InfiniteNothing

link


That majorly sucks IMHO

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cruelpupet

Ive been hearing the "housing market will crash" for about 3 years now. I wish theyd just do it already!!!

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zippyjuan

Housing as an "investment" is overstated- unless you own more than one property. The idea of owning is to not have to pay rent when you are retired and your income is lower. If you buy a house and sell it to buy another house after the value of yours has gone up, the price of the replacement has also gone up, unless you move to a cheaper area or smaller home. Buying an additional property and later selling or renting it out is an investment, but at today's prices, certainly in San Diego, you cannot possibly rent it our for what your payments and taxes would be. They have been saying that interest rates will be going up, but they have actually declined slightly in the last several months. New and creative financing plans have also lowered the initial cost of borrowing has allowed more people to borrow more money which has also pushed up the prices of homes- because they can afford to spend more. Supply, in this part of the country, has not kept pace with population growth and hence demand for new homes so that will keep prices high for a while. Once things do turn around (and whenever that is- even if it is in ten years) people will say, "see, that is what I was talking about! I told you things would go back down!". But for a while, the prices will be slow to decline. When demand for houses starts to decline, for a time the houses for sale will merely stay on the market longer or be taken off the market altogether. This will make any turnaround (minus a sudden economic crisis) a slow one. Prices will not fall overnight.

But the rates of price increases are not sustainable for an infinate amount of time. They are climbing faster than incomes so you will eventually get to a point where nobody can simply afford to buy them. Then it will flatten out.

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johnnymk

I put "Housing Bubble" in my Google Alert. It's amazing the number of articles that are eMailed to me everyday.

I have discovered that 14 of the 20 hot spots where housing prices have risen faster than the national norm are in California. Another hot spot is in Florida.

In my area, I have seen my home go up in value approx. 80% in 5 years.

I have also read that between 25% to 50% of houses are sold to speculators trying to make a quick buck.

I have a hard time believing that prices can be sustained in a country with so many financial problems and with such a dismal outlook for future job growth.

IMO. the longer the period of rapid price escalation, the bigger the drop when it does burst. It's inevitable.

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InfiniteNothing

Yes but what were those estimates based on? how far away did they predict it? Have those predictors been sucessful before.

Really, I've seen alot of signs of this starting in San Diego... suddenly rental places are turning into condos to be sold immediatly at below market prices... I think somebody's abondoning ship.

MrGreg

For purely selfish reasons, I'd like to see the bubble burst in the next two years. I started my 401k just after the market crashed, and I wouldn't mind buying a house shortly after prices go down (assuming they do).

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DJjeff1080

I will be buying a house in about 18 months, so I am with MrGreg on this one. Especially since I am in the SF Bay Area, the cheapest house in my city last month was over $500k.

POP!

attgig

yes, please burst quickly so i can move. i got my condo cheap, so i don't mind selling it near what i bought it for. over 1/2 paid off, so i built enough equity to help me on a down pmt for a new place.

what i'm really hoping will open up (not to have joy in other's pain, but still.... purely financially looking at it) are houses that were bought with interest only loans that suddenly aren't worth the amount on the mortgage. These guys will have their homes forclosed and their houses auctioned off for hopefully cheap prices.

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bachviet

We are saving up $$$ to get a house so I'm still waiting for the bust.

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cheapie

att...i was listening to a b'more station and they said prices on certain types of real estate in dc/b'more have risen 50% this year!!!! wtf???

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attgig

hrm, looks like some other people have the same idea as i. too bad i'm not rich enough to invest in their funds...

http://www.theledger.com/apps/pbcs.d.../1001/BUSINESS


and yes, dc is crazier than bmore. bmore's gains this year have been somewhat decent, but not like those in dc area.

DarkFury

Well since California is gonna fall into the sea... eventually , I guess it really doesn't matter...

Good oceanside land value for Nevada though... Buy now and avoid the rush!

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Markel

From the comments I heard on the radio of Greenspan's talk today, he doesn't anticipate a housing bubble burst. "Although a bubble in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets," he said. (link)

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dbax791

I think you have to be very careful in anticipating a "bubble burst".

Real estate is not like stocks where an investment can go from darling to dog overnight.

What tends to happen in a slow real estate market is that homes just tend to stay on the market a lot longer, months instead of days. Not a drop in price since homeowners are VERY reluctant to sell an asset for less than they paid.

That said, the market in Phoenix is crazy right now. A livable single-family home does not last more than 2-3 days on the market. Often with multiple bidders and a $20-30K premium over the asking price.

Kevster

I wasn't so worried about a bubble before, but now that rampant speculation has entered the market and is driving up prices even more. People that normally would have nothing to do with the buying and selling of real estate are now entering the market to try and make a quick buck (much like the late 90's). If I had to buy a house in this market I don't know if I would because it's just waaaaay too crazy right now.

What So. California really needs is another big earthquake to 'shake things up' literally and figurtively.

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LegendKiller

I think this year is going to be pivotal in the FL region. Sure, 1 year of 3 hurricanes hitting is odd. Two years is a sign of a pattern and oldsters might not want to deal with that.

InfiniteNothing

I'd like to take a moment to laugh at how capitalism makes up want to kill eachother.

johnnymk

Three years ago, Phoenix Management Services, a turnaround firm based in Philadelphia, asked about 100 lenders in its regular quarterly survey if they thought there was a real estate bubble. Voting yes were 58 percent, and 29 percent said no.

A few months ago, Phoenix asked the question again. Despite the past three years of zooming prices, 46 percent of the lenders said it was a bubble, and 39 percent believed it wasn't.

"They're saying, 'This isn't a bubble -- this is here to stay,'" said Phoenix Managing Director Michael Jacoby. "That's really scary."

Also, a scenario from the Indianapolis Star of what will happen when it bursts:

However, it's not clear what the Fed can do if this bubble bursts. More likely, if it does burst, the economic damage will be severe. It will affect, first, the real estate investors, who will default on their mortgages. Their properties will be taken over by the banks, which will dump them on the market, reducing house prices further.

Those people who have planned to make big purchases using home equity loans would feel the pinch next. As the value of homes declines, home equity diminishes. But if they stop buying cars and other big-ticket items, it will mean falling consumption, and that will mean cuts in production and workers.

But laid-off workers can't pay their mortgages, so their loans won't be repaid, hurting the housing market and the banks even more. Some banks will fail and the others will surely reduce loans, especially to real estate, further decreasing economic activity and deepening the economic downturn.

Which of course would mean more layoffs and more people who can't pay off their mortgages, which will further depress house prices, reduce consumption, and so on, right into a recession.

Kevster

Thank you for taking the extreme interpretation of what I said.

You obviously were too young to remember what happened to the home prices after the Northridge earthquake. I distinctly remember it because I just got out of engineering school. A lot of people who moved here from other states moved out because they couldn't handle it. Yes there was the extremely unfortunate loss of life and there was a major economic impact to Los Angeles, causing for the first time in a long while the number of people emigrating from California to be greater than the number of people immigrating to it. Home prices sagged and then depreciated at that time and they did not recover until well into the late 90's 'Dot-Bomb boom period'.

It's not really my intention to make $$$ on my house, I just want to try and find another reasonable place to live should I change jobs in the future and have to move. As it stands, my family can't afford to move because this real estate market has spiraled out of control. A couple of years ago it wasn't bad - we had nice growth that reflected market conditions of supply and demand. Now that speculators have moved in, artificially pumping up demand and actively outbidding families trying to buy a home, it's &*$#!@% insane.

MrGreg

So instead of real estate I should invest in canned goods and shotguns?

InfiniteNothing

I said laugh at how... It was a joke ... laugh ha ha

LegendKiller

I think people are getting stupid about this whole thing.


Take for example a friend of ours from college. She is a public school teacher in Naples FL. She has no other jobs and is a single mother not collecting child support. She has a roomate at her current condo and two boyfriends she f's around with mentally and physically. She's basically a psycho.

She buys this 2br 2bth condo 6 months ago in Naples for 130k. She fixes it up a bit, paints and such and she just put it on the market for 270k.

Yes, she thinks she will realize greater than 100% annual profit. She also thinks she will be able to turn around and buy a 450k place with the new "equity".

Now, the RE agents haven't told her that she *has* to pay cap gains unless she wants to use her once in a lifetime exception. She doesn't realize that only 25% of the cap gains is tax free. She doesn't think that she is going to have to pay *massive* property tax on a half million dollar home.

Hell, she can hardly even furnish and pay for her current place, she has been late on her mortgage 3 times in 6 months.

Put on top of that she is going for an interest only, short doc (no checks) loan. She then wants to flip that house within a year and make more money.


This is the exact retarded mentality that got people in trouble in the late 90's and will continue to get them in trouble for the next 5 years. IO loans, ARM's, rampant speculation, demographic shifts, natural disasters, and all time highs in personal debt will come crashing down on these bafoons and prices will drop.

It is only a matter of time.

Merlin

Yes, many people are using these loans to overextend themselves and that is bad but this really is the best type of loan financially speaking. It lets you keep your house fully financed and thus maintains your maximum tax deduction while minimizing the amount of money you have "tied up" in the large illiquid asset. You can really maximize your total wealth using this type of loan as long as you understand how it works and don't overextend yourself.

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brainsmile

it certainly does increase risk

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LegendKiller

Agreed, I know many people who have bought into larger houses using IO, their payments are lower and they can afford more. By the time their P kicks in they can match the payments and absorb the increased costs, or they will sell it before. It is a great tool for those who can use it correctly. However, I fear that many of those using it have not been completely educated in the risks.

mcs328

I got a 30 year fixed. Put they do push IO a lot. My condo has increased 25% in less than a year. The original owner bought it about 2 years before I did and if he were to sell it now if he had it he would sell it for twice what he paid.

I'm speculating the bubble to come soon just because I've been reading more stories on it and I've been searching for homes and I've seen the supply go down but the prices have come down also instead of going up.

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Kevster

I have a 30-year fixed as well. I am on a bi-weekly payment plan and could have it paid off in 18 years instead of the normal 30.

zippyjuan

In real estate all markets are local. My aunt in Pennsylvania cannot move her house (two floors, four bedroom) for $100k, but if she had the same house out here it would be $500k and sold. The supply of houses on the market will have to be higher and demand lower for the bubble to happen and as has been said before, even when that occurs, prices will not like drop for a while- homes will either stay on the market longer or people will decide not to sell if they can't get what they think they want. I think condos will drop in price before houses do because they are normally tied to rental rates- being bought to rent out or bought by people tired of paying rent. Right now you could not rent out condos in San Diego and hope to cover your mortgage payment for what they are selling for now as compared to the rental rates. Rising interest rates would be a concern, but so far they have not been going up. It seems like things will be staying as they are for a while longer.

mcs328

How is that working out for you? I get those offers to pay twice a month also instead of once a month. They attatch a service fee to it though from the ones I get at least. I figure it's worth it if I lived in the home I'll live in for several years but not on the condo I'm living in now since I could use that fee as extra towards the principal.

Merlin

As long as employment stays strong then you are right. If we see umemployment tick up meaningfully (i.e. we have a recession) then it all goes out the window.