Another way is to look at inflation. My rent has gone up 38% since I moved to my neighborhood years ago. In the same time real estate has gone up almost 100%. You could say that rental prices are a true reflection of the supply and demand for housing, while anything beyond that is pure speculation. I heard the rental market in San Fran is soft, but it's been that way for years while real estate keeps growing.
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Is there a housing bubble?
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Well, jlmadyson, the first rule is to not get in over your head. Lenders and agents will attempt to get you to buy more house than you can really afford. Well, maybe you can, if all you want to do is stay home, sit on old furniture, drive old cars, fuss over every nickel and dime...
The other thing is to look very hard at 20 or even 15 year mortgages, if you can swing it. Maybe that sounds contradictory, it's not. Long term savings from lower rates and less total interest on shorter term loans is astounding, and you'll probably never be able to refi at rates lower than today's... It also insures that you'll have real equity, not speculative equity, a lot sooner, just in case you need or want to make use of it... Debt-free Real Estate is an extremely valuable asset, in any market... and something that middle class people can still have, if they're smart...
The other thing is to look very hard at 20 or even 15 year mortgages, if you can swing it. Maybe that sounds contradictory, it's not. Long term savings from lower rates and less total interest on shorter term loans is astounding, and you'll probably never be able to refi at rates lower than today's... It also insures that you'll have real equity, not speculative equity, a lot sooner, just in case you need or want to make use of it... Debt-free Real Estate is an extremely valuable asset, in any market... and something that middle class people can still have, if they're smart...
dullard
Elite Member
Averave home prices falling
If it is a bubble, the bubble won't suddenly pop. It would be slow, gradual, and gentile in my opinion.
Sure this may be a one time blip on the radar. Are prices just leveling off for a while? Or as I suspect, is the bubble beginning to slightly deflate?
If it is a bubble, the bubble won't suddenly pop. It would be slow, gradual, and gentile in my opinion.
chowderhead
Platinum Member
Greenspan made the famous "Irrational Exuberance" speech regarding the stock market in 1996. It took 3-4 years before the market corrected itself. FW thread on the bubble has been going on for 1 and 1/2 years now. I think we may be at the cusp of the bubble but I will disagree with you regarding the SF and NYC. SF and the coasts are being infused with immigrants and foreign-born buyers who have cheaper dollars. This may dry up but right now, the market is hot and the supply is limited. You also have a phenomon of people staying put in their houses and not selling because they are afraid they cannot afford to upgrade. NYC is completely different market because of the strong influence of coops boards which can help prop up prices by artifically limiting supply. Plus, the vast vast majority of buyers in these two areas are buyers who intend to live there and not speculators. Florida on the other hand is prime for a drop as in many markets, a large % is bought by speculators.
I wil agree with others that prices will begin to level off in many regions. But it will be interesting! to see what happens in a couple of years when all the IO loans adjusts.
Stunt
Diamond Member
When prices for homes rise what happens is a lot of the Middle Class Tax Payers move to another location. The problem is that their jobs often remain in the same location and you have problems with air pollution and road gridlock around large cities. I think what this does is it allows for the people to move and create a kind of release valve.
I think people with fixed Interest rates will have no problems at all. A real housing crisis can only be caused by a major change in our economy for the worse brought on by High Interest Rates. The inerest rates are the key. If we can control the interest rates even in times of economic slow down like we have gone through we can experience a housing boon. If statistics are right more people own their own house now than ever before. Personally, I think I would rather own an apartment, so I dont have to pay for the upkeep of the grounds.
If you are buying a house dont just visit a house during the day when everyone is working or at school, go there in the evening and see what the neighbors are like. Is there a park nearby? Do thugs drug dealers or Homosexuals frequent the park? The neighborhood is as important as the price of the house. Depends what you can live with. It is scary buying a house and no matter what you do unexpected expenses will crop up. You might need a new water heater, Pipes, Gas Lines, tree service, lawn care, and other things. Housing is just one expense, upkeep should be part of the big picture and included in your budget.
Sometimes I feel like I am a slave to the upkeep of my house. So dont buy more house than you need, smaller more well built homes with good insulation, good windows, and good plumbing are better than large houses with all the extra cleaning and upkeep they will need.
I think people with fixed Interest rates will have no problems at all. A real housing crisis can only be caused by a major change in our economy for the worse brought on by High Interest Rates. The inerest rates are the key. If we can control the interest rates even in times of economic slow down like we have gone through we can experience a housing boon. If statistics are right more people own their own house now than ever before. Personally, I think I would rather own an apartment, so I dont have to pay for the upkeep of the grounds.
If you are buying a house dont just visit a house during the day when everyone is working or at school, go there in the evening and see what the neighbors are like. Is there a park nearby? Do thugs drug dealers or Homosexuals frequent the park? The neighborhood is as important as the price of the house. Depends what you can live with. It is scary buying a house and no matter what you do unexpected expenses will crop up. You might need a new water heater, Pipes, Gas Lines, tree service, lawn care, and other things. Housing is just one expense, upkeep should be part of the big picture and included in your budget.
Sometimes I feel like I am a slave to the upkeep of my house. So dont buy more house than you need, smaller more well built homes with good insulation, good windows, and good plumbing are better than large houses with all the extra cleaning and upkeep they will need.
Japan hasn't recovered from their bubble bursting, it's been 10 years too.
This thread is looking mainly at residential housing as being the issue, in Japan it was the financing done on property by corporations that caused the immense bubble and subsequent crash. This money was not used in Japan, but rather for investment in manufacturing plants all through Asia and indeed in America. In a bubble that size it isn't merely investors that take a hit, the Japanese banking system is a total wasteland at the moment.
Things I am concerned about;
Overpriced real estate, combined with overpriced stocks and large trade/foreign debt. That alone is cause for pause. Throw in that mix the fact that the current attempts at stimulating the economy are not going to address any of these issues. You have super low interest rates and lowered taxes. On the part of your average earner, they will most likely invest this extra money(that they don't spend) in property or stocks. On the part of Corporations at present they will use that to build a factory in China(Microsoft) or set up a call centre in India. All these factors are so reminiscent of the Japanese situation in the late 80's. Their stocks are still well below the levels they were at back then. Yes housing in Tokyo is still expensive relative to some places in the world, but it too hasn't reached near the levels of that time.
Australia is in a similar position. We have the highest housing price/earnings ratio in the world. Kind of ironic for the country that is the least densely populated. I live on the Gold Coast on the Eastern seaboard. I can look out my apartment window and see(as I type this) another 7 new towers being constructed for residential living. There was a speculative bubble that burst here in the 80's. Now it is happening again. There is no new industry here, people are moving here for a lifestyle. That happened last time too, and eventually it burst because services and infrastructure never grows as quick as a market fed by rabid dogs.
Our only saving grace in Australia is a Government that is fiscally responsible, and has managed to secure increasingly close economic ties to the new booming economies in Asia. We will still feel the effects of a U.S led depression in the globalised economy.
1. Big cities were formed initially because that was where the work was e.g. Detroit, Pittsburgh(sp). The current and future economy will require less and less need to be all gathered in one place. That being said, no doubt places like Manhattan will always hold a high value due to the prestige of having corporate HQ there among many other factors. To successfully guage where your bubble will burst first and or not burst at all, you have to look at which areas are likely to be hit by either a mass exodus of Jobs or people. Places like SoCal while they may look ridiculously inflated, the demand is always going to be there. A correction or adjustment could happen, but it will always rebound due to the massive demand likely to always be there for that location.
2.There is funds you can invest in for real estate, but the only way I know to short sell is to just get TF out, which I did. I'm currently looking at other areas of the country that haven't been on such a bull run, to re-invest. But here in Aussie it seems to me things are significantly overpriced all over. I'm just as likely to find it snowing on Christmas morning as I am to find a property that I can gear positively, where rental income will exceed my expenses and mortgage payments.
imported_Condor
Diamond Member
I think there is a bubble. That is tempered by the fact that housing is very expensive in all of the world?s largest cities. It seems a global issue. Price is based on demand and demand is based on population. It may be that the lower cost areas are just under exploited and this isn't a bubble, but a fragmented reflection of reality and housing costs will eventually increase in all markets. Japan can be looked at as a predictor as the population there is large in ratio to land mass and individual income is good. This is an issue that is also distorted to a degree by the availability of interest only mortgages that allow the optimistic to think that they can afford more than their budget will actually support. Increase in interest rates are on the increase and I think that will crive the bursting of the bubble.
Oh there is one, a big big bad one, at least in iceland
Here is a chart that shows the rise of the prices, 100 is the base, was 100 in 1994, over 266 now.
http://www.fmr.is/chartfx2/visitala_stor.aspx
Here is a chart that shows the rise of the prices, 100 is the base, was 100 in 1994, over 266 now.
http://www.fmr.is/chartfx2/visitala_stor.aspx
dmcowen674
No Lifer
Signs of Housing Market about to crash:
8-8-2005 All Eyes on Home Market in San Diego
SAN DIEGO ? When the housing market here was red-hot 18 months ago, Alex Flores could buy a downtown condominium with as little as $5,000 down and sell it six months later for a tidy profit of $200,000.
Such a shock could come from a wave of job losses.
Alan Gin, an economics professor at UC San Diego, said a crash is unlikely, predicting that the region will continue to create jobs at a healthy pace, which will support demand for housing.
Still, he said, many new jobs are in the lower-wage category.
===================================================
Bahahaha all those jobs at Wally World and McD's is going to crash San Diego and other parts of the Country. :laugh: :thumbsup:
8-8-2005 All Eyes on Home Market in San Diego
SAN DIEGO ? When the housing market here was red-hot 18 months ago, Alex Flores could buy a downtown condominium with as little as $5,000 down and sell it six months later for a tidy profit of $200,000.
Such a shock could come from a wave of job losses.
Alan Gin, an economics professor at UC San Diego, said a crash is unlikely, predicting that the region will continue to create jobs at a healthy pace, which will support demand for housing.
Still, he said, many new jobs are in the lower-wage category.
===================================================
Bahahaha all those jobs at Wally World and McD's is going to crash San Diego and other parts of the Country. :laugh: :thumbsup:
dmcowen674
No Lifer
Nope, try reading the whole thing.
The building was based on speculation that never happened.
Biotech??? Bahahahahah , come on, this is the U.S., Science is no longer praticed here.
Healthcare??? Bahahahahah , come on, that's only for the rich.
Defense??? What is made in San Diego defense related? I know there is a massive Naval base so there would be service jobs but that's about it.
Anyone in San Diego? Chime in and explain, Boom or Bust there?
BoberFett
Lifer
Yep, this here internet we have the forum on doesn't really exist. There's a little magical gnome inside your computer that puts the words on the screen. :roll:
I thought roughly 80% of the population has health insurance. So you're admitting that 80% of Americans are rich? Things must not be as bad as you're always claiming if 80% of Americans are rich.[/quote]You're a tool Dave. I regret ever sending you a dime for your defense. If I'd know what a loser you were going to become I'd have sent the money to the prosecutor instead.
Engineer
Elite Member
You're a tool Dave. I regret ever sending you a dime for your defense. If I'd know what a loser you were going to become I'd have sent the money to the prosecutor instead.[/quote]
:thumbsdown:
Let an innocent man go to jail for "hacking" when it clearly wasn't regardless of whether you agree with his political affiliation or not. Shameful, just shameful. It would be one thing to not send money, but to suggest that you should have donated to the prosecution on the RC5 scenario is simply shameful. Very 🙁
BoberFett
Lifer
It has nothing to do with his political affiliation. I disagree with plenty of people in this forum and would hate to see them locked up. But Dave has taken paranoia and dishonesty to levels politicians can look up to. Ideally he belongs in a psych ward with no access to newspapers or the internet.
Supply fixed. Demand increases.
However, regional bubbles may exist. People may say omg 2bed 1500 sq house in LA built in 1950 is $800,000 bubble wtfbbq. However, you try looking for a seller who's willing to sell for less than that. Heck, let alone look for a 2bed house in a desireable area i.e. West LA. Is it really a bubble when a married couple professional in LA making combined $250K buys a million dollar house? No. Is it a bubble when a loaded ass speculator/real estate investor who's seeking to amass his portfolio pays $800k for a 2 bed house? No, because he just won't sell it; he'll keep it for 30 years.
Bubble? Maybe in the crazy condo market, but nationally i doubt prices will tick down by much if it even does. Heck 2 years ago people were shouting bubble...2 years later market is up 40%.
However, regional bubbles may exist. People may say omg 2bed 1500 sq house in LA built in 1950 is $800,000 bubble wtfbbq. However, you try looking for a seller who's willing to sell for less than that. Heck, let alone look for a 2bed house in a desireable area i.e. West LA. Is it really a bubble when a married couple professional in LA making combined $250K buys a million dollar house? No. Is it a bubble when a loaded ass speculator/real estate investor who's seeking to amass his portfolio pays $800k for a 2 bed house? No, because he just won't sell it; he'll keep it for 30 years.
Bubble? Maybe in the crazy condo market, but nationally i doubt prices will tick down by much if it even does. Heck 2 years ago people were shouting bubble...2 years later market is up 40%.
dmcowen674
No Lifer
You're a tool Dave.
I regret ever sending you a dime for your defense.
If I'd know what a loser you were going to become I'd have sent the money to the prosecutor instead.[/quote]
I may be a tool and a loser but I made you and others look twice at the issues.
That's a whole lot more than you can say about sitting politicians.
dmcowen674
No Lifer
Awwww thank you, such love.
I sat in jail with a Poltician that murdered his predecessor. He would glady trade places with me and/or go to a psych ward rather than prison.
Todd33
Diamond Member
Interest only are good for getting into a house you cannot afford with a 30 year fixed. We used one when we were just ramping up in salaries, just out of school. We then refinanced into a 30 year fixed later.
As for the bubble, ya it will pop soon. Interest rate will go up and demand will dive. Prices will stagnate and maybe drop. I think like 50% of CA's economy is supported by the housing boom, it won't last for long.
As for the bubble, ya it will pop soon. Interest rate will go up and demand will dive. Prices will stagnate and maybe drop. I think like 50% of CA's economy is supported by the housing boom, it won't last for long.
Personally I dont see what the big deal is.
The market will fix itself.
Some people will sort of lose money because thier home will be worth less.
I doubt I will because the house I live in only costs about $40k, then again I'm not trying to make money off of my home, its a place to live, not an investment.
The market will fix itself.
Some people will sort of lose money because thier home will be worth less.
I doubt I will because the house I live in only costs about $40k, then again I'm not trying to make money off of my home, its a place to live, not an investment.
Starbuck1975
Lifer
Perhaps, but how many households have a combined income of 250k? Not everyone in the southern California area is making six figures, yet the houses in what should be middle class suburban neighborhoods are selling for 800k.
Greed has a lot to do with it...the age of high risk, interest only and negative amortization loans, with people going into homes with the intent of flipping them for a huge profit...nothing wrong with that, except for the herd mentality of making a quick million off the real estate boom...you have many households who are now approaching the point in their high risk loans where they can no longer afford their payments...we are already starting to see a trend of 800k houses in desirable neighborhoods sitting on the market for weeks...if this trend continues, it could cause a panic for people who went into these homes with the intent of selling for profit.
I can understand 800k or $1M for beach front or ocean view homes along the coast...beachfront property is always prime...but the inland suburbs of Southern California...homes in those areas should be in the 500k range...not 800k and above.
Then there is also the snob effect of Southern California...these pre-planned communities of cookie cutter houses, with the added "bonus" of having to pay membership fees so that everyone can have perfectly landscaped lawns...want to paint your house a different color??? The Stepford Wives of southern California would never allow it!!!
I live in So Cal now, but I would never buy real estate at these prices...800k for a starter home, built right on top of the homes surrounding it...no thank you...I have gained a whole new appreciation for the Tool song "Aenema" after living in Southern California for a year.
The big deal is that a lot of the increase in consumer spending comes from people refinancing their homes. The savings rate is zero, that affects everyone, because when people can no longer buy at the rate, it's recession time.
Of course the market will fix itself, but the longer the bubble builds, the greater the burst will be. The point of discussing it is to warn people to be wary of the housing market, and start saving in case of a burst of the possible bubble.
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