Real Homes of Genius

[jefftheshark]

I've been reading this site for a while now and thought I'd share it on here. This article discusses the relationship between renters, shadow inventory and the selling of houses, and how the interactions between these same groups within a single neighborhood can affect housing prices.

It also explains why the existing housing numbers that we see published every month are basically a fabrication.

http://www.doctorhousingbubble.com/

JTS

 

[conraddobler]

I've been reading this site for a while now and thought I'd share it on here. This article discusses the relationship between renters, shadow inventory and the selling of houses, and how the interactions between these same groups within a single neighborhood can affect housing prices.

It also explains why the existing housing numbers that we see published every month are basically a fabrication.

http://www.doctorhousingbubble.com/

JTS

A GIANT dirty secret of all this is that by postponing the inevitable, there's a lot of people potentially buying a home at wildly inflated prices right now and they wouldn't know it without a pretty huge investment of time and research.

It's possible for the shadow inventory to finally hit, destroy the values and sink you into a pit for 10 years or more when nothing of the sort would happen if foreclosures proceeded at a normal or reasonable pace.

I think you'd be shocked to find out who in your neighborhood might be in deep trouble and you'd notice relatively nothing out of the ordinary.

I know one place that has finally foreclosed on people after almost 2 years and welcomed them to rent the place at next to nothing just to keep the property maintained.

It's so good a deal they've already purchased another home using just the wifes credit but haven't yet moved in.

This is just farked up.

 

[Russ Smith]

There's a story on the front page of my paper today about the new trend in Silicon Valley even in higher income areas, homeowners renting out rooms to make mortgage payments, often to complete strangers.

The one that caught my attention was a 70 year old woman who has owned her home for FORTY years and has a family of 3 renting a room and has 2 grandsons renting a garage they turned into a bedroom. First I have to wonder if they aren't violating housing ordinances because it's pretty hard to get an actual permit to turn a garage into a room? Second, it amazes me that a 70 year old who's owned for 40 years doesn't outright own her home, she either got into trouble refinancing or a second or something is unusual?

But they are talking in some of the higher end neighborhoods of the valley people are doing this which is completely unheard of around these parts. The article said you'd be surprised how many homes would be in foreclosure if not for renters.

 

[Gaddabout]

The rule of thumb in most well regulated urban areas is no more than three unrelated renters in one home. It's especially enforced in neighborhoods near a college.

Wonder how many of these regulations will be modified if times get really tough, and someone sublets a single bedroom to a family of five or something -- real Third World quality of life stuff.

 

[conraddobler]

That kind of phenom is being called household deformation, but technically it just means that the average number of people occupying a home is climbing.

To be very technical, you'd have to remove the foreclosures or bank owned properties from that graph, ie you'd only want to focus on those actually paying on their homes.

If you stuck the shadow inventory in their it'd wildly skew that.

 

[Dback Jon]

There's a story on the front page of my paper today about the new trend in Silicon Valley even in higher income areas, homeowners renting out rooms to make mortgage payments, often to complete strangers.

The one that caught my attention was a 70 year old woman who has owned her home for FORTY years and has a family of 3 renting a room and has 2 grandsons renting a garage they turned into a bedroom. First I have to wonder if they aren't violating housing ordinances because it's pretty hard to get an actual permit to turn a garage into a room? Second, it amazes me that a 70 year old who's owned for 40 years doesn't outright own her home, she either got into trouble refinancing or a second or something is unusual?

But they are talking in some of the higher end neighborhoods of the valley people are doing this which is completely unheard of around these parts. The article said you'd be surprised how many homes would be in foreclosure if not for renters.

The house I am renting is being rented out by the owner so he can make payments on his mortgage. He moved out, and into a very cheap apartment. Otherwise, he would have lost it.

 

[conraddobler]

The house I am renting is being rented out by the owner so he can make payments on his mortgage. He moved out, and into a very cheap apartment. Otherwise, he would have lost it.

Have no idea how well you know him but be carefull that scenario is one where all of a sudden they show up and inform you he didn't pay and it's being foreclosed on and you have to move.

In other words he pockets the rent and never passes it on to the lender, if you're paying the lender directly or know he is then all is fine.

 

[Russ Smith]

The rule of thumb in most well regulated urban areas is no more than three unrelated renters in one home. It's especially enforced in neighborhoods near a college.

Wonder how many of these regulations will be modified if times get really tough, and someone sublets a single bedroom to a family of five or something -- real Third World quality of life stuff.

The funny thing is the day I took the census test(got a 98) they told us one of the nuances of the 2010 census is there are going to be many homes now that have non family members living there which still have to be counted of course.

And yes Jon I agree with Conrad be careful, that situation could be good but it could be just what Conrad described. Happened to a good friend of mine she was renting a room in a house in San Jose while the owner worked in Texas. She got one week to move, it turned out the owner had lost his job in Texas and was using the rent money from the San Jose home(he had multiple renters) to live off in Texas so he was months behind on his mortage and when they foreclose the renters have to be out quickly.

The friend in question got lucky in the sense she got an apartment, because a few months later she got laid off herself.

 

[Dback Jon]

Have no idea how well you know him but be carefull that scenario is one where all of a sudden they show up and inform you he didn't pay and it's being foreclosed on and you have to move.

In other words he pockets the rent and never passes it on to the lender, if you're paying the lender directly or know he is then all is fine.

I am a little wary of that scenario - I know it is a risk. He has been good about fixing things, etc, so he seems to be on the up and up.

But, again, it could happen.


Of course, I would then, depending on the price, see about buying the place, since we like it.

 

[Duckjake]

Have no idea how well you know him but be carefull that scenario is one where all of a sudden they show up and inform you he didn't pay and it's being foreclosed on and you have to move.

In other words he pockets the rent and never passes it on to the lender, if you're paying the lender directly or know he is then all is fine.

Isn't that always the same scenario with almost every rental property? Almost every person I know who owns a rental property also has a mortgage on that property. You take that risk every day whether renting your office space, your storage space, or your living space, even your deer lease.

 

[82CardsGrad]

Isn't that always the same scenario with almost every rental property? Almost every person I know who owns a rental property also has a mortgage on that property. You take that risk every day whether renting your office space, your storage space, or your living space, even your deer lease.

The likelihood of people walking away from their home/mortgage has never been higher... Sure, as a renter there is always a risk your landlord could be scummy. But today, even traditional, non-scummy people are choosing to simply walk. And from all I can tell, the pace of this trend is only going to increase over the next year or so.

 

[conraddobler]

I am a little wary of that scenario - I know it is a risk. He has been good about fixing things, etc, so he seems to be on the up and up.

But, again, it could happen.


Of course, I would then, depending on the price, see about buying the place, since we like it.

Well a good way to tell is do some research, if your county is online you may be able to see what it's valued at or get an idea of what it's worth on Zillow, then search the county records for his mortgage on it and see what he borrowed when he took out the loan on it.

There can be all kinds of information in that filing, don't know how it works in AZ but here I could get a reasonable idea of what the guy owed and what it was worth.

If he owes less than the approximate value you're probably ok but if he's way upside down, then I'd be more wary.

Even if you want to buy it and want to be ready you should research it in case he does get foreclosed on there's a good chance they'd still rent to you but as to buying it, a lot of places aren't willing to take the hit and just sit on it forever.

It's very weird out there right now, everything is very case by case.

 

[Yuma]

I've been reading this site for a while now and thought I'd share it on here. This article discusses the relationship between renters, shadow inventory and the selling of houses, and how the interactions between these same groups within a single neighborhood can affect housing prices.

It also explains why the existing housing numbers that we see published every month are basically a fabrication.

http://www.doctorhousingbubble.com/

JTS

The National Association Of Realtors has an economist, who basically said he fudged the numbers before, yet every month they still break out numbers saying the housing market isn't that bad, and the media still quotes the guy. I find that amazing!

 

[Yuma]

I have a rental with a tenant in it right now. But if I had to find a new renter, I would advertise that it doesn't have a mortgage and is a safe rental! You guys gave me that idea!

 

[Linderbee]

Second, it amazes me that a 70 year old who's owned for 40 years doesn't outright own her home, she either got into trouble refinancing or a second or something is unusual?

My guess is that when home values went through the roof she got a home equity loan, not necessarily a 2nd.