Housing bubble The Sequel (Liquidity trap edition)

[Hugo Drax]

http://www.cnbc.com/id/100397644

Bottom line.
#1 too many people underwater cant sell existing home.
#2 too many people do not have enough equity without taking a bath if they sell.

#3 Employment is not a healthy market yet limiting mobility.
#4 Lots of foreigners scooping up homes for cash for rental/investment draining out the limited supply pool, driving up prices.

#5 not enough decent inventory due to (1-3) so those able to sell will not because they cannot find a home they want to move to.

 

[Jimzz]

"#4 Lots of foreigners scooping up homes for cash for rental/investment draining out the limited supply pool, driving up prices."

Where do you see that?

Also you can't measure housing at the national level, hell you can't even do it many times at the state level. Its all local. There are places where prices are still dropping and places where they are going up.

 

[Capt Caveman]

http://www.cnbc.com/id/100397644

Bottom line.
#1 too many people underwater cant sell existing home.
#2 too many people do not have enough equity without taking a bath if they sell.

#3 Employment is not a healthy market yet limiting mobility.
#4 Lots of foreigners scooping up homes for cash for rental/investment draining out the limited supply pool, driving up prices.

#5 not enough decent inventory due to (1-3) so those able to sell will not because they cannot find a home they want to move to.

Yet:

US home sales rose to 5-year high in 2012

 

[SunnyD]

From what I understand a lot of lenders are also simply holding on to foreclosed properties instead of auctioning them off because there's too much supply driving prices of foreclosed properties down.

Home builders in my area seem to have no problem putting new home after new home up right now, even if they aren't under contract at time of construction OR completion. There's a shitton of inventory on the market are ridiculous prices. It's a buyer's market right now, but yeah, for sellers it's pretty damn tough.

 

[Xonim]

Yet:

US home sales rose to 5-year high in 2012

We can thank our friends at Blackstone and similar investors for some of the run up.

Link

Somewhat related, someone not, I'm in the camp believing there's another bubble coming due to student loans and credit cards and such. With stagnant wages, stuff costing more, especially education costing more, it's unsustainable. That isn't going to help home prices in the long term, especially not the short and medium term.

 

[boomhower]

From what I understand a lot of lenders are also simply holding on to foreclosed properties instead of auctioning them off because there's too much supply driving prices of foreclosed properties down.

That is certainly true in my area. I live in a very distressed county. When I went looking I knew where a ton of foreclosed homes were I wanted to look at only to find out the banks were just sitting on them.

 

[PricklyPete]

Also you can't measure housing at the national level, hell you can't even do it many times at the state level. Its all local. There are places where prices are still dropping and places where they are going up.

So true. Doesn't mean there won't be a bubble at the macro level, but for individual buyers, the location is much more important.

 

[overst33r]

I think my area has been a victim of #4.

Too many investors paying cash for the asking price. I just put in an offer on a home above asking price because all the others ones I've been interested in are either gone in a couple days or sell for significantly above asking.

Prices are certainly higher here than they were last year.

Either way, if this is true on a larger scale. We are/will be in big trouble.

 

[thing1thing2]

The house prices will continue to stay high if the rental market and interest rates remain where they are at.

Investors has all the incentive to gobble up the properties, rent > mortgage and interest rates are super low. Even in Silicon Valley, return on investment is in the 15% range, granted this was in 2011 time. Now there's a huge shortage, people are even going to Sac and Anitoch to look for investment properties.

 

[s0me0nesmind1]

We can thank our friends at Blackstone and similar investors for some of the run up.

Link

Somewhat related, someone not, I'm in the camp believing there's another bubble coming due to student loans and credit cards and such. With stagnant wages, stuff costing more, especially education costing more, it's unsustainable. That isn't going to help home prices in the long term, especially not the short and medium term.

Perhaps we should hold the executives of banks / other corporations accountable instead of bailing them out? Such as Garnish the CEO / Other executive wages in order to pay for the mistakes to keep them alive.

 

[s0me0nesmind1]

Speaking of the Housing buble... Slightly off topic - but for the sake of learning my best options...

Currently me and my fiance have a home that is valued at ~$120k. It is currently paid down to ~$125k. It was bought in 2010, when the majority of the house buble had passed for approx $140k originally.

Ultimately, I don't like the house. She has had it since we first started dating. I'm not a fan of the house, I hate the neighborhood, and I would NEVER send my kids to the shit ass school district in the area.

1) Try to pay off as much as possible. Get the principle as low as possible. The more we get the principle down, the more we get out when we sell it? If so, how much?
2) Pay off the minimum - Keep as much cash as possible for down payment on our next home
3) Try to invest in the house in order to try to get it sold for more (or sold at all!). My fiancee wants to do stuuff like put in wood flooring and granite countertops. I look at stuff like that and think both are EXPENSIVE and dumb to put in if we're just going to leave it. Are those worth it? Are they too expensive if we're just going to leave within the next 2 years?

 

[uhohs]

"#4 Lots of foreigners scooping up homes for cash for rental/investment draining out the limited supply pool, driving up prices."

Where do you see that?

Also you can't measure housing at the national level, hell you can't even do it many times at the state level. Its all local. There are places where prices are still dropping and places where they are going up.

Southern California, Here in the LA area I've been seeing homes in "asian" areas going for 50k-100k over asking. It's nuts.

 

[Jimzz]

Southern California, Here in the LA area I've been seeing homes in "asian" areas going for 50k-100k over asking. It's nuts.

And as I said that sounds more local thing, not national or "the foreiners are takign our houzz'z..." either.

 

[nehalem256]

Speaking of the Housing buble... Slightly off topic - but for the sake of learning my best options...

Currently me and my fiance have a home that is valued at ~$120k. It is currently paid down to ~$125k. It was bought in 2010, when the majority of the house buble had passed for approx $140k originally.

Ultimately, I don't like the house. She has had it since we first started dating. I'm not a fan of the house, I hate the neighborhood, and I would NEVER send my kids to the shit ass school district in the area.

1) Try to pay off as much as possible. Get the principle as low as possible. The more we get the principle down, the more we get out when we sell it? If so, how much?
2) Pay off the minimum - Keep as much cash as possible for down payment on our next home
3) Try to invest in the house in order to try to get it sold for more (or sold at all!). My fiancee wants to do stuuff like put in wood flooring and granite countertops. I look at stuff like that and think both are EXPENSIVE and dumb to put in if we're just going to leave it. Are those worth it? Are they too expensive if we're just going to leave within the next 2 years?

Well if you live in a state where lenders cannot come after you for value beyond what the house is worth I would think the optimal solution would be to have your fiance stop paying the mortgage and then live their rent free for the next 2 years.

Then you use the saved money as a down payment on a new house using only your credit. And after purchasing the new house get married.

 

[uhohs]

And as I said that sounds more local thing, not national or "the foreiners are takign our houzz'z..." either.

many of the buyers here are wealthy chinese from overseas but yeah, it's only really happening in a few markets/areas and not a nationwide thing.

 

[Colt45]

Yeah.. you can't extrapolate from foreign ownership on the west cost.

I'm guessing there are considerably fewer foreigners buying up dirt in arkansas.

 

[Tommy2000GT]

I'm getting discouraged looking at houses in the Bay Area because of #4. All of the Chinese people with illegal business money buying everything up with $100k over asking.

 

[randomrogue]

I'm getting discouraged looking at houses in the Bay Area because of #4. All of the Chinese people with illegal business money buying everything up with $100k over asking.

The dollar is really weak. As we drive our dollar into the ground foreigners will come over and go shopping.

 

[s0me0nesmind1]

Well if you live in a state where lenders cannot come after you for value beyond what the house is worth I would think the optimal solution would be to have your fiance stop paying the mortgage and then live their rent free for the next 2 years.

Then you use the saved money as a down payment on a new house using only your credit. And after purchasing the new house get married.

In Texas - so not sure which side that plays on.

But either way, we are at (or nearly) out of the bubble, so I really don't see that as reasonable - especially if house pricing starts to rise again... or even if it stays stagnant.

 

[Corporate Thug]

We can thank our friends at Blackstone and similar investors for some of the run up.

Link

Somewhat related, someone not, I'm in the camp believing there's another bubble coming due to student loans and credit cards and such. With stagnant wages, stuff costing more, especially education costing more, it's unsustainable. That isn't going to help home prices in the long term, especially not the short and medium term.

Some argue that the student loan bubble has either burst or is on the brink:

http://seekingalpha.com/article/1105261-student-debt-a-trillion-dollar-bubble


I tend to agree.

 

[s0me0nesmind1]

Some argue that the student loan bubble has either burst or is on the brink:

http://seekingalpha.com/article/1105261-student-debt-a-trillion-dollar-bubble


I tend to agree.

It was destined to explode when you leave it up to dumbasses to decide for themselves that a retard bachelor degree won't get them a job.

What? You mean to say there is no jobs for my bachelors in video game playing? WTF IS THIS! I BLAME THE GOVERNMENT! Sorry, but if you're going to take loans that us tax payers will pay for - the very least is that we should be able to decide if what you are doing with it is stupid or not.

 

[Xonim]

Some argue that the student loan bubble has either burst or is on the brink:

http://seekingalpha.com/article/1105261-student-debt-a-trillion-dollar-bubble


I tend to agree.

I don't think it's burst just yet, but we're getting there. The problem is, unlike mortgages, you can't just walk away from student loans. They follow you, as do the collections agencies and wage garnishments.

His last paragraph I think is pretty accurate:

Rising delinquency rates should serve as the proverbial canary in the coal mine and indeed suggest that this is no more of a far-off problem than the subprime crisis was in 2007. This is perhaps the best reason of all to bet against the U.S. economy in 2013 and steer clear of U.S. equities in general (SPY) (QQQ). A crippled consumer equals crippled consumption, hobbled corporate profits, and a sluggish economic environment. Investors should also be particularly wary of private student-loan originators like Sallie Mae (SLM).

 

[cheezy321]

Tons of Canadians are buying houses in Phoenix.

Blackstone is buying and investing in tons of rental properties in Phx thru the Treehouse Group.

Link: http://www.arizonalease.com/

As for my neighborhood of ~125 houses there are zero for sale. About 15 have sold in the last 9 months. Inventory is definitely down.

 

[soulcougher73]

Speaking of the Housing buble... Slightly off topic - but for the sake of learning my best options...

Currently me and my fiance have a home that is valued at ~$120k. It is currently paid down to ~$125k. It was bought in 2010, when the majority of the house buble had passed for approx $140k originally.

Ultimately, I don't like the house. She has had it since we first started dating. I'm not a fan of the house, I hate the neighborhood, and I would NEVER send my kids to the shit ass school district in the area.

1) Try to pay off as much as possible. Get the principle as low as possible. The more we get the principle down, the more we get out when we sell it? If so, how much?
2) Pay off the minimum - Keep as much cash as possible for down payment on our next home
3) Try to invest in the house in order to try to get it sold for more (or sold at all!). My fiancee wants to do stuuff like put in wood flooring and granite countertops. I look at stuff like that and think both are EXPENSIVE and dumb to put in if we're just going to leave it. Are those worth it? Are they too expensive if we're just going to leave within the next 2 years?

Or just walk away and take the small credit hit from the foreclosure which will bounce back in about 2 years assuming you dont let all your other credit default, etc.

Its the most financially smart move and lots of people are doing it including myself. We bought our house for $185k about 3 years ago. VA loan so the cost were rolled into the loan which was for like $189k total. We currently owe $182k and our house when went to try and sell was worth about $160k. So about 22k upside down plus if used a realtor you got their 6% etc you have to come up with in cash. Cant take a loan to cover that amount is what i found out.

So we just stopped paying last August. Still living there currently and saving the money for when we are forced to move out. But we still pay all our other debts. Cars, bills etc. So our credit score in the end wont be hit too bad, not that i care about that anyways. Could be 0 Credit score and i wouldnt care. But thats me lol.

 

[Hugo Drax]

And as I said that sounds more local thing, not national or "the foreiners are takign our houzz'z..." either.

Foreign investors are not interested in buying a home in Bumfuck texas out in the boondocks.