Friday, May 20, 2005

So Long Playboy, Hello Real Estate

The Washington Post has an article on the rush into RE speculation. "It feels as if Playboy's Playmate of the Month for May is speaking for the entire country. Fort Lauderdale native Jamie Westenhiser, 23, told the magazine recently that she is ditching her modeling career to take up real estate investing."

"In the magazine's May issue, Westenhiser poses, leaning on a computer desk next to a stack of books with titles including 'All About Escrow' and 'Real Estate Principles.' In her playmate data sheet, she writes that her ambition in life is to have a 'successful career in real estate.'"

As is now common, the focus turns very cautionary. "'Everybody can't sell all together,' economist John Silvia said. 'Somebody has to be buying. There's absolutely a chance that a whole bunch of people will try to sell at the same time. The game can change very, very quickly.'"

Some local investors say they would sell if the market turned. 'I'd want to sell while it's still a seller's market,' said Kitty Bernard, an agent in Reston who has teamed up with several colleagues to invest. 'I wouldn't want to wait until it reverted completely to a buyer's market.'"

13 Comments:

At 1:36 PM, Anonymous Anonymous said...

she should protect her assets a bit more...

e-

 
At 1:53 PM, Anonymous Anonymous said...

did anyone catch the season finale of Trump's apprentince...the winner indicated that she had some interest with some other fired apprentice to jump in to the 'hot' las vegas market.

also, when asked by trump which project she would work on she opted for the 100mil house and said of course...real estate mr. trump...its my passion like u sir.

ding-dong the bell has rung.

lol.

 
At 2:24 PM, Anonymous Anonymous said...

Yeah, she is a playmate. She has probably
already sunk $60,000 grand into an excellent
set of bubbles already.

Something tells me that even is she loses her panties, she can fall back on those assets.

 
At 2:27 PM, Anonymous Anonymous said...

("In the magazine's May issue, Westenhiser poses, leaning on a computer desk next to a stack of books with titles including 'All About Escrow' and 'Real Estate Principles.')

Is there anything hotter than a Playboy Playmate who understands the intricacies of the escrow process? I need a cold shower!

Now they're not just ringing a bell, they're sounding off sirens!

Who's left to join this ship of fools? Is the Pope gonna quit and become a mortgage broker? Is Terry Schiavo gonna rise from the dead and announce that she is planning to do some condo conversions in Boca?

I used to study semiotics---the examination of signs and symbols and how they can be used to signify larger meaning within systems and cultures. So I get kind of worked up when I see stories like this.

If this ain't a sign, I don't know what is.

It's like driving down a deserted highway and seeing a sign that says "Dead End". But you proceed. Then a few more signs crop up, "Road Ending", "Danger", "Cliff Ahead". But you proceed. Then an entire forest of signs, "Stop Now!", "You'll Be Sorry", "The End is Near". There are car parts and body parts strewn across the highway. There are vultures circling above. Black smoke rises in the distance. But you proceed.

And you go off the cliff...

As you plummet, you notice something very strange. There are no more signs.

 
At 2:34 PM, Blogger desi dude said...

this quote from that article , I found interesting
Price appreciation is a big part of real estate investing. "Let's say you're taking a loss of $300 a month on your cash flow, but appreciation is 15 percent on a $400,000 investment. You're making $60,000 a year in appreciation, but you're losing $3,600 a year on cash flow. Which is better?" asked investor Fairweather, who said he controls or manages hundreds of investment properties

is it any wonder that the person being quoted is name fairweahter ?
or is it a signal about the end of fair weather?

 
At 2:47 PM, Blogger desi dude said...

http://www.firstamres.com/pdf/Cagan_FireBurn_1104.pdf

Here a realestate professional already called top for SoCal.
(link copied from WSJ forum)

 
At 3:31 PM, Anonymous Anonymous said...

Boy that crack tastes good..... Man when it crashes,
it will be one great shit storm here.

 
At 3:34 PM, Anonymous Anonymous said...

***

I like this quote from the WaPo story: "Sarah Petusky, 28, and her husband, Matt, 33, who are the parents of a baby, are two recent buyers. They bought a $200,000 three-bedroom townhouse in Columbia late last year. For the down payment, they drew on a home equity line on their house in Olney. They rent out the townhouse, but are taking a loss of "a couple hundred dollars a month," Sarah Petusky said. "We think the situation will turn around with values increasing," she said. "Our townhouse has already gone up about $30,000 in value."

Imagine the laughs this would get from a stock market investor, even in a bull market. Never count your chickens. It isn't a profit until you sell. Let's say the house lost 10% of its value. The home would now be worth $207,000. After closing costs, the Petusky's would net $190K...a loss of $10K. If they put down 10%, they would have a 50% loss on their investment. Plus they are losing $200 a month on top of that (probably more, because people always fib to reporters.)

So in a very mild downturn, they could be sitting on a minimum 50% loss on investment and the prospect of losing hundreds every month ad infinitum.

This market badly needs a shakeout to dispel the myth that speculative investments always go up in value.

 
At 3:38 PM, Anonymous Anonymous said...

("Let's say you're taking a loss of $300 a month on your cash flow, but appreciation is 15 percent on a $400,000 investment. You're making $60,000 a year in appreciation, but you're losing $3,600 a year on cash flow. Which is better?")

This guy makes it sound as if making 15 percent a year in appreciation on residential tract homes is some kind of normal occurrence. In California, where I live, we've seen more housing booms than anywhere else in the country. In the last 50 years, there have only been about 10 years with appreciation anywhere near 15 percent and half of those have come in the past few years.

In many parts of the country, markets have NEVER seen 15 percent in a year, even during this boom.

This is nonsensical thinking. A negative cash flow stinks and it stinks even worse when your home's value is flat or declining---which is what lies ahead.

Filling newbie "investors" with sugar plums like 15% annual appreciation forever is darn close to fraud.

 
At 5:02 PM, Anonymous Anonymous said...

(Some local investors say they would sell if the market turned. 'I'd want to sell while it's still a seller's market,' said Kitty Bernard, an agent in Reston who has teamed up with several colleagues to invest.)

Famous last words. They don't ring a bell to let you know the market's turned. I know from experience here in California. When the buying dries up, it really dries up. You have to lower prices to sell and that doesn't even always work.

A lot of naive speculators out there today think you just sell a house like you do a share of stock: click a mouse, sell a house. Doesn't work like that. If you plan to sell, the time to sell is when buyers are frenzied. If you wait for the market to turn, you could be sitting on a negative cash flow unit for months and months (or even longer) and have to knock down the price multiple times.

 
At 6:20 PM, Anonymous Anonymous said...

Ben,

This is the first time I have been able to post at a sensible time in your time zone.

This post and the one a few days back about the bikini realtor indicate that you have gone WAY past the bubble excesses in Australia in some areas.

From checking out the posts here it would also seem you have more "creative" finance options, although we are familiar with the letter of credit scenario. Our version was deposit bonds; if you had to put 10% down on an off-the-plan apartment you could get a deposit bond from a finance institution for a fee (I think the going rate was 10% of the bond price which = 1% of the apartment price). The financier is guaranteeing to the builder that the 10% deposit will be paid.

Some financiers would even arrange personal loans for the bond fee, while other people would pay by credit card so you could secure an apartment with no money down at all.

Of course, if you couldn't settle (is your term close?) when the apartment was completed, the bond financier would come after you for their bond AND the builder would come after you for the rest of the purchase price. I suspect the legal situation here may also be different; you are obliged to buy once contracts are exchanged (I.e. when the deposit is paid or the bond arranged).

AJH

 
At 9:33 AM, Anonymous Anonymous said...

Come on, folks, she's not just a Playmate, you know.

She also was on the National Bikini Team:

http://www.usanbt.com/team.php?category_id=17&parent_id=0

 
At 9:50 AM, Blogger Ben Jones said...

AJH,
I appreciate your contrast of the US ral estate situation and Australia. I admit to not knowing the legal ins and outs of foreign markets, so posts like yours are invaluable. There is no question that the financing in the US allowed much of the appreciation to occur, and this country will suffer all the more from the debt hangover. Thanks.

 

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