#instead of waiting 24 hours slash leaving it to me for the third time in a row? peggy write this down

[lovesodeepandwideandwell]

Oh gosh the roommates are unloading the dishwasher ... this is an answer to prayer

[thedumpsterqueen]

Standards of Performance, Chapter 3: Boundaries and Text Messages

Regular weekly update! Look at me go! This one took me ages to write for absolutely no reason, and then ages to edit because the AO3 text editor kicked my ass. Hopefully the formatting isn’t a dumpster fire, and hopefully you enjoy! Sidenote: you are always welcome to scream about Hotch, nsforwork or not, in my inbox.

Chapter 1, Chapter 2

AO3 Link

Summary:  You’re the BAU’s newest intern, desperate to prove yourself amongst an established team of much more experienced profilers. Agent Hotchner, the seemingly infallible team leader, sets strict expectations for your performance. He commands your respect without even trying, but is there something more to your relationship than a simple desire to impress your stony-faced boss?

Chapter: 3, Boundaries and Text Messages

Chapter Summary: You discover that the unsub isn't what he seems, and overstep some boundaries you probably shouldn't have.

Words: 2291

Rating: Explicit, 18+

Pairings: Hotch x Reader, Hotch x You

Back in Hotch’s hotel room, the three of you were sitting on the ground, surrounded by textbooks and torn-out pages covered in the seemingly mindless scrawls of the suspect. Well, you and Morgan were on the floor; Hotch was at the desk chair. Hotch wasn’t really a sit-on-the-floor type of person.

Morgan groaned and rubbed his temples for the third time in an hour. “It means nothing, man. He researched all this shit so he could commit the crimes in a way that would fuck with us.”

Hotch sighed and nodded in agreement. “It certainly seems that way. That explains the inconsistencies in the profile. However, we can still understand the subject by the signatures he chose.” He pointed to a scribbled note in a textbook section about the psychology surrounding different methods of murder: “Slashing throat? Effective + easy.”

He looked at you. “What can this note tell us about our subject?”

“Um, it doesn’t sound like the cause of death is important to him. Like it’s just something he needs to do. A necessity. Right?” you responded, somewhat unprepared for this sort of pop quiz.

“Exactly. And this tells us more about him. This isn’t about the kill; it’s about what he does beforehand. It’s about the rape,” Hotch said. “Don’t be so humble. You know more than you think you do.”

Your face felt hot, and you looked at the floor - an increasingly regular occurrence around him.

Morgan spoke up, still visibly exasperated. “If he spent so much time trying to throw us off, why did he pick victims that were so easy to tie to him?”

“He’s an idiot?” you offered before you could stop yourself.

Really professional. Holy shit, please shut up.

The faintest trace of a smirk graced Hotch’s face. “You’re not entirely wrong. He isn’t particularly intelligent, based on the information we’ve gathered so far. Not nearly as complex as we initially assumed.”

“Yeah, well, either way, he’s a nut. And Gracia can’t find anything about where he might be, and I’m starving,” Morgan said, standing up. “I’m gonna pick something up. You guys want anything?”

“Get me whatever looks good,” replied Hotch, focused on whatever written ramblings he was currently dissecting.

“You?” Morgan asked you.

“Just get me whatever you get him,” you said. “Thanks, Morgan.”

Morgan nodded and grabbed his jacket. “Be back soon.”

He closed the door, leaving you alone with your boss that you definitely didn’t have an erotic dream about the night before. You tried to focus on the textbook, but the words swam. After a few minutes, you huffed and set the book down.

“Shouldn’t we be looking for him right now instead of reading his weird psychobabble?”

Hotch looked up from his work with a raised eyebrow.

You continued, “I just mean, isn’t it more important to stop him from killing again? We already know he did it based on the stuff he wrote in the books, we don’t need to fully understand his motivations to confirm that.”

“Yes,” Hotch said, “but these offenders rarely cease their behavior out of nowhere. His appetite is alarming; he took three victims at once. We don’t know if those were even his first assaults or kills. Given that Garcia couldn’t locate any family or friends, we have no idea where he might be, so our time is best spent learning how to predict his actions and respond if someone else goes missing.”

He was correct, of course, but it just didn’t feel right - like you were sitting and waiting for something terrible to happen before you could do anything. Hotch must have sensed your frustration, because he leaned forward towards you, elbows resting on his knees, and continued in a slightly softer tone, “I know you feel helpless. We all do in situations like these. But trust me, we’re accomplishing more here than we would be trying to canvas the entire city.”

“I know,” you mumbled. “You’re right. It’s just, seeing the photos of those girls, knowing the type of person that’s out there, it’s hard to convince myself I’m doing enough just sitting here.”

“You’re not just sitting here, and you know that,” Hotch said, sternly. “You’re doing your job. People will die with or without us; our job isn’t to save them. It’s to catch the people that kill them.”

“But how do you deal with it?” you asked, growing more bold than you probably should be. You weren’t just asking about this case anymore, and you weren’t sure whether or not you wanted him to understand that. You wanted to ask him how he did it - how he woke up every morning alone, how he suffered an unimaginable loss at the hands of some of the purest evil society could produce and went back to the job that showed him more of that evil every day.

Judging by the hard set of his jaw, he knew exactly what you were getting at.

“I do it because I have to,” he said. Every word sounded measured, like he was explaining something he had dozens of times before.

“You don’t,” you whispered, but you knew you were wrong, at least to him. You knew he felt it was his responsibility to shoulder the burden so other families didn’t have to experience what he did. You had a background in psychology, and this was pretty low hanging fruit. A therapist would have a field day with him, but you weren’t a therapist, and you certainly weren’t in any position to tell your boss, a leader with decades of experience in the field, that he shouldn’t be taking all of this on.

He evidently didn’t find your comment worthy of a response, as he went back to picking through the pile of evidence. You’d hit a nerve though - his posture was more rigid, his almost-permanent scowl even more pronounced. The tension built with every second of silence, and you suddenly wished you could go back and erase the conversation.

Thinking better of trying to repair the damage you’d done, you kept the subsequent conversation focused on the profile. By the time Morgan got back, you had a fairly good idea of the suspect’s psychology, and after a quick break for fried rice and a video chat with the team, JJ set up to deliver a press conference from the police precinct in Vegas. Hotch switched on the news on the hotel TV, and you sat back to watch.

“The man currently suspected of committing the triple homicide that left bodies here in Vegas, in Phoenix, and in San Diego is an obsessive sexual predator,” JJ said to a waiting crowd of reporters and police. “He displays characteristics of a stalker, and women who interact with him may describe him as creepy or off-putting. Though murder is not his ultimate goal - in fact, he may not be completely comfortable with the act - he views it as a necessary step to dispose of his victims post-assault.”

“Do we usually do this?” you whispered to Morgan, “Release the whole profile publicly?”

“Nah, but with this guy, we want him to know we’re onto him,” he said back, trying not to disturb Hotch, who was watching JJ’s address intently. “He put so much effort into throwing us off, we gotta let him know we see through his bullshit. It’s the only play we got right now, considering we got no idea where he is.”

You turned back to the screen, where JJ had moved on to talking about the suspect. “His name is Ellory Matthews,” she said, holding up his ID photo. “He’s a 24 year old white male, about 5’9” and 200 pounds. We have strong reason to suspect he is involved and currently trying to evade the police. He is considered armed and extremely dangerous, so if you see him, please do not approach and call 911 immediately.”

Hotch, apparently having heard enough, stood up and turned off the TV. “Hopefully someone has seen him and can tell us where he is. If not, this should be enough to scare him into making a mistake.”

You tried not to think about the fact that a mistake still probably involved someone being hurt or killed.

“Get some rest. I’ll clean up here. Morgan, before you head to bed, call Garcia again and see if she’s found anything that can point us to where he might be.”

“Got it, I’ll let you know. Night, Hotch,” Morgan said.

You echoed Morgan and headed back to your room.

____________

After getting ready and tucking into bed, you found yourself completely unable to fall asleep. The conversation with Hotch kept replaying in your head - how resentful he’d looked when you asked him how he does his job, knowing that you were asking about it in relation to his family members’ deaths. He was a reasonable man, and you knew you hadn’t done anything wrong on the surface, but you shouldn't have pushed it, especially since the events you were referencing had been relayed to you by JJ in private. You weren’t even sure he wanted you to know about what happened to his wife and kid.

Shit, I might have really fucked up.

You rolled over and yanked your phone off the charger, and before you had time to convince yourself it was a bad idea, you sent him a message.

Me: Hey, sorry to bother you, I know it’s late. I just wanted to apologize if I offended you during our conversation earlier. You’re an incredible agent and boss and I didn’t mean to imply you shouldn’t be in the field for any reason.

You scrolled through Instagram mindlessly, waiting for his response, but he texted back almost immediately. Knowing him, he hadn’t even made an attempt to go to bed; he was probably still up reviewing the case.

Agent Hotchner: I understand. No need to apologize. I knew you’d hear about what happened sooner or later, and it’s natural to question my judgement, considering. I hope my actions in the field haven’t done anything to lend credence to that concern.

A weight lifted from your shoulders at his response, knowing he wasn’t angry with you.

Me: No, not at all, Sir. You and the team have been incredible and I’ve already learned so much. If I ask a question, please know it’s for my own learning rather than questioning your decisions!

Agent Hotchner: I’m glad to hear that. Please always feel free to ask questions.

Me: Thank you so much! Will do!

Satisfied with conversation, you set the phone back on the nightstand and rolled over. A few moments later, though, it buzzed again, and you looked at the screen.

Agent Hotchner: “Sir” is a little formal for text messages though, isn’t it?

You blinked, struggling to process the tone of the message. Was Aaron Hotchner making a joke? You messaged him back hesitantly.

Me: Can never be too formal! :) Is there something you’d prefer?

Agent Hotchner: Oh, I’m sure you can figure something out.

Your eyes widened at that, and you sat up in bed, staring at your screen. If you thought he was messing with you before, this was more; this was almost… flirting.

Ok, let’s not get ahead of ourselves here, you thought, trying to calm your embarrassingly high heart rate. He’s older. Way older. He probably doesn’t text that much, and he probably doesn’t realize how that came off.

Me: I’ll let you know when I do.

Agent Hotchner: Please do. Sleep well.

You placed the phone back on the bedside table, almost shaking with adrenaline. What was wrong with you lately? First you have a sex dream about your boss (who’s old enough to be your parent, you might add), and now you’re freaking out because he texted you something that could possibly be, in some interpretations, construed as flirting.

Hotch was attractive, of course. You’d have to be an idiot not to admit that. He was handsome in a way you didn’t see often - not the obvious, in-your-face stunning like Morgan was, or even the adorable, put-together look that Reid gave off. Hotch was old-school handsome, like he should be in a black and white movie smoking a cigarette while his doting wife made him dinner.

Or something. It’s not like you’d thought about this before.

But even if he was handsome to such a degree that seeing him with two buttons on his dress shirt undone nearly gave you a heart attack, leaning into this fantasy you were unconsciously creating where your relationship was anything more than boss and intern had the potential to destroy your career. Hotch could read people like a book, and if you were unable to conduct yourself normally and effectively at work for any reason, your internship and aspirations would be tossed out to the street.

Time to stop being an idiot.

Sometime during your mental dissection of the text conversation and its implications, you must have fallen asleep. You were awoken to a still-dark room and someone gently squeezing your shoulder, saying your name.

“Wha- oh, it’s you. I’m so sorry, did I miss something? What’s going on?” you asked, still not fully conscious.

“I’m sorry, I didn’t mean to scare you,” Hotch replied, standing over you. You were suddenly thankful for the dark room and the blanket that were covering your lack of pants. “I tried calling you and knocking, but you didn’t respond. I figured you’d forgotten to turn your ringer on.”

“Shit, yeah, I did. I’m so sorry,” you said, sitting up. “What did you need?”

“It’s Ellory Matthews. Police caught him trying to kidnap another girl. He’s in custody.”

[whatarubberchicken]

The Bodyguard’s Tale -Chapter 3

<<Previous - Ao3 or ff.net - Next>>

Chapter 3

Lance’s next excursion wasn’t any better; he somehow got it into his head that he wanted to try hunting ducat. Whatever that was. Apparently, some guy named Coran told him all about them and where to find them. However, after a full day of tromping through the Altean jungle, he and Keith didn’t find anything. And when a tired, muddy, bedraggled Keith asked Shiro about it later, the man had laughed and suggested snipe hunting instead.

He was fairly certain they were being played. So was Lance.

In retaliation, Lance convinced him to help with a little prank. Somehow, the Altean prince had gotten ahold of a couple-dozen half-feral klanmüirls. Keith, openly shaking his head and secretly snickering for the sheer brilliance of it, had the task of putting a collar on each one that clearly stated that the beast was one of 25. There were only 24 klanmüirls. Then they set them loose in the Grand Hall, just before the High Council was called into session.

Keith had never seen such mayhem.

It was glorious.

Uptight lords ran around, panicking, yelling, and trying to catch the stray animals; women were screaming shrilly as several beasts mistook their shiny jewelry for a snack—Lotor had a huge one chasing him that was sure his hair was something edible—even Shiro’s calmer efforts to corral them was hilarious in its own way.

Keith and Lance were literally unable to stand, they were laughing so hard.

Unfortunately, their fun came to an end when Allura caught them hiding behind some draperies. Keith thought for sure they were doomed, but in exchange for her silence, the princess decided to have a bit of her own fun instead.

The next day, Lance and Keith looked at each other miserably as they were forced to try on dress after dress for the princess’s amusement. (She did not, as a small mercy, make them leave her quarters in the dresses, which Keith was eternally grateful for.)

“Does this one make my butt look big?” Lance asked, looking in the mirror while his sister was off trying to find accessories for them. The apparent reasoning behind this whole fiasco was that she wanted to see how different outfits looked side-by-side.

Why she couldn’t use her own ladies….

“I don’t think you have the hips for it,” a voice by the door laughed before Keith could reply. They both whirled around to see Shiro standing there, snickering. “Or the chest!”

“What are you doing here?!” Keith hissed, attempting to cover himself with another dress. Embarrassing himself in front of his best friend was not in the job description!

“Ah, Shiro! You have those documents I needed signed?” Allura said, handing her brother some jewelry as she crossed the room to the ambassador. Keith narrowed his eyes at her. So, she’d arranged this, the scheming little—

“Right here, princess,” Shiro said cheerfully, handing her some forms. “And I—uh, love your new models.”

Keith growled and Lance freed a hand long enough to give Shiro a rude hand gesture.

“Aww, did Lotor not come with you?” Allura pouted, looking behind the ambassador. Keith gaped at her in horror. His brother? Seeing him like this?! She was EVIL!!

“Unfortunately, Prince Lotor had some pressing business to take care of,” Shiro said, grimacing. Keith snorted. Undoubtedly, his brother simply hadn’t seen how a visit to see his betrothed would benefit him and had brushed off Allura’s invitation. “He swears he’ll make it up to you later.” Shiro glanced at the two boys again, and barely hid his laughter behind his hand.

“Of course, if he’d known what was waiting for him, I’m sure he’d have come,” he added, grinning at Keith.

“Don’t you dare tell him!” Keith hissed, trying to wiggle out of his dress to go threaten Shiro properly.

“And now, Princess, I have some pressing business of my own… That’s a good color on you, Keith!”

“Shiro! Get back here!!” Keith yelled, struggling harder. He ended up stumbling around and crashing into Lance, who yelped when they went down in a pile of limbs.

“Ow, mullet-head!”

“Shut up and get off me!”

“Excuse you! You’re the one on me!” Lance shouted.

“Move your leg!”

“Hey, watch the heel! Watch the heel!!”

“WHY are you wearing heels, Lance?” Keith asked, completely exasperated and still tangled up on the floor in what could be considered a very compromising position.

“Hey, if I’m gonna do this, I’m gonna do it right!” The Altean prince had the nerve to pose.

“Ugh, you idiot!”

“Oh yeah? I’m not the one who—OOF!” Lance groaned. Keith winced. He’d accidently kneed the other boy in the stomach.

“Sorry.”

“You Galra, always so violent!” Lance cried dramatically, throwing a hand over his eyes for effect. “Sister-dear, did you see how he brutalized me?!”

“My poor brother,” Allura gushed, joining in the drama effortlessly. “You must be traumatized! Facial masks for both of you!!”

Lance cheered. Keith suppressed his urge to bang his head on the floor. The royal siblings were two of a kind, and a royal pain in his—

“C’mon, Keith, let’s get you exfoliated!!”

Quiznak.

………..

The next few weeks were more of the same. Lance got into more bar fights (which Keith had to step in and defend him for, even if the prince had a pretty good right hook himself) and attempted to learn how to play some sort of wind instrument (Keith chucked it out the window after the third day and claimed it must be in Lance’s messy room somewhere. Win-win for him; Lance had to clean his room, finally, and Keith was no longer subjected to the sound of a dying cat).

The best times were when Lance decided to hang out with Allura, usually studying spellcasting or playing Monsters and Mana. (Keith decided to forgive her for the dress debacle, since those few hours were the most peace he had these days. Still, he swore Lance cheated at that game, there was no way anyone could roll that many Nat 20s.)

Lance also attempted to learn how to use a sword, which Keith had to help him with. The prince was surprisingly light on his feet, but he was no match for Keith’s strength, even if he was Altean. Still, he was stubborn, and those practice matches were very enjoyable for Keith. Especially the way Lance’s eyes would sparkle every time he learned a new move or managed to land a hit….

NOPE! Nope. That was just the adrenaline talking. Keith loved the adrenaline rush. That was all.

Finally, the king and queen deemed Lance worthy of representing Altea on another world. Keith was apprehensive until he found out the mission wasn’t going to take long; it was just a festival that the locals called Clear Day. Shiro even offered to accompany them and make sure Lance didn’t get into too much trouble.

Keith regretted it the moment they touched down. So many lights and noises and smells—

“It’s a carnival,” Shiro exclaimed softly, his eyes wide. “We used to have them on Earth all the time!”

“Really?” Keith asked, interested in learning more about that part of himself. And honestly, watching Shiro was easier on his eyes than all these flashing lights….

“Hey, where’d Lance go?” Shiro suddenly asked.

Keith spun around, looking for the prince who had just been at his side.

“QUIZNAK!”

They searched for nearly an hour before they found him at the shooting games, entertaining several females with his ability to get them some cheap little stuffed animals.

“Lance!” Keith roared. “You know you’re not supposed to go off on your own!!”

Lance took one look at the rage on his face and, to Keith’s astonishment, he ran. What the quiznak?! Where did he think—?

“Get back here!” he yelled after the wayward prince, only vaguely aware of Shiro laughing behind him as he chased the other boy. Shiro could laugh, but it was going to be Keith’s ass if something happened to the prince!

Lance was darting left and right, trying to lose him in the crowd, but Keith was quicker. He tackled Lance right into a line of people. Keith pulled them both to their feet, and was about to start laying into the Altean when—

“Fine, fine, you can go first,” a bored, nasally voice said. The next thing they knew, they had been strapped into a ride and told to have a “blissfully burrowful time.”

All Keith could do was glare at Lance, which intensified when the animatronics all around them began to sing. Lance looked interested (for all of two tiks) and then he chanced a glance at his bodyguard.

“Just remember, if you kill me, you fail your mission,” he sang, grinning sheepishly.

“I remind myself that every day.”

The ride broke, right when they were in the middle of it. Keith groaned in despair and buried his face in his hands.

It took him less than five minutes to get fed up with the idiotic song and slash his way to freedom, dragging a laughing Lance behind him. The prince promised to pay for damages to the irate carny, but also pointed out that the ride had already been broken. Then Keith chimed in about how it could’ve been a trap to harm Lance’s royal person, blah-de-blah, and the worker quickly let them go with hasty apology for their troubles.

They were never coming back to Clear Day. Keith would beg Lance’s other bodyguards on his knees if he had to.

Now, they couldn’t find Shiro.

Some of the locals said something about a human being in the arm-wrestling tournament, but to get there, they had to pass the shooting games again. And of course, Lance wheedled and whined until Keith finally gave in and stopped to let him play for awhile.

It wasn’t like he was actually going to win anything… those things were totally rigged.

So, when Lance presented him with a stuffed red lion, Keith took it out of sheer disbelief—and ignored his flaming cheeks.

It was just to say sorry for that whole ride debacle. It’s not like it meant anything. Besides, they were both quickly distracted by the fact that Shiro was now the center of a cheering crowd of fans.

[samuelfields]

What If You Buy A Home At The Top Of The Market? A Look At The Real Estate Cycle

One way to tell whether buying a home right now is a good time or not is seeing what the stock market is doing. The stock market reflects earnings expectations 6 – 24 months in advance. You can investigate further and look at sectors in which your location has large exposure e.g. tech in San Francisco, oil in Houston, and banks in New York City.

With the stock market seemingly stuck down 10% from its peak, there is a growing chance that you might be buying at the top of the market in 2018. Exactly what that percentage chance is, nobody knows. Maybe the chance is now 50% for expensive coastal city markets, up from 40% in 2017.

Stocks correct swiftly, while real estate corrects slowly until everybody knows real estate is weakening. Then liquidity dries up and the floor drops out. If the stock market is correcting, it’s time to pay closer attention to any investment you make, especially with leverage.

What we do know about the real estate market is that it moves in cycles due to the desire for economic profits i.e. new construction to meet new demand. Peak new construction tends to occur past peak demand, which ultimately leads to temporary oversupply and lower prices. This bust phase usually lasts between 1-3 years before a price floor is found. We are clearly in the hypersupply/boom phase of the cycle now.

What’s also important to recognize is that every real estate market is at a slightly different phase of its housing cycle. Here’s a nice chart by John Burns Real Estate Consulting which names cities in each phase of the housing cycle.

Given I had three properties in San Francisco with $2,000,000 worth of leverage in 2017, I found it prudent to sell one property and reduce leverage by $815,000 since I feel San Francisco is in the “Maturing Exuberance” stage. Institutional investors have all but pulled out of the California housing market, leaving retail investors fighting for scraps.

Real estate investors can look at the chart above and rationally make an argument that it would be wise to shift exposure from late phase markets to early phase markets to earn more money and protect against downside risk. If you believe in such logic, then you should believe in my thesis of investing in the heartland of America and BURL: Buy Utility, Rent Luxury.

Buying At The Top Of The Market

Let’s say that despite all the signs that the real estate market is at risk of rolling over, you go ahead and buy property with leverage at the top of the cycle. What happens to your mind and to your money? I’ve got first hand experience since I bought my Lake Tahoe vacation property only one year after the peak.

1) You go in denial at first. You will always stand behind your decision to buy at the very beginning. Even if you see a neighboring home on the market sit for longer or drop their asking price, you will justify your purchase by saying your home has a better layout or nicer amenities. You will tell yourself that you bought your home for a better lifestyle first and foremost.

After about a year, the elation of owning your home fades a little bit. It’s similar to the fading elation of buying a new car with a loan. You are thrilled for the first six months, but that thrill dies down while the car payments stay the same. You’ll go online to see the valuation of imperfect comparable home sales to justify your purchase.

2) You begin to accept your mistake. Between 12 – 24 months, you start realizing that maybe you didn’t make the best purchase after all and start telling yourself, “In the long run, things will be fine,” in order to feel better. But the more you look at homes that sell for less, the more you beat yourself up about your purchase.

You start doing calculations on how much you could have saved on the downpayment or on the monthly cash flow if you had just been a little bit pickier or a little more patient. You look at the nicer homes you could have bought with what you paid and kick yourself a little bit. Finally, you tell yourself, “It’s just money at the end of the day.”

3) You start to think worst case scenarios. Due to leverage, a 10% decline in the value of your home is a 50% decline in your 20% downpayment. Just as the stock market can correct 10% in a month, the real estate market can easily correct 10% in a year. Once the momentum to sell begins in real estate, it starts getting scary, especially if you own a condo in a large building.

During a worst case scenario, you start calculating how long you can keep the house before you run out of savings if you lose your job. You also calculate how low the house can go before it no longer makes sense to keep paying the mortgage. During the worst stage of a correction, you may really begin to freak out because you will know friends who have been laid off. You start wondering when you’ll be next.

4) You start to cut out all excess fat from your budget. The great thing about being rational is that during difficult times, all extraneous expenses get slashed and savings rates go up. You might even try and get a second job or work a side hustle if you really start getting worried. Fear of financial ruin in 2009 is what got me to start Financial Samurai. I needed a cathartic outlet to release my fear. I needed something to do just in case I was one of the thousands of people who got fired from the finance industry that year.

During the financial crisis, I didn’t buy anything. I also hustled harder to build relationships with clients who were my only leverage to keeping my job. Instead of buying groceries, I took as many clients out for lunch and dinner to not only build better relationships, but save on food! Yes, I took leftovers home to feed my wife as well. My clients were also worried about losing their jobs and also wanted to save money. When you go through a crisis with someone and survive, your relationship thrives in good times.

5) You either stick with the game plan, or stick it to the bank. If things get really bad where you’re underwater on your home, you will need to make the crucial decision of either staying current on your mortgage or stop making payments. First, you must realize which states are non-recourse states so they don’t come after your other assets after you welch. By short-selling or foreclosing on your home, not only do you ruin your credit and dignity, you also hurt your neighbors who decided to keep paying.

But in America, it’s often every man and woman for himself. You can foreclose on your home like one financial pro did in 2011. He subsequently got hired by The New York Times to write about money advice and even wrote a book about how to improve your finances! This example is one of the reasons why I’m so bullish on America. It doesn’t matter what mistakes you’ve made or who you are, you can always come back.

Nothing Happens If You Decide To Keep Paying Your Mortgage

If you decide to keep paying your mortgage, then life goes on usually as planned. After all, real estate markets tend to recover over time, and few people go into buying the most expensive thing in their lifetimes without a long-term holding plan. The one thing you will run out of is time.

I bought my Lake Tahoe condo after a 12% correction in 2007. At the time, I thought it was nice to save $100,000 from the original purchase price. Little did I realize the value of my condo would plummet by an additional ~30% since so many of my neighbors decided to foreclose.

I felt like a real dummy buying the condo two years later. I started thinking how nice it would be to have an extra $150,000 in cash sitting in the bank. I felt so bad about my decision that I decided to become super frugal for the next five years, work extra hours in order to get promoted and paid, and start Financial Samurai as a potential way out.

More than 11 years later, I’m at peace with my decision to buy a third property as a delusional 29 year old who thought he couldn’t lose. Valuations have rebounded from the depths of despair, the mortgage balance is 40% lower, and the value of the condo has shrunk to a small portion of my net worth. There is also satisfaction that I didn’t welch on my debt.

Now, I cannot wait to take my little boy up to play in the snow. I cannot wait to show him how to jump in the lake off one of the public piers. I cannot wait to make roast marshmallows on an open fire after a rewarding hike. I cannot wait to tell him fun stories under the stars.

When his mother and I pass, I hope he has his own family to take up to the mountains one day. Maybe he’ll even have a picture of his parents on the mantle smiling and watching over him.

Related: Why Real Estate Will Always Be More Desirable Than Stocks

Readers, with the stock market stuck down 10%, what gives homebuyers the confidence to pay peak prices today? Have you ever bought property at or near the top of the market? What happened next?

The post What If You Buy A Home At The Top Of The Market? A Look At The Real Estate Cycle appeared first on Financial Samurai.

from Finance https://www.financialsamurai.com/what-if-you-buy-a-home-at-the-top-of-the-market-and-a-recession-hits/ via http://www.rssmix.com/

[ronaldmrashid]

What If You Buy A Home At The Top Of The Market? A Look At The Real Estate Cycle

One way to tell whether buying a home right now is a good time or not is seeing what the stock market is doing. The stock market reflects earnings expectations 6 – 24 months in advance. You can investigate further and look at sectors in which your location has large exposure e.g. tech in San Francisco, oil in Houston, and banks in New York City.

With the stock market seemingly stuck down 10% from its peak, there is a growing chance that you might be buying at the top of the market in 2018. Exactly what that percentage chance is, nobody knows. Maybe the chance is now 50% for expensive coastal city markets, up from 40% in 2017.

Stocks correct swiftly, while real estate corrects slowly until everybody knows real estate is weakening. Then liquidity dries up and the floor drops out. If the stock market is correcting, it’s time to pay closer attention to any investment you make, especially with leverage.

What we do know about the real estate market is that it moves in cycles due to the desire for economic profits i.e. new construction to meet new demand. Peak new construction tends to occur past peak demand, which ultimately leads to temporary oversupply and lower prices. This bust phase usually lasts between 1-3 years before a price floor is found. We are clearly in the hypersupply/boom phase of the cycle now.

What’s also important to recognize is that every real estate market is at a slightly different phase of its housing cycle. Here’s a nice chart by John Burns Real Estate Consulting which names cities in each phase of the housing cycle.

Given I had three properties in San Francisco with $2,000,000 worth of leverage in 2017, I found it prudent to sell one property and reduce leverage by $815,000 since I feel San Francisco is in the “Maturing Exuberance” stage. Institutional investors have all but pulled out of the California housing market, leaving retail investors fighting for scraps.

Real estate investors can look at the chart above and rationally make an argument that it would be wise to shift exposure from late phase markets to early phase markets to earn more money and protect against downside risk. If you believe in such logic, then you should believe in my thesis of investing in the heartland of America and BURL: Buy Utility, Rent Luxury.

Buying At The Top Of The Market

Let’s say that despite all the signs that the real estate market is at risk of rolling over, you go ahead and buy property with leverage at the top of the cycle. What happens to your mind and to your money? I’ve got first hand experience since I bought my Lake Tahoe vacation property only one year after the peak.

1) You go in denial at first. You will always stand behind your decision to buy at the very beginning. Even if you see a neighboring home on the market sit for longer or drop their asking price, you will justify your purchase by saying your home has a better layout or nicer amenities. You will tell yourself that you bought your home for a better lifestyle first and foremost.

After about a year, the elation of owning your home fades a little bit. It’s similar to the fading elation of buying a new car with a loan. You are thrilled for the first six months, but that thrill dies down while the car payments stay the same. You’ll go online to see the valuation of imperfect comparable home sales to justify your purchase.

2) You begin to accept your mistake. Between 12 – 24 months, you start realizing that maybe you didn’t make the best purchase after all and start telling yourself, “In the long run, things will be fine,” in order to feel better. But the more you look at homes that sell for less, the more you beat yourself up about your purchase.

You start doing calculations on how much you could have saved on the downpayment or on the monthly cash flow if you had just been a little bit pickier or a little more patient. You look at the nicer homes you could have bought with what you paid and kick yourself a little bit. Finally, you tell yourself, “It’s just money at the end of the day.”

3) You start to think worst case scenarios. Due to leverage, a 10% decline in the value of your home is a 50% decline in your 20% downpayment. Just as the stock market can correct 10% in a month, the real estate market can easily correct 10% in a year. Once the momentum to sell begins in real estate, it starts getting scary, especially if you own a condo in a large building.

During a worst case scenario, you start calculating how long you can keep the house before you run out of savings if you lose your job. You also calculate how low the house can go before it no longer makes sense to keep paying the mortgage. During the worst stage of a correction, you may really begin to freak out because you will know friends who have been laid off. You start wondering when you’ll be next.

4) You start to cut out all excess fat from your budget. The great thing about being rational is that during difficult times, all extraneous expenses get slashed and savings rates go up. You might even try and get a second job or work a side hustle if you really start getting worried. Fear of financial ruin in 2009 is what got me to start Financial Samurai. I needed a cathartic outlet to release my fear. I needed something to do just in case I was one of the thousands of people who got fired from the finance industry that year.

During the financial crisis, I didn’t buy anything. I also hustled harder to build relationships with clients who were my only leverage to keeping my job. Instead of buying groceries, I took as many clients out for lunch and dinner to not only build better relationships, but save on food! Yes, I took leftovers home to feed my wife as well. My clients were also worried about losing their jobs and also wanted to save money. When you go through a crisis with someone and survive, your relationship thrives in good times.

5) You either stick with the game plan, or stick it to the bank. If things get really bad where you’re underwater on your home, you will need to make the crucial decision of either staying current on your mortgage or stop making payments. First, you must realize which states are non-recourse states so they don’t come after your other assets after you welch. By short-selling or foreclosing on your home, not only do you ruin your credit and dignity, you also hurt your neighbors who decided to keep paying.

But in America, it’s often every man and woman for himself. You can foreclose on your home like one financial pro did in 2011. He subsequently got hired by The New York Times to write about money advice and even wrote a book about how to improve your finances! This example is one of the reasons why I’m so bullish on America. It doesn’t matter what mistakes you’ve made or who you are, you can always come back.

Nothing Happens If You Decide To Keep Paying Your Mortgage

If you decide to keep paying your mortgage, then life goes on usually as planned. After all, real estate markets tend to recover over time, and few people go into buying the most expensive thing in their lifetimes without a long-term holding plan. The one thing you will run out of is time.

I bought my Lake Tahoe condo after a 12% correction in 2007. At the time, I thought it was nice to save $100,000 from the original purchase price. Little did I realize the value of my condo would plummet by an additional ~30% since so many of my neighbors decided to foreclose.

I felt like a real dummy buying the condo two years later. I started thinking how nice it would be to have an extra $150,000 in cash sitting in the bank. I felt so bad about my decision that I decided to become super frugal for the next five years, work extra hours in order to get promoted and paid, and start Financial Samurai as a potential way out.

More than 11 years later, I’m at peace with my decision to buy a third property as a delusional 29 year old who thought he couldn’t lose. Valuations have rebounded from the depths of despair, the mortgage balance is 40% lower, and the value of the condo has shrunk to a small portion of my net worth. There is also satisfaction that I didn’t welch on my debt.

Now, I cannot wait to take my little boy up to play in the snow. I cannot wait to show him how to jump in the lake off one of the public piers. I cannot wait to make roast marshmallows on an open fire after a rewarding hike. I cannot wait to tell him fun stories under the stars.

When his mother and I pass, I hope he has his own family to take up to the mountains one day. Maybe he’ll even have a picture of his parents on the mantle smiling and watching over him.

Related: Why Real Estate Will Always Be More Desirable Than Stocks

Readers, with the stock market stuck down 10%, what gives homebuyers the confidence to pay peak prices today? Have you ever bought property at or near the top of the market? What happened next?

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