Originally Posted By beamerdog Mr. X, do you have any recommendations for anyone invested in commercial real estate mutual funds?
Originally Posted By Mr X Commercial real estate hasn't been badly hit, yet. Could be the next shoe to drop though...depends on the economy really. At least that's how I see it. You're not facing the same issue as with residential though...what with all the bad loans, bad underwriting, and generally bad business practices that is now biting so many companies in the butt. Is it a taxable or tax-defered account? If taxable, of course you need to look into the tax consequenses. If it's in an IRA or something and the fees are low, why not get out of that game and look for a more stable sector (or even a fund that tracks the whole market like Peeaanuut has talked about). If it's a small part of a diversified portfolio, I don't think it's a HUGE worry though (not immediately anyway). How is it performing so far this year? (or is this just a general question?) I personally wouldn't touch anything with the term "real estate" on it with a 10 foot pole.
Originally Posted By Mr X Keep in mind, I'm no expert (I'd say "hobbyist" would be the best term ), and I could be totally wrong. It's just my 2 cents. If you (or anyone) is really concerned, talking to a pro financial advisor would probably be the way to go before you freak out and take action (especially reacting off of advice from a Disney chat site! ).
Originally Posted By fkurucz <<People have been saying that the real estate "bubble" will "pop" for almost a year. >> It's already happenning. Prices are already plummeting in places such as Florida and Las Vegas. Houses that used to sell in days (if not mere hours) are languishing for months. Double digit appreciation is history. Nationwide wide home builders (Lennar, KB, etc.) are posting huges losses. I would say the bubble has popped. What will happen to prices in the next 2-3 years is anyone's guess. But I do know that in most of the country first time buyers cannot afford to buy houses at the current price/wage ratio.
Originally Posted By fkurucz <<Would anyone want to venture a guess as to how/if this would affect the Disney company? (I am referring to the affects of the inflation or the recession that could happen when the real estate bubble pops.)>> I suspect that a lot of people taking WDW trips were using Home Equity Lines of credit to finance those vacations. So I expect that there will be an impact. I also imagine that previously successful house flippers will no longer have cash to burn as well. Make no mistake about it, the bubble has popped. Slumping sales, record foreclosure rates and falling prices are the new reality in almost all markets.
Originally Posted By fkurucz It sounds like Fannie Mae and Freddie Mac are going to bail out the subprime borrowers. If this is true, prepare for heavy inflation.
Originally Posted By Mr X Inflation is not a concern, imo. Prolonging the inevitable, though, is a VERY big concern I think. I think fannie and freddie (isn't it interesting how government monoliths get such "cute" nicknames?) bailing out the situation is a HUGE mistake...now the scumbags who caused this don't have to pay the piper? Is THAT fair? Is that going to solve anything? It will only extend and exacerbate the problem (as can already be seen today...many shady lenders up BIG on Wall Street even though it's a crappy day for the markets so far! is that fair and equitable? NO. But it's reality at the moment...more good chances for me to short sell, anyway lol). FKU, YOU ARE CORRECT. The bubble has indeed popped...it seems to be a slow leak though. This will take time (I've been watching the slow leak since last year, in fact!)... In the meantime, my overall advice still stands. Check your investments and re-arrange any that are heavy on anything to do with housing. NOT trying to make anyone overly concerned (the markets in general are STILL near record highs)...my only concern here is to warn long term folks (I assume a lot of LPers have mutual funds) to really look into what their funds actually contain, and to consider switching out for another one (preferably in a tax defered account, of course) IF it turns out some of those have a lot more exposure than you might want to have. Oh yeah...and by the way...IT'S ARMAGEDDON OUT THERE!! THEY HAVE NO IDEA HOW BAD THINGS ARE! **NO IDEA!!!!** I'VE BEEN ON THE PHONE WITH EVERY CEO IN THE PAST 72 HOURS, AND IT'S SHAMEFUL! SHAMEFUL WHAT'S GOING ON!!!! (inside joke...only superdry will get it, I think...don't panic folks (unless you're a bald egomaniac))
Originally Posted By LuLu This real estate nonsense is so pervasive... I can't believe it *won't* affect the overall economy. I agree, I hate the "bailing out" idea, but I guess the gov't wants to spread the pain around. No personal consequences for individual stupidity/greed. How long til this gets moved to WE ?? ;-)
Originally Posted By friendofdd If predicting the economy were a true science, we would all be wealthy.
Originally Posted By Mr X friendofdd, that is the ULTIMATE "words of wisdom" my friend! Lulu...strangely enough it hasn't so far. It has affected the SECTORS involved, of course...but the overall economy still SEEMS to be okay. Of course, that might change when all those teaser rates re-set in late 2007 into 2008 and suddenly people have no recourse but to sink EACH AND EVERY DOLLAR into their unaffordable homes...which they shouldn't have bought or qualified for in the first place...and which will deprive them of the ability to purchase any more LEXUS'S, FLAT SCREEN TV'S, FUN GADGETS, or anything else (that they otherwise would have bought by tapping into with a HELOC when prices were rising)... THAT, will probably be bad for the economy. But it won't happen for several months (couple of years at the most). So, not to worry too much about the economy overall NOW...but, soon is a different story (I'm sure Doughdubya is hoping there's a democrat in office before the TRUE explosion rips things apart). It's a logical progression though. Greed ALWAYS leads to consequences. ALWAYS.
Originally Posted By Kar2oonMan >>No personal consequences for individual stupidity/greed.<< Well keep in mind that a lot of subprime lenders knowingly swindled a hell of a lot of people into bad deals. Sure, the ultimate fault is with the borrower as they sign on the dotted line, but let's face it, mortgage contracts consist of a small mountain of legalese, and those lenders know it, and they targeted the newbies often in a predatory fashion. Who knows what people were told or promised or lead to believe 'off the record' at signing time.
Originally Posted By Sport Goofy This is all going to get a lot worse. The train wreck hasn't even happenend yet. The kind of home buyers that drove prices up with exotic loans and liar loans are essentially shut out of the market right now. Mortgage brokers are panicked trying to figure out how to qualify customers for conventional loans -- which is nearly impossible given the ridiculous prices in the market vs. the average income of home buyers. Even re-fi's are not being approved right now based on the tightening lending standards. Watch the home sales continue to decline as buyers are shut out of the market when they can't get loans.
Originally Posted By Mr X K2M, I have no sympathy for the borrowers. None whatsoever. Any idiot can understand the following...if it seems too good to be true, it probably is. No sympathy from this corner, sorry. I blame EVERYONE for this mess, lenders, borrowers, idiots who BOUGHT the toxic junk, everyone! And I'll be even MORE upset if these jerks and criminals end up blowing up the whole economy such that *I* have to suffer because a ton of fools were either greedy or stupid or both.
Originally Posted By Mr X Sport Goofy, post 53 is wisdom for the ages. I hope to come back and re-read it in about 18 months time when that all becomes truth immemorial! (do you invest, by the way? if so, I wanna buy what YOU'RE buying!! )
Originally Posted By Sport Goofy I'm not buying anything right now. Mostly cash and bonds. Hanging onto healthcare (even a poorly run drug company can't lose with a rapidly aging population). Everything else is pretty much overpriced if you ask me.
Originally Posted By Kar2oonMan While you may have no sympathy for the borrowers, Mr. X, note that the attorney generals of 49 states do. >>In early 2006, Ameriquest Mortgage settled a class action lawsuit for $325 million with the attorney generals of 49 of the 50 states over allegations of predatory lending practices. Allegations included usury and bait-and-switch tactics.<< I'm just saying that some people were swindled by clowns like this. Not everyone, but a lot. And I'm sure Ameriquest isn't the only one that did this stuff.
Originally Posted By Mr X It even goes far beyond that issue (predatory lending...which I don't really subscibe too anyway)... All those people who bought on teaser rates and assumed, ASSUMED that prices would rise indefinitely were DELUSIONAL. That is simply not the way the world works. And the world has proven it time and again. And the suckers keep on coming. Anyone who signed on to such foolishness deserves what they get, because it is idiotic to the extreme. There is a REASON why lending standards have been (I should say SOULD lending standards), have been the same for ages. Because not EVERYONE qualifies for extravagent loans, even if people seem to think they are somehow "entitled" to them (even dirt poor people!). I do blame the government somewhat. The whole "everyone deserves to own a home" is a bunch of hooplah. That has NEVER been the case, throughout history, and I don't understand why everyone seemed to think it was the case now (except for everyone assuming prices would skyrocket forever...more stupidity). Like all pyramid schemes, this one has hit endgame. A lot of people will get hurt (and all the pundits on TV are simply BLEEDING for them...and OH so sad)... What I say is, they deserve it. Each and every one of them.
Originally Posted By Mr X Don't get me wrong, K2M, I think the lenders (especially the predatory ones) are getting what they deserve. But the buyers were stupid too. And I don't really care for the attorney generals getting involved, because in my humble opinion all those greedy stupid idiots should taste the medicine. All of them. (it annoys me mostly because this greed and stupidity could actually accelerate to the point where it affects the TRULY innocent...the responsible people, and companies, that stayed prudent and conservative throughout this easy to recognize ponzi scheme)
Originally Posted By Mr X ++Everything else is pretty much overpriced if you ask me.++ I dunno, Goof...really depends on the sector. The market ain't dead yet, anyway (the lenders and homebuilders sure are, though!).
