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2013 real estate bubble?

jc92869

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seems like we never learn.

http://www.doctorhousingbubble.com/...ornia-home-prices-2013-tips-for-mania-buying/

Wife and I are looking to upgrade houses. but in our initial searches we noticed home prices in our area were just too high ( 450k for a 2 k sqf home in a 6k SQF property in inland california). No Way.

I don't care if other people are willing to pay that much, it simply sounds overpriced. SO I went onto my friend google and found this article that explains why we are in a brand new real estate bubble.

the article made a lot of sense, but it was discouraging because it indicates that we did not learn our lesson from the last housing bubble bust.
 

GregT

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seems like we never learn.

http://www.doctorhousingbubble.com/...ornia-home-prices-2013-tips-for-mania-buying/

Wife and I are looking to upgrade houses. but in our initial searches we noticed home prices in our area were just too high ( 450k for a 2 k sqf home in a 6k SQF property in inland california). No Way.

I don't care if other people are willing to pay that much, it simply sounds overpriced. SO I went onto my friend google and found this article that explains why we are in a brand new real estate bubble.

the article made a lot of sense, but it was discouraging because it indicates that we did not learn our lesson from the last housing bubble bust.

I understand the comments and the sentiment, but I feel "better" that a part of the demand-side is coming from investors (some of whom are paying cash) and not just supported by mortgages of questionable quality.

Values are definitely up, but it is also very difficult to get a loan these days -- so hopefully we are returning to a more normal underwriting environment -- and therefore these values might in fact be sustainable?

Hoping....

Best,

Greg
 

easyrider

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Nice article but it misses one thing. Replacement cost. Houses are good investments now because of the higher cost to build. In 2009 lumber was cheap compared to now. Look at 5/16 osb, it went from $7 to $26. Regulations, materials and labor have made the cost of a building increase.

I think we did learn our lesson from the last housing crash as lenders are not lending to just anyone these days. Now days you need a big cash reserve and excellent credit rating to get a loan where in the past they were lending to almost anyone that could sign their name.

Bill
 

jc92869

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i see your point

I understand the comments and the sentiment, but I feel "better" that a part of the demand-side is coming from investors (some of whom are paying cash) and not just supported by mortgages of questionable quality.

I see your point, and I agree. However with a high influx of investors comes a different set of challenges.

I can't predict the future, but if the articles numbers are correct, 34% of buyers today are investors with cash. I assume that this mean wall street, as well as construction companies, as well as the guy next door using his retirement income to buy a second property. and it is this demand and readily available money that has been partially responsible for artificially inflating home prices (23% up from 2012-2013 ). Real estate people chime in, but I don't think that is a "natural " jump.

But what happens when the investors leave. The cash supply is not a bottomless well. Either 1) the cash supply will diminish. or 2) interests rates are raised by the fed and the stock market / lending becomes a better investment.

Not only will that 34% of buyers will be gone, but their asset liquidation could flood the market. - less demand, more supply.

I think prices will decrease ( not necessarily crash). So what happens to the poor schmuck who bought in 2013 at inflated prices? his home will become upside-down, and while his mortgage is a better "written loan", i think it will create a similar bubble burst to what we saw in the early 2010's.

I don't have a solution, BUt in my specific case, I'm choosing to wait and take a gamble in the hopes that the RE market will stabilize.
 

LisaH

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At least in the Bay Area, a lot of cash buyers are from overseas (such as China).
 
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I too see a lot of cash buyers in my area snapping up expensive properties.

The real questions should be - where did all this cash come from?
 

PigsDad

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The real questions should be - where did all this cash come from?
Have you not seen the stock market lately? Anyone who has been invested in the markets for the last couple of years have made some fantastic profits. Selling some at this point and diversifying seems like a reasonably smart thing to do.

Kurt
 

Carol C

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I too see a lot of cash buyers in my area snapping up expensive properties.

The real questions should be - where did all this cash come from?

Bonuses paid to CEOs and bankers when taxpayers bailed out the banks via TARP & other fed handouts? :shrug:
 

Carol C

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There is not a new real estate bubble forming in the US. The real estate market is simply starting to recover from a huge depression. Now that bottoms are in, the market can start operating more normally.

The bubble is in US Treasuries.

And when that bubble bursts, the whole system will collapse...because who will bail out the US Treasury? Oh yeah, China, the Saudis perhaps. And round and round we go. :wall:
 

pgnewarkboy

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And when that bubble bursts, the whole system will collapse...because who will bail out the US Treasury? Oh yeah, China, the Saudis perhaps. And round and round we go. :wall:

The united states is obviously on the verge of another collapse from which we won't recover. You know, like all the other times. That is why we all live in caves, trees, tents and eat dirt. You know, because things are always a total mess over and over again.
 

BocaBum99

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And when that bubble bursts, the whole system will collapse...because who will bail out the US Treasury? Oh yeah, China, the Saudis perhaps. And round and round we go. :wall:

You are a couple of years behind. The Federal Reserve has been bailing out the US Treasury by buying up $85B worth of Treasuries every month.
 

Carol C

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The united states is obviously on the verge of another collapse from which we won't recover. You know, like all the other times. That is why we all live in caves, trees, tents and eat dirt. You know, because things are always a total mess over and over again.

Eating dirt I find a bit extreme. I prefer foraging for nuts, berries, pokeweed & other edibles. As for my cave, you should see it...it is solar heated and lit and quite a step up from the grass shack timeshare I "owned" in South Africa!
 

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The united states is obviously on the verge of another collapse from which we won't recover. You know, like all the other times. That is why we all live in caves, trees, tents and eat dirt. You know, because things are always a total mess over and over again.

over and over again the apocalypse destroys America. It's a wonder the zombies haven't completely taken over .....
maybe they have
 

PigsDad

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over and over again the apocalypse destroys America. It's a wonder the zombies haven't completely taken over .....
maybe they have
Seems to me in the 80's everyone was saying the spiraling debt would be the end of our country soon. It's been 30 years and we're still here. Hmmm...

Kurt

P.S. I also vividly remember during the oil crisis of 1973, there was an article in our "weekly reader" (I was in elementary school) saying that the world would be out of oil by 1984. For some reason, that really stuck in my head.
 

jc92869

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not as dramatic

I think the political rhetoric and the doomsday comments are taking the point of the article a bit to an extreme.

I don't think this is a political issue, but rather a financial one. IN every investment opportunity, there will be the ones who make money, and the ones who are left holding the bag.

I also don't think that the apocalypse is on it's way. rather i think it might be somewhat of an "aftershock" to the housing bubble burst of the past decade. While this will not take us back into the stone age, I think it can further depress an already weak economy which will make recovery longer to achieve.

A healthy dose of investors in the marketplace is good. Bu the current 34% of homes being bought by investors is very worrysome. We do not want a third of buyer being people simply looking to make a buck. we want the vast majority of home owners to be people living in the property who will maintain it and bring stability to the neighborhood.
 

ScoopKona

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It's simple.

The people who had no business buying houses in the first place have been marginalized. They aren't buying houses now with "mirror test" stated-income signature loans. That means that the people who can actually afford to buy houses are now snapping up the "less-than-replacement-cost" inventory out there.

And the "I can't buy a house because my FICO score is in the 450 range" people are on the Internet complaining to ANYONE WHO WILL LISTEN that the game is rigged. This isn't a bubble. People are buying houses for less than the replacement cost. What's happening is people snapping up values. This is pushing housing back to where it should have been all along.

It's only a "bubble" when the house costs more than it's replacement cost.
 

Carol C

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I think the political rhetoric and the doomsday comments are taking the point of the article a bit to an extreme.

I don't think this is a political issue, but rather a financial one. IN every investment opportunity, there will be the ones who make money, and the ones who are left holding the bag.

I also don't think that the apocalypse is on it's way. rather i think it might be somewhat of an "aftershock" to the housing bubble burst of the past decade. While this will not take us back into the stone age, I think it can further depress an already weak economy which will make recovery longer to achieve.

A healthy dose of investors in the marketplace is good. Bu the current 34% of homes being bought by investors is very worrysome. We do not want a third of buyer being people simply looking to make a buck. we want the vast majority of home owners to be people living in the property who will maintain it and bring stability to the neighborhood.

Back on topic, sorry to sound "political" so here I go with my own very recent i.e. this week experience. I made a purchase offer on a Fannie home, fa ixer -upper since previous owner hated banks and had anger management issues he took out on the house. I intended to live there with my husband who is disabled. But I couldn't pay cash so I got pre-qualified and was working with a mortgage guy to secure a loan. The very next day after I made my offer, some INVESTOR came in with a cash offer & snapped up that house, which he or she will surely flip. Same crap that happened right before the last housing bubble that started in 2007 when investors "bought low, sold high" and created the 07-10 bubble. This scheme is marginalizing folks of low to average means who want affordable housing and home ownership. Btw my credit scores are just fine, but I don't have $80K sitting around. Sorry to vent, but yes the "game" is rigged and I just had personal experience with it this past week. If you want the MLS of the place I gave earnest money on (now it has yet to be returned), PM me.
 
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l2trade

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It's only a "bubble" when the house costs more than it's replacement cost.

It's only a "bubble" when you sell your 2nd home near the bottom and right before the big bump up. Which, unfortunately I did... :bawl:

Where I sold, it seems we will be seeing rising prices, recovery, whatever you want to call it for many more months / years to come. There is little for sale to choose from. I could be wrong. And, if I am wrong, it will give me a chance to buy a 2nd home again. I am not buying now, although I believe prices will continue to rise much more from here. To me it is a bubble, because I don't have the resources to buy at current prices and still sleep well at night. If I comfortably had the cash, I wouldn't think twice.
 

ScoopKona

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It's only a "bubble" when you sell your 2nd home near the bottom and right before the big bump up. Which, unfortunately I did... :bawl:

Where I sold, it seems we will be seeing rising prices, recovery, whatever you want to call it for many more months / years to come. There is little for sale to choose from. I could be wrong. And, if I am wrong, it will give me a chance to buy a 2nd home again. I am not buying now, although I believe prices will continue to rise much more from here. To me it is a bubble, because I don't have the resources to buy at current prices and still sleep well at night. If I comfortably had the cash, I wouldn't think twice.

Good idea!

Wait for house prices to go up more before buying! Especially since you're not a cash buyer -- much wiser to pay interest on the same house for much more money, after all. :rolleyes:
 

jc92869

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really?

It's simple.

The people who had no business buying houses in the first place have been marginalized. They aren't buying houses now with "mirror test" stated-income signature loans. That means that the people who can actually afford to buy houses are now snapping up the "less-than-replacement-cost" inventory out there.

And the "I can't buy a house because my FICO score is in the 450 range" people are on the Internet complaining to ANYONE WHO WILL LISTEN that the game is rigged. This isn't a bubble. People are buying houses for less than the replacement cost. What's happening is people snapping up values. This is pushing housing back to where it should have been all along.

It's only a "bubble" when the house costs more than it's replacement cost.

Wow. that comments sounded a bit elitist. - i take it you didn't read the article.

this is not saying that we are in a financial collapse, or the end of the world , or the destruction of american values. But i think it is a bit naive to look at the current state of real-estate and not see that what's going on is a little weird.

An increase in home prices of 23% in a 12 month period is analogous to a 23 pound weight loss in one month. while it may be headed in the right direction, it is not healthy, and certainly not sustainable.

A 360k home in 2012, has increased to 420k in 2013. if this growth continues, the same house will be 500k this time next year. that kind of growth is simply not indicative of a healthy market and cannot go on for a long time.

Right now there is a manic drive to buy by people who do not want to be priced out of the market, and those who want to buy while prices are still "low" (if you didn't buy in 2012, you are already buying high). this manic drive is what is getting people to make offers above asking price in order to compete with cash investors.

my take is-->once growth stops, slows down, or reverses the 34% of investors will begin selling R/E assets ( as an investor, would you keep an investment that is no longer paying out, or even worse loosing value?), and that is when the burst will happen. the same mania that drove the purchasing will now cause people to start dumping assets in order to not be the one holding the bag at the end. and yes that is the bubble bursting.

If nothing else, please understand that this is not a case of chicken little running around saying the sky is falling. It is simply a conversation piece intended to spark thoughts and communication in a public forum of like-minded people.
 

smurfyblue

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The system is designed to create a bubble

What I don't get is why house prices go up just because another house in the area was sold. So investors strategies is to buy and sell repeatedly until the house prices are out of wack again. The arbitrary math of how house prices increase is just mind boggling. It makes no sense at all and we all just accept it and go with the flow cause ???


I guess cause we too want the magical equity?


Hence the reason why I expect a bubble will form again and burst again soon enough.
 

l2trade

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Good idea!

Wait for house prices to go up more before buying! Especially since you're not a cash buyer -- much wiser to pay interest on the same house for much more money, after all. :rolleyes:

It is a good idea because I don't need a 2nd home. That is why I sold it, except I sold way too soon. I am not a real estate investor. I have timeshares, so I don't need a vacation home. If prices go up more, as I expect they will, I still won't be buying another 2nd home. If I am wrong and we get another real estate pop, then maybe I will buy a 2nd home again... still not likely. ;)
 
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