reading about the real estate bubble

[Scarpozzi]

So what....if you are buying a house, it should all even out. If you already bought a house, you're making payments...it doesn't really affect you. Just don't worry about it and don't buy into real estate as a short term investment and you'll be fine.

 

[kranky]

That said I don't think anyone is losing their as$ that's living in the homes or renting them

Go back and see the example where in some SoCal areas the average home price is 10 times the average salary. The only way most people can qualify to buy a home is with a interest-only adjustable-rate mortgage.

When the average home price is 10x the average salary, something has to give. Either the wages skyrocket (not going to happen), people build new homes for half or less of the going rate (ditto), or home prices drop.

If someone with a $700K mortgage has their home value drop by just 5%, that's a $35,000 loss. They have no equity since they are paying only the interest. If they want to move, they have to eat that loss. Or what if their ARM rate increases? So what's going to happen at the first sign of a drop in prices or rate increases? Massive selling by the people with their interest-only mortgages. They can't afford to see if the $35,000 loss turns into $70,000 or more if prices decline further. That's only going to make things worse. If people had been putting down 20% and accumulating equity with their fixed-rate mortgage payments, they could afford to ride things out.

Renting is probably a wise idea if it can be done affordably. But I don't see how the owners can offer affordable rental rates with housing prices so high.

 

[Kipper]

Originally posted by: Scarpozzi
So what....if you are buying a house, it should all even out. If you already bought a house, you're making payments...it doesn't really affect you. Just don't worry about it and don't buy into real estate as a short term investment and you'll be fine.

The real problem with the bubble is people have been using their houses like ATMs, using their value to borrow against. When their house values tank, well...

 

[HomeBrewerDude]

I seriously doubt that there is a bubble. Prices may adjust in some markets, declining 5-10%, but that nothing that wouldn't be made up for the next time the market gets strong again.

 

[Pliablemoose]

Unless a crapload of idiots finance through interest only notes, real estate corrections should be regional...

Has anyone noticed the decrease in stock investment threads and the increase in real estate threads?

 

[kranky]

Originally posted by: HomeBrewerDude
I seriously doubt that there is a bubble. Prices may adjust in some markets, declining 5-10%, but that nothing that wouldn't be made up for the next time the market gets strong again.

I agree that the decline may only be 5-10% but with prices so high, that is going to ruin people. The people who lose a job and have to relocate can't ride out the dip. And in SoCal, a lot of tech jobs are going overseas and aren't coming back.

 

[getbush]

Originally posted by: Pliablemoose
Unless a crapload of idiots finance through interest only notes, real estate corrections should be regional...

Has anyone noticed the decrease in stock investment threads and the increase in real estate threads?

There is another thread about how 66% of new loans are interest-only in the Bay Area. So, that place should be exciting to watch in the not so distant future. But ya nationally it won't have much affect at all.

 

[Kipper]

Originally posted by: HomeBrewerDude
I seriously doubt that there is a bubble. Prices may adjust in some markets, declining 5-10%, but that nothing that wouldn't be made up for the next time the market gets strong again.

Of course, the problem with any bubble is you don't know you're in one until it pops.

 

[glenn beck]

Originally posted by: Orsorum

Originally posted by: ironcrotch
I wonder how many vultures are out there just waiting for things to go bust.

I am.

Ditto

 

[NogginBoink]

Originally posted by: Orsorum

Originally posted by: ironcrotch
I wonder how many vultures are out there just waiting for things to go bust.

I am.

Me too!

 

[IHateMyJob2004]

Originally posted by: OS
link

At the bottom of page, there are daily updated links to articles about real estate bubble related news. There are some damning articles in there.

In NYC, it was reported that money simply can not support the housing prices there. It will crash.

People are jsut so stupid. Why people pay such high prices is beyond me.

 

[IHateMyJob2004]

Originally posted by: Orsorum

Originally posted by: ironcrotch
I wonder how many vultures are out there just waiting for things to go bust.

I am.

:thumbsup:

 

[IHateMyJob2004]

Originally posted by: b0mbrman
Meh...this is why I own income property rather than simply speculating on property whose value might increase.

My rental income healthily outpaces my depreciation and other costs so that's covered. Any amount I can get back through resale is just icing on the cake...

So, what happens when your rents drop 50%? How will the loan(s) be paid?

Depending on where ytou have rentals, you could be in deep sh!t. Most of hte couintry is safe. Basccially, NYC, Bosotn, California.... Those places are F'ed.

 

[IHateMyJob2004]

Originally posted by: Kremlar
Seriously. I have 2 friends who live at home with mommy and daddy and have both had a good amount of money for a down payment on a house for 5 or 6 years now. They keep saying house prices are too high, they can't afford it.

Bull - they just don't want to actually support themselves, and give up some of the frivilous things they buy now to actually gain some independence.

Well, here they are now - prices are much higher, and they refuse to make a move.

I bought my first house 4 years ago and was deathly afraid the market had topped off. Sold 3 years later and made $80K or so on the deal.

Personally, I wish I would have bought years ago when I first started renting, convincing myself it wasn't a good time to buy - I'd have a $500 mortgage payment right now on a great house!

It's the land prices that are getting outrageous in some areas. It simply costs $300K for a 2500 sqft home these days. But when land costs $200K, that's a bit rediculous.

matters on the area...

 

[IHateMyJob2004]

Originally posted by: kranky
While a bubble is clearly a regional/local issue, there are some serious warning signs for the overheated markets out west.

When the average home sells for 10 times the average salary, something is going to change. And people taking interest-only mortgages... they are crazy. That's betting your financial security on low interest rates, and that's not real smart.

Yes, it is not smart. That's like saying I own stock ... therefore I am an investor. I'd say more than 50% of peole have no clue what they are doing in the stock market. Luckily, if it crashes, my stocks won't move much. Thank you valuation! Just like I didn't get hurt by the tech crash ... but my REITS took off (which I no longer own).

 

[AntiEverything]

Originally posted by: BriGy86

Originally posted by: Demon-Xanth
Put it this way, I have a friend who is a realtor who sends me listings every few days. The bubble isn't close to popping in my area.

what area are you in?

i think entry level houses are in the 200,000+ range here in MN

The average home price in the metro area is around $250K. Get out of the metro and it drops to around $170K I believe. FHA loan maximums typically follow average selling price pretty closely.

As for entry level, you can still find lots of townhomes and small single family homes in decent parts of town from $150K to $170K.

(I'm an agent for Edina Realty, BTW)

 

[IHateMyJob2004]

Originally posted by: alkemyst
There isn't a 'bubble' so much in my opinion for the educated.

When you have someone selling a property for $150k, then immediately someone flipping it for $250k and another coming it to try and get $350k...that is where you have the danger, the last guy standing. Especially when you are talking a 5-10 year old home compared to an equally sized new home that's probably now in a gated/guarded community with a warranty and better amendities.....just doesn't make sense other than avoiding the 12-18months houses here take to build.

I do see prices adjusting though, some areas will be really hit. The guys that bought in 2+ years ago should be safe, maybe the last year buyers, but those just coming on need to buy as low as possible as I do see a definitely blip down.

That said I don't think anyone is losing their as$ that's living in the homes or renting them. Those that are planning on flips though may be holding a large mortgage.

Some guy in town bought a lot for $190K. now he is trying to sell it for $250K ... 2 years later. Unfortunately, the lot is worth about $160K. Neighobring homes simply don't support hte price this guy want. You can't go bigger than 2500 sqft in the lot because going bigger in the area is stupid. That caps your biuodling cost at $400K. When other 2500 sqft homes arn't selling at $550K, how does this guy think $250K is a fair price? You can buy an existing home for $550K or buy the land and build for $650K. Any rocket scientists out there?

 

[IHateMyJob2004]

Originally posted by: Scarpozzi
So what....if you are buying a house, it should all even out. If you already bought a house, you're making payments...it doesn't really affect you. Just don't worry about it and don't buy into real estate as a short term investment and you'll be fine.

Problem.... Buy home for $500K. Owe $400K on it. Bubble bursts. Home now wworth $250K. Sell it for $250K. You still owe $150K.

Still no problem?

 

[IHateMyJob2004]

Originally posted by: HomeBrewerDude
I seriously doubt that there is a bubble. Prices may adjust in some markets, declining 5-10%, but that nothing that wouldn't be made up for the next time the market gets strong again.

Study Japan 10-20 years ago. POP!

 

[Poulsonator]

Originally posted by: JulesMaximus

Why? Did you buy a house within the last year with 100% financing and an adjustable rate mortgage?

My wife and I did this exact thing in November. 5 year ARM, wouldn't have done it any other way.

 

[IHateMyJob2004]

Originally posted by: Kipper

Originally posted by: HomeBrewerDude
I seriously doubt that there is a bubble. Prices may adjust in some markets, declining 5-10%, but that nothing that wouldn't be made up for the next time the market gets strong again.

Of course, the problem with any bubble is you don't know you're in one until it pops.

If you arn't greedy, it's pretty obvious. But people use emotions to make financial decisions. it's the same reaso nthe tech bust happened. It's the same reason people fgo to casinos. And in this case ... it will eventuially ruin some people because they are to stupi to know better.

 

[IHateMyJob2004]

Originally posted by: Poulsonator

Originally posted by: JulesMaximus

Why? Did you buy a house within the last year with 100% financing and an adjustable rate mortgage?

My wife and I did this exact thing in November. 5 year ARM, wouldn't have done it any other way.

As long as you plan on moving within 5 years, it's a good move to make.

 

[alent1234]

Originally posted by: IHateMyJob2004

Originally posted by: OS
link

At the bottom of page, there are daily updated links to articles about real estate bubble related news. There are some damning articles in there.

In NYC, it was reported that money simply can not support the housing prices there. It will crash.

People are jsut so stupid. Why people pay such high prices is beyond me.

NYC is not one market. If Manhattan gets too expensive then people will move to other parts of the city. Manhattan prices today are still a lot higher than what they were during the last exodus to brooklyn

 

[alent1234]

Originally posted by: IHateMyJob2004

Originally posted by: HomeBrewerDude
I seriously doubt that there is a bubble. Prices may adjust in some markets, declining 5-10%, but that nothing that wouldn't be made up for the next time the market gets strong again.

Study Japan 10-20 years ago. POP!

there are a lot of differences between the US and japan

 

[alent1234]

Originally posted by: IHateMyJob2004

Originally posted by: Scarpozzi
So what....if you are buying a house, it should all even out. If you already bought a house, you're making payments...it doesn't really affect you. Just don't worry about it and don't buy into real estate as a short term investment and you'll be fine.

Problem.... Buy home for $500K. Owe $400K on it. Bubble bursts. Home now wworth $250K. Sell it for $250K. You still owe $150K.

Still no problem?

that's only if you sell and you assume prices will fall that much. Why will they? I know someone that bought an apartment for $120,000 in NYC in the early 1990's. Prices crashed and it took her a decade to make money on it. She lived there and sold it a few years ago for twice what she paid. Just because prices fall doesn't mean people will start selling. They have to live somewhere.