Real Estate - 1 Bedroom Condo for $450k. Should I Buy?

[z0mb13]

Originally posted by: Mo0o
There's no such thing as a bubble that wont pop.

I predict (and hope) it will pop in a year or so

 

[brtspears2]

I just bought a condo in Riverside, CA. $225,000. 2 bed, 1 bath. Scared of bubble bursting, never. The university nearby is expanding rapidly, and with a university bus stop and less than 10 minutes walk to campus, I should be fine keeping this as an investment.

 

[OS]

Originally posted by: z0mb13

Originally posted by: Landroval
I am in a similar position, wanted to buy property in that range but not sure if the time is right. Forecasts say it will go up another 25% in next year or two, but we've had crashes before.

if you think about it, what is the true cause of these crazy increases in house/condo prices?

this is akin to stock prices going nuts in the late 90s, fueled only by increased demands of these stocks. Companies dont show greater profits/fundamentals, but the market still went up fueled by high demands.

House prices that go up by 20% every year also is not based by the improvements of the house, the house itself stays the same, only the DEMAND of houses increase..

you can say the demand increases because more people need houses, but I dont think the demographics of CA increase a lot to justify the increase in demand of real estate. I believe the high demand is purely caused by speculative reasons, or more of "I'd better buy a house with interest only loans since everyone else is doing it and making money"

CA house prices will see a correction in a year or so, especially with higher rates looming. Higher rates = less people able to buy, and also less lenders. Also higher rates will cause some people not being able to pay their mortgages, so foreclosures will be more common as well. So the demand of houses will fall, and the supply will increase (due to foreclosures and whatnot).

People with enough equity in their houses wont be affected by this price correction, but speculative people or people that cant really afford their mortgages will certainly be affected

Exactly, there is no basis in fundamentals to justify the increases in prices. Neither salaries nor population grew 25% year after year for the past ~3 years.

By any fundamental/historical measure, be it rent to buy cost ratio, median salary vs house price ratio, the valuations are abnormally high. Historically, there has been a close/fixed correlation between rent to mortgage payment ratio and median salary to housing price ratios. Is the market now suddenly beating history, or will historical standards catch up to the market?

 

[jspeicher]

in reality, most of you are crazy, as there is no such bubble and we will soon all live in condominiums on mars anyway.

 

[PaidLess]

Well i live in MA ... My dad is selling his condo for about ... 160K ... and he's buying a single family house for 320K ... and it has 4 bedrooms a full basement .. 1 and a half baths ... personally .. dont buy a condo in Cali ... SO EXPENSIVE ... move to NY and rent an apartment for 600$ a month .. with water .. heat and sometimes electricity included ...

 

[StageLeft]

lmfao, move.

 

[bigdog1218]

Originally posted by: z0mb13

Originally posted by: Landroval
I am in a similar position, wanted to buy property in that range but not sure if the time is right. Forecasts say it will go up another 25% in next year or two, but we've had crashes before.

if you think about it, what is the true cause of these crazy increases in house/condo prices?

this is akin to stock prices going nuts in the late 90s, fueled only by increased demands of these stocks. Companies dont show greater profits/fundamentals, but the market still went up fueled by high demands.

House prices that go up by 20% every year also is not based by the improvements of the house, the house itself stays the same, only the DEMAND of houses increase..

you can say the demand increases because more people need houses, but I dont think the demographics of CA increase a lot to justify the increase in demand of real estate. I believe the high demand is purely caused by speculative reasons, or more of "I'd better buy a house with interest only loans since everyone else is doing it and making money"

CA house prices will see a correction in a year or so, especially with higher rates looming. Higher rates = less people able to buy, and also less lenders. Also higher rates will cause some people not being able to pay their mortgages, so foreclosures will be more common as well. So the demand of houses will fall, and the supply will increase (due to foreclosures and whatnot).

People with enough equity in their houses wont be affected by this price correction, but speculative people or people that cant really afford their mortgages will certainly be affected

Real Estate is nothing like the stock market, you can't compare the two. Even if you buy a house this year and over the next 5 years its value drops 10%, you still own a property that WILL be worth more than you bought it for. Prices for everything fluctuate, but unlike stocks, you're not going to see some bubble burst and real estate prices fall and everyone go bankrupt.

If you buy that house for 450k and in 5 years its worth 400k do you think you're going to be in any kind of trouble? Most likely you'll continue living there and not even notice the dreaded bubble burst, or if you're renting the property you could care less cause your rent isn't going to be touched and you'll still have the same income. Even if you do sell the home any other home you buy in the area will also be at a corrected value, and will also increase in due time.

A lot of people say it, but you can't build more land. Houses whether in cities and highly populated areas or the middle of nowhere are a good investment if you can afford it. Renting is throwing your money out the window and bubble or no bubble, renting is just plain retarded if you can afford a house.

Most people that have bought homes recently used fixed rate mortgages, so an increase in rates isn't going to effect them, if they can afford their home now, they'll be able to afford their home later.

 

[randomlinh]

Originally posted by: Descartes

Originally posted by: BobDaMenkey
Move to Arizona, you can get a 3 bedroom house in a nice part of town for 450k.

You can get a nice home in most parts of the US for $450k, but that wasn't his question.

I wish that applied here stupid overpriced county...

 

Market is about to bust. I am selling my 1BR for 600k. Paid 400k for it 1.5 years ago. Going to rent and wait it out then buy what goes for 800k now for 600k after the bust.

 

[HyTekJosh]

Real estate is crazy where I live.

 

[Red Dawn]

That area isn't all that anymore. Maybe ten years ago San Jose was great but now it's over crowded, traffic sucks and it's way too expensive. In the last ten year to quality of life there has suffered.

 

[roguerower]

The house that i live in now cost $250k 4 years ago in northern VA. Probably worth $400k today. 5 bedroom, 3 bath, big ass downstairs and basement.

 

[mercanucaribe]

Originally posted by: BobDaMenkey
Move to Arizona, you can get a 3 bedroom house in a nice part of town for 450k.

Then he still has to live in a nice part of town in Arizona

 

[z0mb13]

Originally posted by: bigdog1218

Originally posted by: z0mb13

Originally posted by: Landroval
I am in a similar position, wanted to buy property in that range but not sure if the time is right. Forecasts say it will go up another 25% in next year or two, but we've had crashes before.

if you think about it, what is the true cause of these crazy increases in house/condo prices?

this is akin to stock prices going nuts in the late 90s, fueled only by increased demands of these stocks. Companies dont show greater profits/fundamentals, but the market still went up fueled by high demands.

House prices that go up by 20% every year also is not based by the improvements of the house, the house itself stays the same, only the DEMAND of houses increase..

you can say the demand increases because more people need houses, but I dont think the demographics of CA increase a lot to justify the increase in demand of real estate. I believe the high demand is purely caused by speculative reasons, or more of "I'd better buy a house with interest only loans since everyone else is doing it and making money"

CA house prices will see a correction in a year or so, especially with higher rates looming. Higher rates = less people able to buy, and also less lenders. Also higher rates will cause some people not being able to pay their mortgages, so foreclosures will be more common as well. So the demand of houses will fall, and the supply will increase (due to foreclosures and whatnot).

People with enough equity in their houses wont be affected by this price correction, but speculative people or people that cant really afford their mortgages will certainly be affected

Real Estate is nothing like the stock market, you can't compare the two. Even if you buy a house this year and over the next 5 years its value drops 10%, you still own a property that WILL be worth more than you bought it for. Prices for everything fluctuate, but unlike stocks, you're not going to see some bubble burst and real estate prices fall and everyone go bankrupt.

If you buy that house for 450k and in 5 years its worth 400k do you think you're going to be in any kind of trouble? Most likely you'll continue living there and not even notice the dreaded bubble burst, or if you're renting the property you could care less cause your rent isn't going to be touched and you'll still have the same income. Even if you do sell the home any other home you buy in the area will also be at a corrected value, and will also increase in due time.

A lot of people say it, but you can't build more land. Houses whether in cities and highly populated areas or the middle of nowhere are a good investment if you can afford it. Renting is throwing your money out the window and bubble or no bubble, renting is just plain retarded if you can afford a house.

Most people that have bought homes recently used fixed rate mortgages, so an increase in rates isn't going to effect them, if they can afford their home now, they'll be able to afford their home later.

I totally agree people with fixed rate mortgages that can actually AFFORD to pay their mortgage will be FINE when the bubble bursts. But people with interest only mortgages (option ARMS, negative amortization) will be BURNED by the increase in rates. If you are looking to buy a house and stay there for at least of 5 years then you will be fine, but if you are looking to buy a house just for investment purposes for 2 years then prepare to be burned.

You say that most people use fixed rates, and I agree with this. But alarmingly more and more people in bubble areas (socal, bay area) buy houses with interest only loans since that is the ONLY way they can afford to buy a house. so basically they are RENTING with the option to buy, that is if their income increases thus they are able to pay more each month. This situation is fine as long as interest rates does not increase. But all signs point to an increase in interest rates. Heck I heard some lenders in orange county starts offering 60 year mortgages so people can actually afford to buy a house.

Yes stocks and houses are different, but house prices increase by 25% in a year is not fueled by good fundamentals such as an increase in demographics or increase of quality of the house. It is simply fueled by overinflated demand caused by the low interest rates we have for the past couple of years.

oh, and about renting, in some areas (bay area for one), renting is actually a bargain compared to buying.

 

[dirtboy]

Your friends are right; prices will adjust in the future. When exactly, nobody knows, but all the signs of a bubble exist, so it's just a matter of time before it happens.

 

[Firsttime]

moved to Nova Scotia, our 4 bedroom house was 150k canadian, and its in the nicest part of town in the nicest county

 

[villageidiot111]

Move to Fargo, ND. The most expensive houses in town cost 450k, and the people who live in them are considered f*#&ing rich!

 

[StageLeft]

Originally posted by: Firsttime
moved to Nova Scotia, our 4 bedroom house was 150k canadian, and its in the nicest part of town in the nicest county

Maybe so, but I know that around the Halifax area $150k doesn't buy so much anymore. I was there at Christmas and surprised at how much prices have gone up in recent years.

Regarding bubble, it may not burst. It may. When? Who knows. If a $450k house is $600k in three years and then the market sheds 20% of its value you still come out ahead.

And yes, bubble bursting is a problem. It will quite possibly coincide with an increase in interest rates, so although you can afford a $450k mortgage now, if your house drops to $400k and then you're going house hunting you may find that not only are you now upside down on your mortgage, but to keep payments where they were on your 450k house now you can only afford a 350k house. It's a real problem. If you want to stay in your home for 10 years go for it. Chances are minute that it will net-loss over that period, but if you're buying a pissant one bedroom or two bedroom place now you have to realize it's possible you'll take a bath in a few years when you buy something for a family.

IMO the bubble bursting is overblown. 95% of the country won't have to worry about it in any case, because most of us don't live in fantasy land like those in select counties in florida, CA, etc.

Something like 60+% of CA mortgages now are interest only vs 30% nationally. LOL.

 

[Kenji4861]

About the bubble bursting in real estate market. is there a real life example of this?

 

[LS20]

Originally posted by: conjur
Fvck no. San Fran/San Jose area housing bubble will soon burst.

agreed. and im from SJ.

 

[Baked]

You would overpay. I can get a 2 bedroom condo in Palo Alto for $420K.

 

[OS]

Originally posted by: Kenji4861
About the bubble bursting in real estate market. is there a real life example of this?

Japan, Socal ~1990

 

[DrPizza]

Originally posted by: Skoorb

Regarding bubble, it may not burst. It may. When? Who knows. If a $450k house is $600k in three years and then the market sheds 20% of its value you still come out ahead.

But, who's to say that the value of a 450k house is going to go up by 10% per year? Would a similarly built home 25 years ago have sold for about 42 thousand? If you're assuming 10% a year, then you'd have to have started off at 42K 25 years ago to get to 450k now. At that rate, it would have been only worth 280k 5 years ago. Unless average wages go up by 10% a year, then housing values cannot possibly continue to go up at that rate.
Go beyond 3 years from now... that would imply that the 450k house today will be worth 1.267 million in 10 years. Does anyone dream that their salary is going to increase at such a pace that they can afford a million+ dollar home in 10 years??

Personally, I think part of the reason for the bubble is that it's a self-fulfilling prophecy. If the media reports "houses are going to go up in value by 25% during the next year", then a ton of people are going to think "crap, we better buy now or we won't be able to afford a house next year." A lot will think "I'll buy now, and sell a year from now, making 100k profit on my investment." Demand will increase for houses, and prices will go up.

But, if you report that "house prices are expected to fall by 25% during the course of the year, then everyone's going to wait to buy... demand goes down, and prices fall.

On top of this, factor in how an increase in interest rates will affect sales...

 

[rh71]

Originally posted by: Kenji4861
The price is insane, but if the price is going to grow, why not.

It's your money, and if you truly believe that, go for it. I'm not as sure as you are...

 

[Doggiedog]

Sounds cheap. The average price for a 1 bdrm in Manhattan is about $1M.