And pool weather isn’t really THAT much longer in LA than elsewhere. Pool weather lasts May-Sept in most of the country. What is it in LA April-Oct? So you get an extra couple of months with the pool compared to everyone else.

        Other than S. Florida and maybe parts of Arizona, there really isn’t a lot of year round pool weather in the mainland US.

  • Crazy how many people argue about their crap shacks being worth 1.5 million … even if the house is new in California, the wooden piles of crap that are called homes are built so bad they should depreciate like a car instead of appreciate in value. I think soon we will see an adjustment which will be painful for decades.

  • Just for fun I looked at some higher-end properties in my area:


    That’s located in what is considered a “just okay” school district in Temecula (5/8/8 Great Schools ratings), although a perfect location for everything else.

    And then I compared it to one in a “desirable” part of LA:



    • Even better:


      A little out of the way, but better school district. I showed it to my wife and she wants to buy it. I talked her down.

      • To John D re: 41725 Avenida Ortega in Temecula – imagine trying to maintain that on Jerry Brown’s 55 gallons/day/person water restrictions.

      • That is an awesome house. If your wife doesn’t buy it, I just might. Although for that price, I would expect a swimming poo. Offer $75K less for a pool allowance 🙂

      • son of a landlord

        I’d worry about security in a place like that. Seems isolated. What if a gang of home invaders broke in?

        I suppose if you have a large family, with several adult sons, and guard dogs and guns and electronic security, it’d be okay.

      • Son,

        What’s more likely? Gangs from LA/SD driving an hour plus to the desert to rob a place, or driving to Beverly Hills, La Jolla, Pasadena, etc to rob a place? And besides in a place like that, much better chance someone has a gun (or two or 3) vs the ultra lib residents of BH, LJ, Pasadena who think guns are icky and have GUN FREE HOME signs on their front lawn. You’re a criminal….which option sounds more appealing to you?

    • Temecula is booming. Big houses on big lots w/ nice neighborhoods going for 500k-600k. Lots of people are commuting to SD from there.

    • Some Chinese money launderer will buy the “desirable” one soon enough.

    • The price on that LA house is a typo. Nobody in their right mind would pay more than 130k for that shitbox.

    • Touche! Love it.

    • Laura Louzader

      WOW- what a contrast! What would that little palace in Temecula cost in a desirable L.A. County area? The price difference could pay for a good private school for one or two kids, easily. If it wouldn’t mean an excessively long commute, and there are good private schools in the area, a family might want to consider it.

      • The way I look at it is this – would I want a 5-minute commute home to that LA house, or an hour to the Temecula house? I’ll take the hour and consider it downtime.

      • temecula is boom bust 101 town, hotter than the Sahara, allergies up the ying yang, no water, a virtual desert now with a bloom of over-sized homes that most people will lose in the next 5 years….

      • Sitting in traffic = downtime!! ROFL
        I almost fell out of my chair.

        That needs to be advertised!
        Can’t afford to live close to your high paying job at the coast? Move to the inland empire. Where the AC is your friend and the 2+ hour round trip each day is the most relaxing/rejuvenating time in your day. After all, who doesn’t like to get in the car for an hour each morning and night……kick back, put your feet up and listen to your favorite music and rest your eyes. And when you wake up you are in the IE in 110 degrees! Call now, our overpriced DESERT homes go fast these days! As a bonus….we have schools!!

      • Laura Louzader

        “hotter than the Sahara” and NO WATER… no wonder Temecula is so cheap relative to the coastal cities. Might as well be in the outer suburbs of Chicago, where at least you don’t have water use restrictions.

      • John D,

        Not everyone commutes to work every day. This is one of the big misconceptions I keep reading here and other housing blogs. OMG that’s like 2 hour commute each way, that’s 10 hours a week in your car!!! Yeah it can be. Or maybe you work from home and it doesn’t matter where you live. Or maybe you telecommute and only go into the office 3 days a week and can show up at 10 and beat a lot of the traffic.

        The majority of people still do the 9-5 M-F at the office thing, I get that. But it’s nothing close to 100%. There are millions of people all across the land who rarely if ever drive to an office.

        And the other thing is, everyone always assumes everyone works where they work. I work downtown, therefore, everyone else must work there too. Well, not really. In this case, maybe you work in Temecula or Oceanside or Escondido. I know it may be shocking to some, but there is a wold outside of LA and SD. There are all sorts of people who own businesses in those towns or are teachers or nurses who work in local schools/hospitals or have a law practice or CPAs, etc. Yeah there isn’t a Fortune 500 company in Temecula, but not everyone works for a Fortune 500 company. Few people ever get rich working for a corporation, it’s the last thing you want to do long term.

    • I would like to chime in. I own multiple rental properties in Temecula/Murrieta area. It is a VERY fast growing area with lots of potential. Property values and rents are increasing rapidly. There is even a proposed stop in Murrieta on the second leg of the Bullet-Train between LA and San Diego. IMO it’s a fantastic area of opportunity for investors but I don’t think I would want to live there. It is hot as hell during the summer, traffic is horrendous, and there are very little job opportunities outside of retail, service industry (restaurants), and healthcare. Majority of the people living in the area commute to San Diego county and that can take hours because of nightmarish traffic. Weekends in Temecula/Murrieta are even worse with more traffic and lines at all the local restaurants. City planners did a poor job of planning for the increased growth. With hoards of people moving to the area from LA & Orange County it’s easy to see it becoming a congested mess of over-population and strip malls.

  • Around 2010 I sold a triplex in the Hawthorne area. Later I regretted selling too early while watching prices rise. My biggest salvation was that I had also done an AITD into an 8 unit in Long Beach which also rose in price. It’s penciled out well, but I just saw that Long Beach rents rose around 15% in the last year! Praise the Lord! I think I’ve entered the land of milk and honey.

  • Mille Summarized

    1. Invest in crypto.
    2. Repeal prop 13
    3. Wait for 55-75% correction

    Lather, rinse, repeat.

    • He mentioned above that he sold a bunch of the crypto already.

    • Extremely accurate. Very impressive.
      Not much to add.

      Dont ever buy high. Harming yourself (jumping from a cliff) would be much better than buying high. Buying high is probably the worst mistake one can make in life.

      Save, Save, save and do the opposite of what realtards, lenders and RE cheerleaders say. You will win.

      Wait until prices normalize. 55-75% drop compared to todays prices would be a good buy signal.

      Rent cheap or live with your parents/in laws.

      dollar cost avg in stocks and legit money (crypto).

      read on housing blogs and join the fun (ridiculing RE cheerleaders statements)

      • And yet you still won’t provide any dates. Because you’ve got nothing, not even a house to call your own.

      • Keep forgetting the date. Depending on the day my calculations show August 21 2020 3pm and July 28 2020, 7pm.

  • There has been talk here about the decimation of the Aerospace industry. That was true back in the 80’s, 90’s when so many of the Aero companies were closed or relocated or gobbled up by Boeing and moved to Washington.
    However, these days, Aero industry is still here.

    Mind you, these companies hire high salary engineers and scientists. Many are in South Bay, between El Segundo (El Stinko) and Torrance.


  • I think what most people forget is that the fed bulk purchase hold times are now coming to an end, inventory is rising, up 12% this month. PE, hedge and banks are unloading into the top, they are much better at this than anyone on the comment board..

    I look forward to watching while I sit in my overpriced paid off house….I could care less but will pick up some cheap stuff later.

    Also Millenial, Your crypto perspective is much like a gold rush miner, none of them made money, where crypto will shine is individual verticals that could use the transferable ledger. A lot of things will happen on that front. The coins will be much lower, 4K I might buy but I’ll watch at that support line. Always be the supply shop owner, pick manufacturer etc in a rush…..much more money to make

    • As I mentioned in previous posts, the inventory of homes for sale here in Mission Viejo appears to be going up rapidly. I wonder if the bubble top has already been reached or more likely this is just a temporary occurrence. I wonder if the smart money is selling.

  • GreenGroovyMom

    I have no clue why anyone would see a house now in So. Cal if they wanted to stay here…and on the flip side, I have no idea why anyone would BUY a house right now with prices so crazy and inventory so tight. I have a rental house that gets high rent, but still way below the cost of buying and maintaining a house.

    • Mom, you and I both. No idea why someone would massively overpay for renting from the bank (“buying”) if you can just live in the same box for half the cost by renting from a private landlord. It must be people with a very low IQ or people who are terrible with math, numbers and finances.

  • GreenGroovyMom

    I have no clue why anyone would see a house now in So. Cal if they wanted to stay here…and on the flip side, I have no idea why anyone would BUY a house right now with prices so crazy and inventory so tight. I have a rental house that gets high rent, but still way below the cost of buying and maintaining a house.

  • “Buy now or be priced out forever”. I remember that phrase. When I got out of college in the 1990s, all the old people who where real estate wealthy told me that. So, I listened to them and purchased a bunch of run down beach close tear downs with nearly no down loans. It was a lot of work, like years of work, getting those places fixed, but it was worth it.

    Good thing I did what I did. Because, if I had not bought, I would have been priced out forever and would have been a life long renter. Instead, I am retired in my late 40s. Although, I am working 25 hours a week fixing my rentals … so perhaps not totally retired, but I enjoy fixing houses much more than working 50 hours a week and paying rent.

    • JT gets it! Follow him!
      If you don’t buy now (or tomorrow- but that’s your very last chance!) you will never, ever be able to buy in your life! You better call now. Don’t wait any longer or you will regret this for the rest of your life.
      If you buy now, you will retire early, hang out at the beach and count the millions on the table. Great riches await you. All you need to do is grab it. You are just one signature away from paradies but you have to do it now. Next week will be too late.
      If you have any last doubts, remember: renter=loser,
      buyer=rich, wealthy, sexy, retires early, financial freedom and gets 70 virgins.

      • Ouch. Looks like you might already be priced out forever. What were you doing 4 or 5 years ago when those little south redondo homes on quiet streets with big yards were in the 700s? They are now twice that.

    • Lol, @jt, you are a pretty silly guy, but really lucky I would say.

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