Be careful people because things are getting worse: New Home Sales>>>

Down 6.6% (June) vs. Down 2.2% (May). <<<Thats a big drop BTW!

What does this mean for REI’s? Well alot actually: New home sales help people understand the overall health of RE in general. This means that this is definitely becoming a buyers market more and more every month. All this does not just relate to new home sellers though, and that’s why this is important news for SS’s and all REI’s. This gives you bargaining power with the banks for your SS. Numbers like this make the value of homes lower than they may currently be. So be sure you have enough “fat” built into your deals because your prospective buyers may not be willing to pay as much as your comps are telling you you’ll get. If new home inventories are increasing, as these numbers suggest, then that’s going to be felt in the existing home numbers as well!

However, information like this obviously does not have an immediate impact on us…it takes a little bit of time for it to affect sellers.

Bottom line: What an exciting time to be in the SS world! Just thought I’d share this info with you guys hope it helps a bit with your dealings w/ those LM :biggrin

S-4, agreed. Now the lenders just need to wake up to the reality that r/e investors have been prophesying.

From some of my conversations today with contacts in the lending world, I’m guardedly optimistic that this week’s news has finally lit that fire. We’ll see.


The problem I see with SS’s is the fact that this market is getting worse by the day. You negotiate a SS with a bank and then finding YOUR buyer is going to get harder and harder. Remember these are SS’s because someone lost their home and their credit is now junk. This is taking THOUSANDS of people out of the market. It’s not just losers with sub-prime mortgages. People are getting KILLED who purchased with ARM’s because their homes will not appraise in a falling market.

Our future problem will be finding OUR buyers. Once Joe Public finally see’s this market for what it is, a bubble deflating, they will be VERY hesitant to purchase ANY real estate while prices continue to fall.

Remember this…Just a few years ago, people in this country thought EVERYTHING was different in real estate, you can’t lose!! Just BUY IT, it ALWAYS goes up. We need to be prepared for the exact opposite of that thinking. I think very shortly we’ll see people looking at real estate like they looked at tech stocks in 2002.

Now we’re investors, that’s GREAT news for us, but you’ll need to re-adjust your strategy. Look to buy VERY low and HOLD these properties.

The great thing about this country is how short peoples memories are. 10 years from now people will be right back on the real estate band wagon and some of us will be SELLING this stuff to them.

My thoughts are in Red.

Are you kidding me???

If you think for one SECOND that this market is going to recover based on the WIVES of America falling in love with dream homes your cooked.

As far as all the 10’s of Millions out there with great credit who are, according to you, lining up to buy homes? What the hell are these people going to do when it comes to selling their EXSISTING homes. Unless your specializing in low priced, first time home buyer property (where people don’t have a home to SELL FIRST) these peole HAVE to sell their EXSISTING property inorder to buy one of your DREAM homes. I guess these people don’t have to wait in your DREAMLAND to sell their homes first. According to all the data it will actually take them longer than at any other time in the last 7 years to sell and they will get less. But that doesn’t apply to DREAMLAND where you live apparently.

And as far as your “people with great credit didn’t jump on the ARM bandwagon” where have you been living for the last 4 years JAPAN?? These are EXACTLY the people who purchased homes with ARM’s, it WASN’T their CREDIT that forced them into ARM’s it was OVERINFLATED HOME PRICES!!! You remember that don’t you? Home prices were moving up so fast that the only way lot’s of people could GET INTO a home was with an ARM. It had NOTHING to do with their credit it was a price to income ratio. Which you obviously know nothing about because that ratio is at an ALL TIME HIGH in this country!!!

Good luck with YOUR theory pal, your gonna need it. Take a look at the forecasts from the HOME BUILDERS themselves. These guy’s BUILD “DREAM homes”, were the hell are all your house wives??? They ain’t lining up to buy those homes. And I got another tid bit for you. If you think for one second you can out gun these guy’s with your little short sales??? GOOD LUCK!!!

Oh, and about all those smart people sitting on “ton’s of equity” being your BUYERS??? Yea, OK, those people are watching a BLOOD BATH occur in real estate RIGHT NOW, I’m sure the first thing they’ll do is run out and MAX out their equity to load up on homes that have JUST STARTED their price drops. All while their 401K’s are getting hammered on Wall St.

I can hear it now…"Honey, I just went down to the bank and mortgaged EVERYTHING we have to invest in…REAL ESTATE!!
WOOO HOOO, Ole JED’S A MILLIONAIRE!!! Short sales are going to make us FILTHY RICH!!! Yea, those dirty bankers are just GIVING away homes. I read it on the internet. Some guy said all us people with ton’s of equity should run out and load up on short sale homes!!!

But there’s a little flaw in your thinking. According to you “when buyers really want something prudence eludes them” So your theory is…All the people who were too smart to jump on the bandwagon then, will now, see their “DREAM HOME” and lose all the rational thought processes that kept them off the “bandwagon” and just BUY, BUY, BUY!!! Even though prices are no where near a bottom yet. But hey, that’s according to that goofy guy who runs the Federal reserve. Just wait till those HOUSE WIVES FALL IN LOVE!!! Prices will rise, war in the middle east will end, Wall St. will hit new highs yadda yadda yadda!!!
That maybe THE goofiest statement I’ve ever read on this forum. But hey, you’ve only got 14 posts here so things can only get better!

I have a question for you. How many short sales have YOU done???
I ask because I’ve been investing in Real Estate for over 20 years. The statements you make sound like classic “new guy” stuff.

Your the one dreaming.

Hope your blood pressure didn’t go higher than your body can really afford to…cause for a 20-year veteran, you really seem to have let some noob get you all bent. LOL, nice!

Listen super-star, if you think from your initial post, that short selling is gunna take a dump…you’re wrong. Higher inventory in any market will cause prices to go down but that doesn’t mean that buying and selling of homes will slow at such a high clip that you’d be hard-pressed to close a dozen SS’s in a 12 month period!

When in an increased inventory environment (of any kind: RE, equities, autos) do you think that people simply STOP buying and selling??? C’mon man…consumers consume…the only thing that really changes are the numbers. So REI’s need to make sure they build enough fat into their deals to make their profit margins suffice in a dynamic market. LM’s will soon understand, if they don’t already, that inventories of new and existings will relegate them to new lows, in turn affording you the ability to do your deals.

I can’t believe that you really think that the vast majority of people with good credit and existing equity in this country ALL jumped on the ARM’s to buy their over inflated homes. That’s just irrational thinking. Out of all of my personal clients (206) three of them bought homes in Florida…and less than a dozen more bought homes elsewhere since 1998. Yes, not all of my clients are millionaires but 1/3 of them are…and ya know what, those clients are NOT the ones who bought property over the past decade. They’re sitting in the background waiting to make their move. Does that mean that everyone else is just going to sit on their hands and wait to buy a house until they ‘think’ the market has bottomed out…no way. Remember consumers consume, IN ALL MARKET CONDITIONS. So don’t try and sell me your garbage pitch that there’s not going to be buyers in the coming year or two…that’s just malarkey. Home buyers can’t time the market to perfection and in a declining sales-price environment you have a positive correlation to the sales price of someone’s “dream home” compared to that shoppers sales price of their existing home that they need to unload to buy. THEY WILL BE WILLING TO SELL THEIR EXISTING HOME FOR LESS BECAUSE THEY WILL BE BUY THEIR NEW HOME FOR A COMPARABLE DISCOUNT! Did the bell go off for you yet? If not, you must have been an art major or something because macro-economics escapes you.

Do you really believe that even 10% of people who buy RE are investors, savvy FTHB’s, or just smart buyers of RE? No way. The same morons who bought that $750k house in Miami are the same people who will be buying next month! Sure, investors who buy property solely for the appreciation potential might not be jumping any time soon…but those types of buyers DO NOT account for even 10% of the RE buying pool. The vast majority of buyers of RE are Joe Public…and they buy homes to live in them. And as long as they can ‘afford’ it, they WILL buy, irrespective of current market conditions! So please don’t make me completely own you by posting new and existing home sales numbers over the past three decades. Cause I don’t want to hear you go cardiac on us! Take an aspirin for that heart of yours and move along. The numbers will NOT support your position. Again markets are cyclical…but that doesn’t mean buyers collectively go away. I can’t believe I’m explaining this to a REI veteran w/20 years under his belt. To quote IBD

Jul. 25, 2007 (Investor’s Business Daily) –

Housing activity has yet to find the floor, the latest existing-home sales data showed Wednesday.

June sales fell 3.8% to an annual rate of 5.75 million, the lowest since November 2002, the National Association of Realtors said. It is the fourth straight monthly drop and below estimates.

If you don’t think 5.75 MILLION homes sold is evidence of the large pool of buyers for your SS’s well then you’re just lost in your thinking.

Respond if you will, I’ve made valid points that I can back up with EVEN MORE empirical data. I’m done wasting my time dealing with someone who’s locked in a glass box of ignorance. I will not respond so say what you will…make fun of my inexperience in SS’ing, etc… You’ve just got owned and you’ve given me a chuckle…I can care less now.

Oh boy… :rolleyes

You have NO idea what your in for little man.

What were you doing during the last real estate slow down in the late 80’s?? Learning to ride a bike???

I LOVE guy’s like you. You’ve been “reading about doing it” for 5 or 6 years and you know EVERYTHING. You didn’t address a SINGLE point that I made, NOT ONE.

Good luck with your short sale career. It’ll be short that’s FOR SURE!

Hey, with all your experience and all those millionaire clients of your’s I’m sure you’ll be OK. Just like all those SMART Harvard educated BUSINESS and Finance guy’s who are now HUNG with CDO’s that are worthless. But I’m sure YOUR the exception.

This market hasn’t even picked up speed on the depreciation cycle yet you “think” doing 12 SS’s a year shouldn’t be a problem HUH? Even though it’s taking 6-8 months to sell a home, that won’t slow you down because we all know the banks are just GIVING these homes away!! Last week I bet you bought 7 or 8 for what??? $400 each? Let me get my flag out :bs :bs :bs That’s sort of like all the EXPERTS who’ve been telling us SUB-PRIME wouldn’t be a problem. But I’m sure YOUR right. :rolleyes

I noticed that you never replied to my QUESTION???

How many short sales have YOU done???

No, that answer ain’t coming and anytime soon.

Oh and just a little economic lesson for you Junior, just because someone will sell for less DOES NOT mean their home WILL sell.
But, you already firgured out that once those house wives get involved your all set!!! That’s BRILLIANT economic theory!!!

Guy’s like you kill me. No experience, no knowledge, read a lot of BOOKS I bet, know a friend of a friend who’s doing it, but HASN’T done a single deal HIMSELF.

I’ve done my deals Junior, I’ve got the portfolio to prove it.

Other than your own home, (which YOUR bank owns)


My guess…NOTHING YET, But you just wait mister, I’m really gonna do it THIS time!!! You watch!!!
Buddy boy I’m 42 years old, I’ve been there and done it in 2 real estate busts, built New Homes, flipped, rented, own commercial real estate, bought over 20 foreclosed properties, have a commercial contracotrs license, and have NO MORTGAGE on MY home!! but what do I KNOW. You handle money for rich people. I made MY OWN money in real estate, but hey, YOUR THE EXPERT HERE.
I’ve got a guy like YOU that the bank has call me EVERY month, they have a nice pile of my money. Read this part carefully…

I’d let my 7 year old son handle my real estate investments before this guy.

Every single time he calls he tells me how he wants to “get into real estate” Sort of sounds like you…JUNIOR!!!

I get emails every week from people here who’ve actually FOLLOWED some of my advice and MADE MONEY!!! That’s right they DID IT, they didn’t write about it, they went out and worked a deal. You’ll get there too, well, maybe not.

As far as getting the best of me??? I’ll let other members of this forum decide whose advice they’ll follow. My GUESS???


Pete (a lot like Mike aka PropertyManager) doesn’t color his words at all or pull punches, this might sting a little to hear. But mark my words, don’t ignore them and treat them as if they are crazy…they aren’t. You seem to think you know everything and can rule the world with your massive brain but it’s just not going to happen. Listen to these guys and spend a lot more time learning before you end up like this guy:

I read that article some time ago. Sad story for that guy. I appreciate the criticism though Rich. I will give up on SS REI until 2008 because that’s when the omniscient one says it’ll be OK to get back in…

Since I understand that you’re not into SS’ing, be sure to tell all your friends who are to: cease and desist immediately on all of their current short sales and short sales prospects and tell the HO’s that they’re currently dealing with to wait until 2008 to continue deliberations. :banghead If they ask why…just tell 'em Petey over on the inter-web told ya…they’ll understand.


Still NEVER told us how many HE’S DONE.


Well Rich, we tried.

Who knows? With all those house wives falling in love with all those homes, this guy could single handedly solve our nations housing problem. If that doesn’t fly the “consumers consume” theory should do it. Funny not one of those “consumers” has consumed the 250 foreclosures listed in my newspaper today… Oh Well.

I hear he’s working on a book, it’s called…

" Our nations economy can be saved by house wives falling in love"

Very interesting reading…Looking at the threads here. I’m curios petemfa…What strategy would you use in this ever changing market? I myself was thinking of foreclosers but have seen the comps in very very nice neighborhoods drop pretty quickly. I’m also seeing very disturbing ranging in comps in these areas. My guess would be that a lot of people are just trying to get rid of those homes before they hit the foreclosure list…You seem to be knowledgeable in realestate and I’m just curious as to what you’ll do between now and 2008? And I believe you’re right about S-4…He seems like he has the knowledge but may not have the experience to back it up. Not trying to knock you S-4… I just hope that you’re as wise as you are smart.

I think what you do is NOTHING!

Think about it, as you correctly noted prices as falling and picking up speed. that’s why the comps are all over the place. It’s also the reason Short selling is fast becoming a dieing sport. How do you short sell a property that the bank is NOT going to GIVE away, in a market that keeps getting weaker??? The answer is YOU DON’T. Banks haven’t thrown in the towel yet. These guy’s doing SS’s are buying properties at 10-15% off??? Are you kidding me??? Why screw around now? If you wait until this sub-prime, ARM mess really hits the light of day you will be ready when the odds favor YOU. We also have a stock market on the brink to make matters worse.
Do you think the odds are good RIGHT now??? There not, the market keeps falling, look at the data. Why would you buy in that enviroment???

People forget how much this market overpriced real estate in the last 5 years. My strategy now is just PRESERVE MY CAPITAL.
There is no better way to lose money than buying real estate in a declining market with tightening lending standards, a sub-prime melt down and a falling stock market. PEOPLE , just like YOU and ME, DO NOT understand what is going on. In these times people just stop… That’s it, they hunker down. S4’s theory that people will just keep spending regardless of events happening around them is just WRONG. It’s not happening.

PRESERVE YOUR CAPITAL…It’s going to get a lot worse. When I see signs of panic, I’ll step in and load up. I’ve seen this movie before. The EXACT same thing occured in the late 80’s. NO ONE wanted to own real estate for any reason other than SHELTER.
Now obviously investors like us KNOW this and BUY at these times. But…remember the crowd is usually WRONG, it’s the guy’s who do the exact OPPOSITE of the crowd who usually make money.

So for now I’ll sit on the sidelines buying only when something is so cheap I can’t afford not to grab it. Good times for us are coming…BE READY or GET READY!!!

Very interesting thread here… I’m new to the board and REI. No deals yet.

Pete - I find your posts very informative. You are obviously very wise and experienced. I have a question for you regarding something you said in your last post on this thread. You said you will wait for “signs of panic” and then you might do some buying. Can you describe a few of these signs you’re looking for? Also, do you believe the ‘sit it out’ advice is applicable to all markets in the U.S. or are there some pockets of good markets out there? I thought there was always a market for REI but one must play a certain hand (or use a certain strategy) depending on the current market environment. Is it just so crazy right now that it’s best to stay out completely no matter the market (location)?

Thanks and I look forward to your reply. My brain is in ‘sponge mode’ so I can absorb and learn as much as possible. I appreciate whatever information you can share.

First off, real estate is local. It’s an old saying but it IS true. If your market never experienced the insane price increases some markets did then things will be different in THAT market.

As far as signs of panic… The two best I know of are time on market, (how long it takes to sell a home) When that number doubles from where it is now (in my market it is running about 6 to 9 months) that is a great sign of STRESS in a market.

The next sign is PRICES…If your market HAS seen 200% price increases over the last 5 years you’ll see those prices coming back to ranges CLOSE to previous AVERAGES. Remember to always take inflation into account. You won’t see prices gop back to EXACTLY previous numbers. You will see HUGE discounts though.

As far as real estate ALWAYS making money. Think about this…
How would you like to do this??? By trying to sell your homes into markets OVERWHELMED with real estate foreclosures and falling prices, or waiting to sell into a better enviroment?

If you buy when things are BAD, and hold these properties for say, 10 years, you’ll be selling into a MUCH BETTER market. So in a nut shell, buy 'em when they’re cheap and sell 'em when they’re not. This is a very simple business. That doesn’t mean you can’t screw it up. Common sense goes along way though.