Karel Kriz contributed these words of wisdom on 11/04/08 00:53:
> In article <66624jF2huimiU1@[EMAIL PROTECTED]
>,
> Stan R <aus086@[EMAIL PROTECTED]
> wrote:
>
>> So how are the US-based correspondents coping with this?
>>
>> Both Charlie Cross and George Zimek live in California, which seems to
>> have been not only on the forefront of the green madness, but also
>> leading the pack on the residential property bubble.
>>
>> With $1 trillion of losses now becoming the "accepted" wisdom and with
>> literally tens of millions of Americans looking down the barrel of
>> negative home equity and the "jingle mail" option looking more
>> attractive by the day, how have you guys been affected?
>>
>> To be honest, Australia has had even more of a property bubble than the
>> US and the blow up is only just beginning here - like in the UK & NZ
and
>> elsewhere. This will be exacerbated by the recent election of a totally
>> inept Labor government (in Aus.) and I have no doubt many Australians
>> will be in for a rude shock when they discover property in fact does
not
>> always go up in value, nor are their jobs guaranteed to last forever.
>>
>> It will certainly be interesting to see how it all develops, given that
>> "jingle mail" is not an option for Australians (the banks do have
>> recourse to your other assets if your home auction does not cover the
debt).
>>
>> The word "depression" seems to be gaining traction, however. If/when
the
>> $145 trillion credit derivative sector blows up, then it's all over and
>> anything is possible.
>>
>> Stress levels at work over the last three or so months do make me look
>> wistfully at islands for sale in Tonga/Vanuatu, with no power, no
>> Internet and no phones, so as to get away from it all...
>>
>> Your comments would be welcome.
>
> Personally, the current depression/recession has not affected us. This
> is not so much by design, but by luck. We bought our house in 98 for
> $217,000. In January 2007 I could have sold it for about $620,000.
Yeah, similar to here. We built our first home in 1992 for about
$150,000. Sold it in 2004 for $420,000. Now just the empty block of land
next door is being advertised for $700,000!
Utter lunacy. When it blows up, it'll be worse than in America.
> Now,
> if I got $450, I'd consider myself lucky.
Given that apparently up to 40% of Americans may well be looking at
having negative equity in their homes by the time the implosion is over,
you are indeed lucky.
I guess it's a matter of not being stupid and buying into the frenzy at
the top of the market, like so many others have done.
This is why my wife and I have not bought another home since we sold our
last one 2 years ago.
> So some of the equity that
> built up, is gone, but that's money we never had so we don't miss it.
It's just returning to the long term trend - which tends to broadly
follow incomes; for obvious reasons.
> But in the height of the borrowing frenzy we nearly jumped on the
> bandwagon and made some half hearted moves to speculate in real estate.
> In those days, up to early last year, anyone with detectable signs of
> life could get a home loan.
As well as a car loan and a credit card with a $15,000 limit. Yeah; I
see that situation quite often.
A potential client came in the other day - single female, earning
$80K/year. Has saved $100K and wanted to borrow another $650K to buy an
apartment at a prestige beachside suburb. Not to live in, mind you, but
to rent out.
Allowing for the net rental after costs, plus the tax deduction for
interest costs (she was going to do it interest only, as otherwise the
figures wouldn't add up at all), she'd "only" have to fork out about
$20K/year. No worries - the place'll have gone up by at least $200K over
the next 2-3 years, so she'll make a killing, right?
The frightening thing is she had actually found a lender willing to
forward the money...
> But, for various reasons, we didn't get into
> it and now we are actually thankful we didn't.
I'm sure you are.
> One of the homes we
> almost bought, burned to the ground in last year fires.
Well, that's relatively not too bad - presumably insurance would take
care of that. It would be worse to own that place with a loan
outstanding being a couple of hundred K more than its value now.
> Our neighbor is a realtor and she has some horror stories of
> bankruptcies, foreclosures and suicides.
So does she admit it may not be the best time to buy now? :-)
I'm yet to see a real estate agent who would not claim that if you don't
buy now, you'll never be able to afford it later.
> It appears that Riverside and
> San Bernardino counties are most affected. I have a home builder client
> in Riverside County who stopped all work on new homes and reduced his
> staff to maybe 10 people from about a hundred.
At least he's still in business.
> In Las Vegas, 50% of
> homes that are for sale, are empty - bought by speculators.
Well they do go to that place to gamble, so nothing new in that, eh?
> I have no illusions. This will not turn overnight.
You can rest assured that it'll get a lot worse before it gets better.
If/when the CDS securities start going bad en-masse, even the Fed will
not be able to do much.
> So we hunker down,
> spend less and make no extravagant moves. The boat I was going to buy
> last year, will not happen.
Why not? Dubya and Helicopter Ben are going to give every Americans a
pile of cash. Apparently you're to do your patriotic duty and spend it!
:-)
> We've raised our fees a bit, gently, not to
> start losing clients. Personally, we'll be OK.
Financially prudent people typically are.
> The super rich in New****t
> Beach are not touched by this.
I think you'll find that at least some of them will, too.
> Most of middle class will be OK. The
> people who will bear the brunt are the lower middle class who
> overextended themselves.
There's plenty of relatively high income earners (families with over
$100K in annual income) who have severely overextended themselves as well.
The higher the income, the higher the debt.
> The idea of an isolated island sound pretty good.
Yeah; I've always wanted to try it.
Some of them are quite cheap, too:
http://realestate.offshorewave.com/property.php?property=1768
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