Another damn housing bubble

[Londo_Jowo]

In a 15 miles radius of where I live the housing market is booming, in the neighborhood where I and the 3 adjacent subdivisions at least 55 to 60 houses have been built this year.

 

[PingSpike]

I don't know how its been in other places, but around here your average 3 bedroom family home of basic construction seemed to simply stop appreciating during the down times. It didn't really go down. What did take a dump was fancy houses, out of state owners second homes, lake front properties, fancy custom build monstrosities and the restored and updated old classic homes like you'd see on this old house minus the location. Stuff really rich people would buy, often as a luxury second home, is what took a dive in sales and price. Most local people were never in the market for those homes at 1 million, still weren't at 750K and still weren't at 500K. That seems to be reflected in the average sale price going down but when I look at the kind of homes I would buy there didn't seem to be a massive difference. What did seem different is poorly maintained shit holes in this class of house stopped moving and started having asking prices that made more sense. I'm not sure many of them sold during the boom once people saw how poor of shape they were in but they usually had asking prices that made no sense.

That said, we looked at one house that had an amazing location with great schools. But the driveway was some kind of nightmare that made me wonder how they even built the house 30 years ago and the house itself had obvious had no work done on it ever and felt like a creepy crap pit when you went inside. That said, some one bought that house a couple years ago...bulldozed the whole fucking thing and built an entirely new driveway for his new replacement home built on the lot!

 

[Capt Caveman]

Bay Area prices have gone up by about 20% from last year. Inventory is down by 50%.

Are you sure it costs more to build than to buy?

This is why you don't understand what you post and it shows in many of you threads. You think the land to build on is cheap or free?

In high demands areas where there is no or very limited open space to build on, the land(not the house) is what costs so much. In these areas, new housing comes out of buying an existing property, knocking it down and building a larger unit or multiple units on that same plot of land.

In my city, I've come across homes that go for over $500k but the house is in such disrepair, it would need to be gutted or it's better just to knock it down and build a new home on the land.

 

[Darwin333]

Housing prices can't fall much lower. Around here, houses are selling for less than production cost. I'm a general contractor and I can't build a house as cheap as I can buy one.

If we are talking "average" houses then you are building to expensive of houses (I know, its what the market wanted and all). The bottom line is the average house must fall to a price point that the average buyer can afford without playing bullshit games with the financing. Current house prices are nowhere near that.

 

[Pulsar]

Who cares?

The only people who worry about this sort of thing are the ones who speculate in the market. People who are buying a home to live in it don't sit and agonize over whether the market is in a bubble or not. They buy a friggen house in move in.

Guessing at what 'might' happen is just that. Even some of the smartest investors in the country got beaten to a pulp in the last housing market crash. Sure, you can point to a couple anecdotal cases of investors doing well, but the investment market is a gamble, and the majority of people get burned. If they didn't, investing would be easy. It isn't.

So the OP is a shill, or clueless, but either way he's just a tool.

 

[gevorg]

Real Estate is brutal in Bay Area. Inventory in San Francisco is extremely low, hence the double percentage jumps in prices. Also, many overseas buyers are here who overbid each other with cash offers.

In my city, I've come across homes that go for over $500k but the house is in such disrepair, it would need to be gutted or it's better just to knock it down and build a new home on the land.

Not that easy in cities like SF with attached homes and a myriad of regulations and approvals to go through. Only an earthquake can flush out all the old homes and ignite a "re-build boom".

 

[Capt Caveman]

Real Estate is brutal in Bay Area. Inventory in San Francisco is extremely low, hence the double percentage jumps in prices. Also, many overseas buyers are here who overbid each other with cash offers.



Not that easy in cities like SF with attached homes and a myriad of regulations and approvals to go through. Only an earthquake can flush out all the old homes and ignite a "re-build boom".

Well, you end-up with a lot of gut/renovation jobs of the existing houses in a city like SF.

 

[Greenman]

Who cares?

The only people who worry about this sort of thing are the ones who speculate in the market. People who are buying a home to live in it don't sit and agonize over whether the market is in a bubble or not. They buy a friggen house in move in.

Guessing at what 'might' happen is just that. Even some of the smartest investors in the country got beaten to a pulp in the last housing market crash. Sure, you can point to a couple anecdotal cases of investors doing well, but the investment market is a gamble, and the majority of people get burned. If they didn't, investing would be easy. It isn't.

So the OP is a shill, or clueless, but either way he's just a tool.

Anyone with a brain cares. There is serious money to be made speculating on real estate, and you can do it all with borrowed money. What's not to love?

 

[Bitek]

I think another Important fact is that existing homeowners have had 4 years now to save up the money they lost in equity when the market crashed. They may not of had the savings to move in 2009, but now the money is there to take advantage of the deals.

 

[Jhhnn]

Citing Bay Area prices doesn't relate to the rest of the country at all. It might as well be a different planet.

Actual trends-

http://www.aboutinflation.com/gloss...estate-index-long-term-chart-ca-san-francisco

I'm not seeing this "bubble"...

 

[Doppel]

Who cares?

The only people who worry about this sort of thing are the ones who speculate in the market. People who are buying a home to live in it don't sit and agonize over whether the market is in a bubble or not. They buy a friggen house in move in.

Guessing at what 'might' happen is just that. Even some of the smartest investors in the country got beaten to a pulp in the last housing market crash. Sure, you can point to a couple anecdotal cases of investors doing well, but the investment market is a gamble, and the majority of people get burned. If they didn't, investing would be easy. It isn't.

So the OP is a shill, or clueless, but either way he's just a tool.

A lot of people who didn't care are now tens of thousands of dollars or more underwater in their house because they bought during a bubble. So, now they cannot move and won't have equity for many years. It's important and not just to investors.

 

[Jhhnn]

A lot of people who didn't care are now tens of thousands of dollars or more underwater in their house because they bought during a bubble. So, now they cannot move and won't have equity for many years. It's important and not just to investors.

Too true. While not necessarily a good investment, home ownership equity has traditionally acted as a store of value, a cushion against personal misfortune. It has also enabled greater mobility wrt employment opportunities. People who could often borrowed against it to send their children to college, let them begin their own lives debt free.

Lots of people who put 20% down at the height of the bubble are still underwater, and will likely remain so for some while. Had they just burned their money, at least they'd have kept the Banksters from getting it...

It's only the stoic integrity of the middle class that has prevented cascading strategic defaults. In their position, the Donald would have flipped it belly up long ago.

 

[Fern]

I see no real evidence of any housing bubble.

Nationwide, I'm seeing an average price increase of 3%. Yeah, in some places more, in others much less.

Lending requirements are currently steep, and too many unemployed to make any housing bubble IMO.

Fern

 

[mikegg]

I see no real evidence of any housing bubble.

Nationwide, I'm seeing an average price increase of 3%. Yeah, in some places more, in others much less.

Lending requirements are currently steep, and too many unemployed to make any housing bubble IMO.

Fern

http://ochousingnews.com/news/bernanke-pledges-to-do-what-he-can-to-reflate-the-housing-bubble

Back in September, Bernanke pledged to buy $40 billion in mortgage-backed securities each month for as long as it takes for housing to fully recover. With an unlimited pledge to provide stimulus, any concerns about a decline in prices was washed away.

What does he mean to fully recover? Go back to 2008 prices?

In 2015, when we have to increase our interest rates, we'll see prices come crashing back to 2011 low.

Bernanke will continue to stimulate housing for the benefit of the member banks of the federal reserve until he is either removed from his post, or house prices reflate back to peak levels so lenders can finally foreclose on the squatters without losing money. I expect to see interest rates continue to fall, and house prices continue to go up. Bernanke will reflate the housing bubble, along with its commensurate problems, to solve the problems created by the last housing bubble. The last vestiges of a free market are quickly fading from memory. We are embarking on a new era of government-controlled housing.

Banks are not foreclosing houses from the last bubble because they'd lose too much money. Once we reach the last bubble's prices, we'll be in another bubble.

 

[lotus503]

Around here near Portland Oregon, prices took a 20-30% hit.

Currently houses in good areas are getting snatch up and they are moving.

I have two rentals currently and have positive cash flow putting %20 down.

I think in my area anyways we have hit bottom and are back to RE tracking about 3% a year.

 

[OverVolt]

The scoop is this:

- foreign investors with no investments in their home country invest here because of...

- QE3 buying $40billion or so monthly in MBS

- The foreign investors think they can't lose out

- Also there is money coming into housing to close the gap between renting and buying, especially with low interest mortgages.

-The 'recovery' affects only some local markets (the foreign investors just google the market they want to buy, basically) so one area can be at 2005 peak prices and a 4 hour drive puts you in a globally little-known neighborhood with crashed prices. Foreign investors aren't going to pull up middle of nowhere Smith mountain lake VA, they tend to buy properties around corporate HQ's and middle-upper class metropolitan areas.

 

[CycloWizard]

The housing market is now horribly inefficient. Try applying for a non-FHA mortgage today and give me a call in 5-6 months when the paperwork goes through. Couple that inefficiency with a growing population and decreased rate of new home construction for the past five years and prices go up.

 

[mikegg]

The scoop is this:

- foreign investors with no investments in their home country invest here because of...

- QE3 buying $40billion or so monthly in MBS

- The foreign investors think they can't lose out

- Also there is money coming into housing to close the gap between renting and buying, especially with low interest mortgages.

-The 'recovery' affects only some local markets (the foreign investors just google the market they want to buy, basically) so one area can be at 2005 peak prices and a 4 hour drive puts you in a globally little-known neighborhood with crashed prices. Foreign investors aren't going to pull up middle of nowhere Smith mountain lake VA, they tend to buy properties around corporate HQ's and middle-upper class metropolitan areas.

Don't forget modified loans - 25% of which go back to default within 1 year. Banks have no incentives to foreclose on squatters right now so they are letting millions of people live for free. Banks are hoping that the prices will rise enough so they don't have to foreclose.

The government is doing its best to try to increase home prices back to 2008 level by using tax payer money. The government is just kicking the can. We'll see another crash when interest rates have to go back up.

 

[mikegg]

The housing market is now horribly inefficient. Try applying for a non-FHA mortgage today and give me a call in 5-6 months when the paperwork goes through. Couple that inefficiency with a growing population and decreased rate of new home construction for the past five years and prices go up.

Has nothing to do with loans. There are multiple offers on every house here in California. Inventory is at an all time low. That's the problem.

 

[CycloWizard]

Has nothing to do with loans. There are multiple offers on every house here in California. Inventory is at an all time low. That's the problem.

It is a factor because the rate of inventory generation (i.e. new home building) is artificially deflated due to difficulties funding the build. My in-laws are building a new home that costs less than 50% of one years' pay and have virtually perfect credit. It took them over 6 months to get the loan approved. This will cause inventory to stay low for a long time to come.

 

[soulcougher73]

I dont understand why the gov would want to help increase prices back to 2008 levels. That was part of the problem. We need a real super crash bringing average priced home within buying distance of most americans.

 

[mikegg]

I dont understand why the gov would want to help increase prices back to 2008 levels. That was part of the problem. We need a real super crash bringing average priced home within buying distance of most americans.

Because they want to create an illusion that the economy is recovering. It's not. It's recovering at the cost of inflation.

I find it funny how newspapers cheer that housing is "recovering" because prices are increasing. Housing NEEDs to bottom out so we can begin the real recovery. Housing isn't recovering. The government is just covering it up by dumping $40 billion into it every month.

These interest rates will not last. At 3.5 percent, you can't make any money because of inflation. When it needs to go back up to 5% or 6%, then what? Housing prices come crashing down again? And anyone that bought homes at 3.5% interest rates will be underwater? Ridiculous.