Author Topic: Recession 2019/2020 Mega-thread (putteth all thy strange eruption in h're)  (Read 6708 times)

Drastic

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I haven't known real fundamental strength for a while. You?

I thought it was a given they were basically doing the same thing that we already did with the housing crisis, its just autos now. RVs fit that mold too.

littleman

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>same thing that we already did with the housing crisis, its just autos now.

There still seems to be some craziness in the housing market too.

To me, this looks like a bomb waiting to go off the moment the job market softens.

Drastic

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ergophobe

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There still seems to be some craziness in the housing market too.

This has been on my mind a bit lately.

Back in 2006-2007, there were some things that baffled me.

1. We had come off a period of earning very little. In a rational system, our income would not have qualified us for a car loan. We got approved for up to $2,000,000.

2. We were told that if didn't qualify based on our income, we could do a "no doc" loan and just "estimate" our income to reach a level where we would qualify.

3. People were buying investment properties in our area and I could not figure out how they could possibly make it pencil out. In 2006/2007, they didn't seem to be doing basic due diligence.

#1 and #2 are not true this time.

#3 doesn't seem quite as bad, but people are buying vacant lots that are prohibitive to build on. One just sold and I know the guy who has the excavation contract. He said that just one piece of equipment, which is to drive in a *temporary* retaining wall to hold back the earth while the permanent wall is built, will cost $100,000 for the minimum rental (it has to be brought in from far away - normally for building highways and ports). This isn't even for the house. This is for the parking. It will likely cost $200K to $250K to put in TWO PARKING SPACES!! The house, which is capped by zoning at two bathrooms, will cost over a million dollars all in.

That's just one story. I can think of a lot that has sold three times because it has no access. My friend owns the lot next door. His 35-year-old driveway cuts across the easement in a way that makes this other lot impossible to put in a driveway at a reasonable cost. So last spring, he walks out of his house and finds a realtor and a client standing in his driveway. "How long has this driveway been here?" one of them asks. "35 years, why?" Turns out, the client had bought the lot in the dead of winter not realizing that my friend does not plow that driveway in the winter. He just shovels the steps that lead to the parking space on the road. They literally spent $150,000 on a lot without realizing the driveway would cost $300,000.

Anyway, we saw a lot of this in 2007. Lately, we're seeing a lot of it again. Purchases that just make you shake your head.

ergophobe

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Oh, the 2007 madness resulted in a wave of foreclosures as leveraged buyers who had not done due diligence on what actual rental profits would be couldn't make their loans. Lots of auctions, foreclosures and short sales.

One thing that's different this time is that a lot of the buyers are Chinese with cash they are trying to expatriate, so they are not as sensitive to falling returns. They seem to be looking for long-term safe-havens for cash.

littleman

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>Chinese

I think this is probably more of a California thing than the rest of the country; but I think this has its own risks.  China's real estate market is basically insane, I can't even imagine what that will do here once that is accounted for.

Brad

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A lot of US farm land is being bought up by foreigners.  I'm assuming it's the same reason now as it was during the Cold War: a safe haven for wealth.

littleman

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Thanks Brad, I had no idea.

ergophobe

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a safe haven for wealth.

And perhaps virtual water exports, though they don't necessarily have to own the land for that.

littleman

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