Author Topic: Housing Bubble 2.0?  (Read 11029 times)

supersaverman

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Housing Bubble 2.0?
« on: November 22, 2015, 09:52:57 AM »
Does anyone here think we are approaching another housing bubble? Prices where we live, San Jose, and the entire Bay Area are just astronomical, many of which are already into record territory. It's not only the high prices but how quickly it got there. As little as just 3yrs ago many homes were selling for several hundred thousand less than they are today.

Many argue that this isn't a bubble, that demand is healthy and reverting back to norms from the disconnect of the crash. Many foreign buyers are doing all cash buys, lending standards are tight so no risk of another sub prime repeat, inventory is a record lows, economy is strong with strong tech jobs.. etc etc.

But when I see absolute dumps and shacks going for 600-700+ and average homes going for 1mil in my town, it just reeks of a bubble. We bought a new construction home last Nov and of course they have all sold out and increased in value from 900 to 1mil. In just one year! But the danger signs I see, some of the homes in our neighborhood are completely empty. Probably another Chinese investor parking his/her cash. Another is for rent for 4200 a month!

With that said, we are planning to list our house soon. Pocket what gain we have  and rent. Sure it could go even higher and we could kick ourselves but I'm seeing the smoke already, don't want to stick around for the fire.
« Last Edit: November 22, 2015, 09:56:55 AM by supersaverman »

arebelspy

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Re: Housing Bubble 2.0?
« Reply #1 on: November 22, 2015, 10:27:26 AM »
Local housing bubbles happen.  Nationwide bubbles are really rare (historically, we've had.. 1?)

So your title?  No. You may be seeing that in your area, and it may or may not be a local bubble (depending on what you think of the foreign investors, tech millionaires, etc.).

I think prices have increased, a lot, but that doesn't necessarily mean bubble. And not all bubbles pop--some you grow out of.

I wouldn't invest or buy there, because I don't like to speculate, but I don't necessarily think it's a bad speculation if you are one.
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Bearded Man

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Re: Housing Bubble 2.0?
« Reply #2 on: November 22, 2015, 04:23:18 PM »
From what I've been reading, the SF area bubble is about to burst. I've read that DC and SF are having a slow down that is starting. Not sure about Seattle, it is still crazy here. The housing market has not slowed much at all this fall. We still have only 1.5 months of inventory in King County, where 6 months is healthy. Plus prices are not AS ridiculous to SF prices. Salaries here are pretty good in comparison. I can get a 125K a year job, more than your typical Senior Engineer in SF, however; I bought houses for a fraction of what SF area housing goes for. If anything, I am wondering if Seattle will turn into the next SF. I'm still in the market for one more house currently, but after that, assuming I find one, I will probably wait a while and see what the market does.

arebelspy

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Housing Bubble 2.0?
« Reply #3 on: November 22, 2015, 04:50:50 PM »
From what I've been reading, the SF area bubble is about to burst.

The people with that crystal ball must really make a lot of money. Wonder why they'd bother to share that information.

Or maybe they're just guessing?  Nahhhh... ;)

(Not saying they're wrong, just that they don't know any more than anyone else, most likely.)
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Vilgan

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Re: Housing Bubble 2.0?
« Reply #4 on: November 22, 2015, 09:19:10 PM »
For nationwide bubble, I'd be a lot more likely to point at Canada. SF seems a bit high but hard to call the US real estate market as a whole in a bubble. Seattle is jumping but there is huge growth/demand here and the increase seems to make sense. Now look at places like Vancouver or Toronto in Canada where the housing prices are crazy high while rent is not and imagine what's going to happen if interest rates go up 1% there.

backyardfeast

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Re: Housing Bubble 2.0?
« Reply #5 on: November 22, 2015, 09:31:21 PM »
Quote
For nationwide bubble, I'd be a lot more likely to point at Canada.

Maybe; certainly everyone and their dog up here has been warning that the bubble will pop at any time.  But, I'm with ARS, I think these are largely driven by local factors and are unlikely to be "nationwide."  Calgary was in an oil industry bubble that has crashed, and prices are dropping there, as well as in some other resource-economy centres.  In Northern BC, there's a boom happening that's partly speculative, and prices have really jumped over the last 5-8 years; I wouldn't be surprised to see a crash there. OTOH, we're in an area where prices have been pretty much flat since the small correction that happened in 2009; there's definitely no bubble here, unless the economy as a whole tanks.

Vancouver, who knows?!  It's a complicated picture, like Seattle's, where there's a big diverse economy, a lot of foreign investment, and a highly desirable physical environment.  Remember that although it's the most overpriced market in Canada, relative to SF, London, etc, it's still a bargain.  I do remember the 80s crash, and the subsequent condo crashes, though.  It's bound to happen at some point, but I'm not convinced its imminent.

undercover

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Re: Housing Bubble 2.0?
« Reply #6 on: November 23, 2015, 03:51:22 AM »
You could list 10 reasons why you think we're in a bubble, and I could list you ten reasons why I think we're not. Both lists of reasons would hold equal weight since none of the reasons are proof of anything. A "bubble" is something we refer to in retrospect, it's nothing that anyone can predict. No one said, "I'm living in the Industrial Age!" Sure, you'll have people try to say that they predicted the last bubble. They didn't. They'll say they knew it was bound to collapse because people making meager salaries were suddenly able to afford million dollar homes. They may have thought, "this can't last", but it's not like they knew when it would happen. The point is that everything that goes up must come down, but you have no idea when that is going to be. Yes, I'm calling it right now! The housing market in SF is going to collapse someday! I'll be a genius when it happens!

We're in a fundamentally different environment than 2004-2008. I don't say that to claim we aren't in a bubble, only to say that it likely won't crash in the severity that it did before.

But, I will give you reasons as to why SF may not be in a bubble: 1. High concentration of high-paying tech jobs. Still the highest of any region in the US. 2. Fantastic year round weather. 3. High accessibility to Eastern countries. 4. Unique architecture and feel to the city. 5. No room to build, nor any desire from the city to abolish height restrictions for higher density.

You just can't call this stuff. I truly believe there are no "signs" since like I said, for every argument as to why we're in a bubble, there is an equally weighted argument as to why we're not. If you're going to sell your house because you think we're in a bubble, make sure it's for rebalancing purposes. Make sure you have found value somewhere else that you can dump the proceeds into. The only thing we can both agree on about the SF housing market is that it's at historical highs and we don't know when it will start to correct. But unless you can find an asset that is at a deep discount, there's no logic in dumping all your proceeds into an index fund.
« Last Edit: November 23, 2015, 04:01:18 AM by undercover »

arebelspy

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Re: Housing Bubble 2.0?
« Reply #7 on: November 23, 2015, 04:08:53 AM »

But unless you can find an asset that is at a deep discount, there's no logic in dumping all your proceeds into an index fund.

I agreed with most of your post, but I don't know about this.

Just because you can't predict to get out at the high, you can still take money off the table into a less risky and concentrated asset.
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Mr. Green

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Re: Housing Bubble 2.0?
« Reply #8 on: November 23, 2015, 07:11:54 AM »
If housing prices are out of reach for almost everyone in your area, you're in a bubble. The Bay area has a lot of tech jobs paying big money but I don't know how representative those pay rates are of the entire area. Housing prices will always correlate to affordability (in varying degrees) when things are stable. If only 10% of the local population can afford to buy a house at current prices, you have a problem.

supersaverman

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Re: Housing Bubble 2.0?
« Reply #9 on: November 23, 2015, 08:40:00 AM »
You could list 10 reasons why you think we're in a bubble, and I could list you ten reasons why I think we're not. Both lists of reasons would hold equal weight since none of the reasons are proof of anything. A "bubble" is something we refer to in retrospect, it's nothing that anyone can predict. No one said, "I'm living in the Industrial Age!" Sure, you'll have people try to say that they predicted the last bubble. They didn't. They'll say they knew it was bound to collapse because people making meager salaries were suddenly able to afford million dollar homes. They may have thought, "this can't last", but it's not like they knew when it would happen. The point is that everything that goes up must come down, but you have no idea when that is going to be. Yes, I'm calling it right now! The housing market in SF is going to collapse someday! I'll be a genius when it happens!

We're in a fundamentally different environment than 2004-2008. I don't say that to claim we aren't in a bubble, only to say that it likely won't crash in the severity that it did before.

But, I will give you reasons as to why SF may not be in a bubble: 1. High concentration of high-paying tech jobs. Still the highest of any region in the US. 2. Fantastic year round weather. 3. High accessibility to Eastern countries. 4. Unique architecture and feel to the city. 5. No room to build, nor any desire from the city to abolish height restrictions for higher density.

You just can't call this stuff. I truly believe there are no "signs" since like I said, for every argument as to why we're in a bubble, there is an equally weighted argument as to why we're not. If you're going to sell your house because you think we're in a bubble, make sure it's for rebalancing purposes. Make sure you have found value somewhere else that you can dump the proceeds into. The only thing we can both agree on about the SF housing market is that it's at historical highs and we don't know when it will start to correct. But unless you can find an asset that is at a deep discount, there's no logic in dumping all your proceeds into an index fund.


I agree with your post and not everyone can predict the future but we can make educated guesses. When I see properties increase in value by 20-40% in a matter 1-2 years, I don't care what arguments you use about not enough land to build on or a plethora of high tech jobs, that rate of ascent is not normal and unsustainable. In our case, yes part of it is market timing, but another part is to also downsize and lower our payments. And since we are sitting on a decent gain even after transaction costs we decided to make the move.

Current payment with mortgage, prop tax, hoa is $4245, net after tax deduction is $3445.
Moving to 1100 sf apartment from 2160sf home. Rent is $2600.
Will walk away with 240k cash and plan to dump into index funds and plan to buy again when I see some sense of normalcy back again.


supersaverman

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Re: Housing Bubble 2.0?
« Reply #10 on: November 23, 2015, 08:43:28 AM »
wanted to share this video...

https://www.youtube.com/watch?v=SBjXUBMkkE8&feature=share

pretty hilarious (especially when they interview the realtor) and a bit over the top but clearly shows the frothiness of the current market.

arebelspy

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Re: Housing Bubble 2.0?
« Reply #11 on: November 23, 2015, 08:44:33 AM »

If housing prices are out of reach for almost everyone in your area, you're in a bubble.

I don't agree with this definition.  Almost no one in NY has been able to afford places for decades, that doesn't necessarily mean they're in a bubble.
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arebelspy

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Re: Housing Bubble 2.0?
« Reply #12 on: November 23, 2015, 08:46:47 AM »

When I see properties increase in value by 20-40% in a matter 1-2 years, I don't care what arguments you use about not enough land to build on or a plethora of high tech jobs, that rate of ascent is not normal and unsustainable.

Not normal or sustainable, no, but also not necessarily a bubble that will pop.  Maybe prices were undervalued. Maybe there is a new wash of funds in there (as with SF and the tech money), bringing a new level of valuations.

Prices can increase a lot without being in a bubble. But you are correct that it's not normal, or sustainable year after year.
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Mr. Green

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Re: Housing Bubble 2.0?
« Reply #13 on: November 23, 2015, 09:16:09 AM »

If housing prices are out of reach for almost everyone in your area, you're in a bubble.

I don't agree with this definition.  Almost no one in NY has been able to afford places for decades, that doesn't necessarily mean they're in a bubble.
I think as you move into markets as big as New York it's more complicated because there is major international interest, so it's not just want locals can afford but whatever everyone else in the world can afford as well. There's clearly enough interest in New York by international parties that displaces the unaffordability by locals to keep the prices stable. New York is also an icon, and that creates demand. San Francisco? Not so much. I don't know enough about the Bay Area to say whether that's something that is happening there but I stand by my statement in general. New York is an exception to me.

arebelspy

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Re: Housing Bubble 2.0?
« Reply #14 on: November 23, 2015, 09:50:27 AM »
Right. That's why I didn't agree with the definition. :)

FWIW, I think SF is in that same scenario with investors from Asia.

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DarinC

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Re: Housing Bubble 2.0?
« Reply #15 on: November 23, 2015, 01:56:08 PM »
I'm in arebelspy's camp. Technically, prices probably aren't bubblicious, since the HAI is still around 30.

http://ggvalues.com/wp-content/uploads/2010/07/hai-c6-e1279918657170.jpg

A healthier long-run average is probably around 40, but I don't think 30 is bubble territory.

http://ggvalues.com/wp-content/uploads/2010/07/hai-c5-e1279918588548.jpg

But... If the fed raises interest rates, prices don't budge, and we slip into another recession, there's a chance we'll dip below ~20 again, and in that context we probably would be in a bubble.

CanuckExpat

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Re: Housing Bubble 2.0?
« Reply #16 on: November 23, 2015, 05:24:59 PM »
There are nice interactive charts from the Economist where you can compare and contrast different housing markets and the US average.
They use data from Zillow.

Of the three markets people were talking about in this thread (SF, NY, Seattle), only SF is at an all time high in nominal terms and all are below their pre-crisis peak in terms of real price and in terms of price/income and price/rent, (SF is close to all time high in real terms, and shows an interesting upwards trend price/income).

I'm not saying this to call or not call a bubble, I don't have a crystal ball. The charts are neat, and there were some statements made in this thread that are inaccurate in terms of all time highs, at least according to this data.
« Last Edit: November 24, 2015, 12:15:36 PM by CanuckExpat »

undercover

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Re: Housing Bubble 2.0?
« Reply #17 on: November 23, 2015, 06:31:17 PM »
You could list 10 reasons why you think we're in a bubble, and I could list you ten reasons why I think we're not. Both lists of reasons would hold equal weight since none of the reasons are proof of anything. A "bubble" is something we refer to in retrospect, it's nothing that anyone can predict. No one said, "I'm living in the Industrial Age!" Sure, you'll have people try to say that they predicted the last bubble. They didn't. They'll say they knew it was bound to collapse because people making meager salaries were suddenly able to afford million dollar homes. They may have thought, "this can't last", but it's not like they knew when it would happen. The point is that everything that goes up must come down, but you have no idea when that is going to be. Yes, I'm calling it right now! The housing market in SF is going to collapse someday! I'll be a genius when it happens!

We're in a fundamentally different environment than 2004-2008. I don't say that to claim we aren't in a bubble, only to say that it likely won't crash in the severity that it did before.

But, I will give you reasons as to why SF may not be in a bubble: 1. High concentration of high-paying tech jobs. Still the highest of any region in the US. 2. Fantastic year round weather. 3. High accessibility to Eastern countries. 4. Unique architecture and feel to the city. 5. No room to build, nor any desire from the city to abolish height restrictions for higher density.

You just can't call this stuff. I truly believe there are no "signs" since like I said, for every argument as to why we're in a bubble, there is an equally weighted argument as to why we're not. If you're going to sell your house because you think we're in a bubble, make sure it's for rebalancing purposes. Make sure you have found value somewhere else that you can dump the proceeds into. The only thing we can both agree on about the SF housing market is that it's at historical highs and we don't know when it will start to correct. But unless you can find an asset that is at a deep discount, there's no logic in dumping all your proceeds into an index fund.


I agree with your post and not everyone can predict the future but we can make educated guesses. When I see properties increase in value by 20-40% in a matter 1-2 years, I don't care what arguments you use about not enough land to build on or a plethora of high tech jobs, that rate of ascent is not normal and unsustainable. In our case, yes part of it is market timing, but another part is to also downsize and lower our payments. And since we are sitting on a decent gain even after transaction costs we decided to make the move.

Current payment with mortgage, prop tax, hoa is $4245, net after tax deduction is $3445.
Moving to 1100 sf apartment from 2160sf home. Rent is $2600.
Will walk away with 240k cash and plan to dump into index funds and plan to buy again when I see some sense of normalcy back again.

Objectively, I think you're totally justified in making that move (we can agree that the SF RE market is at historical highs), but obviously a 1100sf apartment isn't comparable to a 2160sf home. Yes, you'll be saving money, but it's more of a psychological thing. The real question is - did you even buy properly to begin with?

Quote
that rate of ascent is not normal and unsustainable

I would argue against "not normal", but I'll give you that; however, you simply don't know if it's sustainable or not. You could very well come out ahead, and I sincerely hope you do since I personally have no interest in the SF RE market, but know that your subjective reasons for selling/moving are just that.

brooklynmoney

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Re: Housing Bubble 2.0?
« Reply #18 on: November 23, 2015, 09:15:11 PM »
Thank the gods for foreign investors they have taken over a lot of Manhattan leaving everyone else forced to migrate to the boroughs. If foreign investors leave now I do wonder whether the boroughs will lose their appeal at all or if it will continue to be all tres Brooklyn chic.

arebelspy

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Re: Housing Bubble 2.0?
« Reply #19 on: November 24, 2015, 02:38:56 AM »

When I see properties increase in value by 20-40% in a matter 1-2 years, I don't care what arguments you use about not enough land to build on or a plethora of high tech jobs, that rate of ascent is not normal and unsustainable.

I would argue against "not normal", but I'll give you that; however, you simply don't know if it's sustainable or not.
[/quote]

No, I can, and do, know. It's absolutely not sustainable.

20-40% per year is impossible to sustain. Flat out. It'd grow bigger than the u.S., and then entire world,  economy after a decade or two.
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undercover

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Re: Housing Bubble 2.0?
« Reply #20 on: November 24, 2015, 07:01:59 AM »
Right, I agree that nothing can go up forever. That doesn't mean that it's unsustainable for a specific period of time, which is what I meant. I took what he said in the context of "it's unsustainable to the point where I must sell ASAP". Again, it could sustain 10 more years. But yeah, it will definitely stop growing at that rate at some point in time. That doesn't necessarily mean a crash though. A bubble implies an impending crash. All this is to say that you can't time a bubble no matter what you think you know or how smart you are.
« Last Edit: November 24, 2015, 08:05:56 AM by undercover »

brooklynguy

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Re: Housing Bubble 2.0?
« Reply #21 on: November 24, 2015, 07:55:02 AM »
Thank the gods for foreign investors they have taken over a lot of Manhattan leaving everyone else forced to migrate to the boroughs.

That perspective is a bit myopic, assuming you don't want to be "forced" to emigrate yourself.

supersaverman

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Re: Housing Bubble 2.0?
« Reply #22 on: November 24, 2015, 08:45:09 AM »
Right, I agree that nothing can go up forever. That doesn't mean that it's unsustainable for a specific period of time, which is what I meant. I took what he said in the context of "it's unsustainable to the point where I must sell ASAP". Again, it could sustain 10 more years. But yeah, it will definitely stop growing at that rate at some point in time. That doesn't necessarily mean a crash though. A bubble implies an impending crash. All this is to say that you can't time a bubble no matter what you think you know or how smart you are.

Ok maybe the title of this thread should have been "housing overpriced" vs housing bubble. The dot-coms were a bubble, the sub prime housing boom was a bubble since they both crashed afterwards per your definition. No one will ever get the exact top and ring the register at the highs (some do just like some people hit the lottery). You can't time it but you can sure as hell see the warning signs. At the top of every cycle there are arguments for this time it's different, there is this source for growth unlike the last time, lending is stricter unlike the last time, there are no sub prime borrowers unlike last time, interest rates are lower unlike the last time, and the list goes on. Yet when the crash does come, we all look back in hindsight and say "oh I knew that was gonna happen.. prices were just ridiculous! I knew those Asian buyers would cash out and sell!"

I'm see the warning signs.. http://www.movoto.com/san-jose-ca/1017-miller-ave-san-jose-ca-95129-100_81533461/  and I could very well be wrong. It could last several more years or it could end next year, who knows. My reasons are many fold though. After discovering Mustache, my wife and I realized we didn't need all that space and luxury, and we were just as happy in our 900sf apartment when we first got married with a baby. Over the years and the lifestyle inflation we participated in ended up being empty calories that didn't mean much in the end. So before going off on a philosophical tangent, that plus seeing the heated market made us decide to sell and downsize. It will sure be interesting to see how this all unfolds in the next few years. 


Bearded Man

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Re: Housing Bubble 2.0?
« Reply #23 on: November 24, 2015, 10:00:25 AM »
From what I've been reading, the SF area bubble is about to burst.

The people with that crystal ball must really make a lot of money. Wonder why they'd bother to share that information.

Or maybe they're just guessing?  Nahhhh... ;)

(Not saying they're wrong, just that they don't know any more than anyone else, most likely.)

Didn't Shiller predict the last two crashes? I'd say he isn't guessing so much as assessing economic fundamentals based on known scientific principles. It's not an exact science, but his track record and his status as head of Yale's Economics department makes it reasonable to conclude that he knows more than your average person about the subject.

arebelspy

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Re: Housing Bubble 2.0?
« Reply #24 on: November 24, 2015, 10:15:56 AM »
Permabears will eventually always be right, as will permabulls.  Predictions aren't hard to get right when they're vague and have no timeframe.
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undercover

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Re: Housing Bubble 2.0?
« Reply #25 on: November 24, 2015, 10:52:35 AM »
I'm see the warning signs.. http://www.movoto.com/san-jose-ca/1017-miller-ave-san-jose-ca-95129-100_81533461/  and I could very well be wrong. It could last several more years or it could end next year, who knows. My reasons are many fold though. After discovering Mustache, my wife and I realized we didn't need all that space and luxury, and we were just as happy in our 900sf apartment when we first got married with a baby. Over the years and the lifestyle inflation we participated in ended up being empty calories that didn't mean much in the end. So before going off on a philosophical tangent, that plus seeing the heated market made us decide to sell and downsize. It will sure be interesting to see how this all unfolds in the next few years.

Ultimately, your peace of mind is worth more than anything. So at any rate, congrats. I think it's a good move for you.

monstermonster

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Re: Housing Bubble 2.0?
« Reply #26 on: November 24, 2015, 12:25:43 PM »
I've been wondering if Portland is in a housing bubble. Both rental market rates and property values have grown by 50-100% in the past few years, and we got hit fairly hard during the recession (particularly in historically black neighborhoods). But I'm pretty much priced out of the real estate market right now, unless I buy at the very lowest of low end (studio condo in low-income housing zoning).

I tetter on the edge of hoping things plunge a bit and I can buy something a bit bigger (with rental potential at least in a second room).

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Re: Housing Bubble 2.0?
« Reply #27 on: November 24, 2015, 12:38:49 PM »
It's a genuine concern in the high-cost markets, and it's a real exercise in game theory for anyone who plans to live there in the long term. Personally, I'm kind of hoping Seattle implodes so I can move back for less... a good friend of mine just paid 3.5x what we did for roughly the same size & quality of house, which is hard to understand from a fundamental value standpoint.

By contrast, our local market (Madison County, AL) has roughly tracked inflation - real prices are barely above post-crash lows, despite a steady influx of highly-paid jobs. As a cash-flow investor, it's awesome; you can hardly swing a dead cat without hitting a profitable rental, and there's really nowhere for it to fall.

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Re: Housing Bubble 2.0?
« Reply #28 on: November 24, 2015, 04:21:45 PM »
SF housing will fall when the tech market collapses, and the tech market is starting to show cracks. Witness the over-valuation of many of the unicorns.

http://www.sfchronicle.com/business/article/Overvalued-unicorn-startups-stumble-as-they-6642219.php

http://money.cnn.com/2015/11/19/investing/square-ipo-unicorns-jack-dorsey/

The crystal ball says...2 years. :)

pdxbator

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Re: Housing Bubble 2.0?
« Reply #29 on: November 24, 2015, 04:34:32 PM »
I've been wondering if Portland is in a housing bubble. Both rental market rates and property values have grown by 50-100% in the past few years, and we got hit fairly hard during the recession (particularly in historically black neighborhoods). But I'm pretty much priced out of the real estate market right now, unless I buy at the very lowest of low end (studio condo in low-income housing zoning).

I tetter on the edge of hoping things plunge a bit and I can buy something a bit bigger (with rental potential at least in a second room).

Unfortunately I don't think Portland is in a bubble. Housing is just getting more expensive due to all the people moving here. Cities are the place to 'be' and Portland is one of just a few west coast cities that are of size. It will continue to grow and prices will creep up.

brooklynmoney

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Re: Housing Bubble 2.0?
« Reply #30 on: November 24, 2015, 09:44:56 PM »
Thank the gods for foreign investors they have taken over a lot of Manhattan leaving everyone else forced to migrate to the boroughs.

That perspective is a bit myopic, assuming you don't want to be "forced" to emigrate yourself.

I am not so attached to my hood although I like it so I  would not mind moving to Queens or out of the city altogether but yes it has not been easy on those who were here before the current wave of gentrification in BK. I was being somewhat facetious.

monstermonster

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Re: Housing Bubble 2.0?
« Reply #31 on: November 25, 2015, 09:33:18 AM »

Unfortunately I don't think Portland is in a bubble. Housing is just getting more expensive due to all the people moving here. Cities are the place to 'be' and Portland is one of just a few west coast cities that are of size. It will continue to grow and prices will creep up.

Nooooooo don't tell me that. I guess I'm just forced to accept that I'll be paying 50% of my income in rent in a few years.

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Re: Housing Bubble 2.0?
« Reply #32 on: November 27, 2015, 04:49:24 AM »
There's clearly enough interest in New York by international parties that displaces the unaffordability by locals to keep the prices stable. New York is also an icon, and that creates demand. San Francisco? Not so much. I don't know enough about the Bay Area to say whether that's something that is happening there but I stand by my statement in general. New York is an exception to me.

I actually have to disagree on this front . Yes New York is an international icon being the big apple and all that. But I would argue that San Francisco is a big name on the world stage too, it's one of the only other American cities that I (as an indifferent and disinterested kiwi) knew the name of and would be able to recognize a picture of. That, Los Angeles and Las Vegas lol.

The other thing that I can't help but wonder is what would happen to all these house prices is there was a big interest hike. I mean stupid cheap leverage can't last forever....

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Re: Housing Bubble 2.0?
« Reply #33 on: November 27, 2015, 12:09:53 PM »
The other thing that I can't help but wonder is what would happen to all these house prices is there was a big interest hike. I mean stupid cheap leverage can't last forever....

There's some nice researched summarized by the Federal Reserve Bank of San Francisco. One of the findings I found surprising is that during the latest housing boom, the mortgage debt / income ratio has been decreasing while housing prices have been increasing.
That is all country wide data averaged and may not be reflective of particular local markets, and I wonder if it isn't more an indication of exactly how crazy the mid-2000s boom was, instead of a statement that thing are more sane now (all relative).


Sofa King

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Re: Housing Bubble 2.0?
« Reply #34 on: November 27, 2015, 06:32:56 PM »

If housing prices are out of reach for almost everyone in your area, you're in a bubble.

I don't agree with this definition.  Almost no one in NY has been able to afford places for decades, that doesn't necessarily mean they're in a bubble.

That depends where in New York you mean? When someone says "New York" rite away most think of NYC but only NYC and the counties surrounding it is it hard to find nice houses for a good price. I live in Orange County NY and while yes there are plenty of high priced homes here if you don't mind a smaller (1,000 Sq Ft or so) older house in good shape there are MANY nice houses in the $70,000-$120,000 range with a drive to NYC under 1HR away.

arebelspy

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Re: Housing Bubble 2.0?
« Reply #35 on: November 27, 2015, 06:49:04 PM »
Yes, I meant NYC.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

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Re: Housing Bubble 2.0?
« Reply #36 on: November 28, 2015, 03:30:24 AM »
The other thing that I can't help but wonder is what would happen to all these house prices is there was a big interest hike. I mean stupid cheap leverage can't last forever....

There's some nice researched summarized by the Federal Reserve Bank of San Francisco. One of the findings I found surprising is that during the latest housing boom, the mortgage debt / income ratio has been decreasing while housing prices have been increasing.
That is all country wide data averaged and may not be reflective of particular local markets, and I wonder if it isn't more an indication of exactly how crazy the mid-2000s boom was, instead of a statement that thing are more sane now (all relative).

Ah I see. So things are no longer batshit crazy... just moderately hatstand?

Personally after the GFC I tend to err on the side of wanting financial slack. So maybe the average Joe feels similar. (Bolding mine)

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Re: Housing Bubble 2.0?
« Reply #37 on: November 29, 2015, 04:57:45 PM »
If the tech industry took a hit, housing prices would adjust accordingly. However, I wouldn't call that a bubble. My opinion of a bubble is when people think housing prices will keep on going up without a fundamental reason. If a steel factory closes and 50% of the people in town lose their job, housing prices will adjust. Is that a bubble?

If people continue to make high salaries and are able to pay their mortgages they will continue to pay their mortgages even if the mortgages and salaries are abnormally high.

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Re: Housing Bubble 2.0?
« Reply #38 on: November 29, 2015, 10:34:27 PM »
I agree prices have risen to a great extent.

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Re: Housing Bubble 2.0?
« Reply #39 on: November 29, 2015, 11:19:37 PM »
It's definitely possible, even likely, that real estate is overvalued in the bay area.  That doesn't mean it's a "bubble" in the sense that it will "pop."  The biggest risks in this area are increasing interest rates (reducing affordability at any given income level) and private equity bubble pop (causing layoffs at startups).  The housing bubble 1.0 issues do not exist (this time it's different!  buyers are hugely qualified on paper, decent down payments or all-cash, low DTI, etc.)  In my mind, it's entirely possible that real estate just goes sideways for a long time.  So I'd give the same advice you will see anywhere: buy a home for shelter, if the calculations favor buy vs. rent.  But as RE speculation, it's not a great bet.

p.s. other risks are a sea change in housing policy.  Right now, the NIMBYs and "misguided lefties" are keeping land values extremely high by opposing high-density development (or any development), opposing expansion beyond urban limits, championing rent control and BMR units (which increases the price of market rate units), and so on.  If the housing crisis reaches a tipping point, I could see someone with authority (governor, state legislature, prop XX) paving the way for of-right development, which could easily destroy (or at least moderate) land value (basically, you'd see housing prices similar to Houston, Phoenix, etc.)  I'm not even saying that's a good thing, just a possibility if we completely drive out the middle class.
« Last Edit: November 29, 2015, 11:27:16 PM by dragoncar »

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Re: Housing Bubble 2.0?
« Reply #40 on: November 30, 2015, 09:15:03 AM »
Many arguments about how "this time is different" stating that loan requirements are so strict that only well qualified buyers will be approved... well that's starting to change. Here's a year old article..

http://www.wsj.com/articles/mortgage-lenders-set-to-relax-standards-1417197075

and another..

http://blog.credit.com/2014/12/4-reasons-you-can-buy-a-home-in-2015-104418/

Prospective buyers have another reason to high-five Fannie and Freddie: They’ve recently agreed to get behind loans with just 3% down. That lower benchmark, coupled with loosening credit standards, will likely help more first-time buyers enter the market.

and about those Chinese buyers..

http://sanfrancisco.cbslocal.com/2015/08/23/realtors-worry-downturn-chinese-market-cools-bay-area-real-estate/

The economic slowdown in China and the devaluation of the yuan are troubling and DeLeon says an extended global financial crisis could bring a chill wind to the Bay Area’s red-hot — and still-rising — home prices.

“I think that if we do see loss of that 15 to 20 percent of international buyers … it’ll slow appreciation. But I don’t see a decline occurring — but I do think that will limit future upside,” DeLeon said.

DeLeon thinks a bigger threat to his business lies with the financial health of tech workers who represent nearly 80 percent of his buyers. And U.S. stock investors have been hammering technology companies especially hard in recent days.



It's hard to see the party ending right now with the good times rolling, high paying jobs are abundant, low inventories, international investors etc. But nothing lasts forever. Even Mr. Mustache states in his article.. http://www.mrmoneymustache.com/2013/05/07/how-to-prosper-in-an-economic-boom/

If you have a big house that you’d like to downsize, this is the time to do it. The most avid housing optimizers might even move to a rental during this time.

For those interested in their local real estate scene as I am, this can be a frustrating time, as rental houses may become too expensive to provide appropriate returns (I look for monthly rent equal to 1% of the purchase price as a rule of thumb). But this opens up another opportunity: the fix-and-flip. In expensive markets, prices for the same house can vary by $100,000 or more just based on cosmetic condition. If you know how to create residential beauty out of ugliness on an efficient budget, the boom market is the place to ply this trade.

… And eventually, once everybody gets used to the good times, the next bust will arrive.

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Re: Housing Bubble 2.0?
« Reply #41 on: November 30, 2015, 01:16:38 PM »
Many arguments about how "this time is different" stating that loan requirements are so strict that only well qualified buyers will be approved... well that's starting to change. Here's a year old article..

http://www.wsj.com/articles/mortgage-lenders-set-to-relax-standards-1417197075

and another..

http://blog.credit.com/2014/12/4-reasons-you-can-buy-a-home-in-2015-104418/

Prospective buyers have another reason to high-five Fannie and Freddie: They’ve recently agreed to get behind loans with just 3% down. That lower benchmark, coupled with loosening credit standards, will likely help more first-time buyers enter the market.

and about those Chinese buyers..

http://sanfrancisco.cbslocal.com/2015/08/23/realtors-worry-downturn-chinese-market-cools-bay-area-real-estate/

The economic slowdown in China and the devaluation of the yuan are troubling and DeLeon says an extended global financial crisis could bring a chill wind to the Bay Area’s red-hot — and still-rising — home prices.

“I think that if we do see loss of that 15 to 20 percent of international buyers … it’ll slow appreciation. But I don’t see a decline occurring — but I do think that will limit future upside,” DeLeon said.

DeLeon thinks a bigger threat to his business lies with the financial health of tech workers who represent nearly 80 percent of his buyers. And U.S. stock investors have been hammering technology companies especially hard in recent days.



It's hard to see the party ending right now with the good times rolling, high paying jobs are abundant, low inventories, international investors etc. But nothing lasts forever. Even Mr. Mustache states in his article.. http://www.mrmoneymustache.com/2013/05/07/how-to-prosper-in-an-economic-boom/

If you have a big house that you’d like to downsize, this is the time to do it. The most avid housing optimizers might even move to a rental during this time.

For those interested in their local real estate scene as I am, this can be a frustrating time, as rental houses may become too expensive to provide appropriate returns (I look for monthly rent equal to 1% of the purchase price as a rule of thumb). But this opens up another opportunity: the fix-and-flip. In expensive markets, prices for the same house can vary by $100,000 or more just based on cosmetic condition. If you know how to create residential beauty out of ugliness on an efficient budget, the boom market is the place to ply this trade.

… And eventually, once everybody gets used to the good times, the next bust will arrive.


So you are saying there could be a lax lending fueled bubble in the future? Cause that's not what we have now (if it's a bubble it's some other kind)

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Re: Housing Bubble 2.0?
« Reply #42 on: December 08, 2015, 07:52:20 AM »

If housing prices are out of reach for almost everyone in your area, you're in a bubble.

I don't agree with this definition.  Almost no one in NY has been able to afford places for decades, that doesn't necessarily mean they're in a bubble.

That depends where in New York you mean? When someone says "New York" rite away most think of NYC but only NYC and the counties surrounding it is it hard to find nice houses for a good price. I live in Orange County NY and while yes there are plenty of high priced homes here if you don't mind a smaller (1,000 Sq Ft or so) older house in good shape there are MANY nice houses in the $70,000-$120,000 range with a drive to NYC under 1HR away.

Is that 1 hour with no traffic? What about traffic? Also, are these houses in the ghetto? I wouldn't live in NY state due to the politics alone, just curious. Good to learn about what markets are available. If it's as close as you say, I wonder what the rents will go to in the long run.