Interesting Article on the Housing Market

Interesting article. I love real estate, yet the US isnt where I want to buy my next home. I think Im going to Europe too, Spain for me though.

Plus, I cant just ignore the bubble issue, its rather worrisome.

 

"Of course there's no bubble..." LOL. I think that is a typo. Should have removed the "no." This housing market reminds me of the tulipmania in Holland, in 1636.

http://www.dirtgardener.com/TipSheets/Bulbs/Tulipamiana.html

"Traders could earn as much as 60,000 florins (today approx. $44,000) in a month -- not a bad commission even by 20th century standards. People were desperate to cash in on the bulb-trading frenzy! Small businesses were sold and family jewels were traded."

 

http://money.cnn.com/2005/03/14/magazine/flippers_0504/index.htm



You, too, can be a flipper!

 

The real question is what will be the catalyst for housing prices to drop. As I have stated previously, the federal government through tax and fiscal policies is creating artificial wealth. This situation is eerily familiar to the dot.com bubble. When I hear people talking about how you can't lose buy investing in a house, I get a little nervous.

 

That's the real question. It will have to be when Greespan substantially raises interest rates. As a new homeowner..............the bubble also scares me.

 

I wouldnt trust Greenspan unquestionably. As the records from the fed meetings (internally) were revealed this past december after the 5 yr waiting period, it showed that the feds indeed knew of a bubble in 99, yet decided that it was no big deal and even defended their stance in front of congress/senate hearing.

 

What a horrible article. Didn't get much out of it, except that we should all move to Coeur D'Alene, Del Ray, or Detroit.

Also Del Ray is "Leave it to Beaver" ?!? Has she ever been there?

 

People also need to consider that Real Estate is NOT equivalent to the dot.com bubble in that the bubble is not every where.

For example, here in the Boston area, nearly every professional feels that while prices have gone up, we are no where near a true bubble. There might be a small 5% correction soon but nothing in terms of a burst as the demand for housing still outweighs the supply.

The equations for a bubble bursting will be different based on where you are in the country.

As a side note, for people waiting for housing prices to come down based on interest rates going up, it won't change your buying power at all unless you are going to buy your house in cash.

Andy

 

I think Andy is right-on.

Depends on where you are.

Here in S. Cali things are pretty crazy. People are getting ARMs everywhere and if rates go up...? I can't imagine that there is not going to be a major correction within a year or two. Average home prices are over $500k. It should drop 15-20% IMO.

But, in Arizona, there's still room to go up.

 

We've thought about PG County. (Hyattsville, Mt. Ranier). Of course we've also thought about moving to North Carolina as well.


EDIT: I think we're due for a bit of a correction. THings have gone up so much that people are taking on all-sorts of loans, and specualtors are running rampant in the market. A substantial interest rate increase could cause a bit of a problem.

 

That's a consideration, but we don't have kids yet, and will probably send them to Catholic School anyway.

 

In Bay Area, CA, the housing price has been kept going up. When a similar house as mine was put on the market for $795k, I knew we have a bubble. I am not scared of it being burst since I owned a house for a long time and I intend to stay in the house for some more. It will probably hurt first time buyers who may have to move around, or buyers who have been investing in 2nd & 3rd homes.

 

True.

 

For the most part I agree, but salaries are increasing at a much slower rate than house prices. Eventually people are going to say no way to spending half or more of their salary on a mortgage. I have to wonder when smart companies are going to start moving their headquarters to places like Ohio where industrial jobs are in decline and the house prices are dirt cheap. True, many companies in the DC area need to be here, but many don't. "But who wants to relocate to Ohio?" you ask. I do. I can buy a decent sized house for 1/10th what I would pay here in Maryland.

 

Some thoughts, reposted from two months ago in P&CE:

Back in 1997, I rented a room in a house on a street where the houses across the street were on Seattle's Lake Washington. Since the house was clearly the dump of the neighborhood and I was working in the King County Courthouse at the time anyhow, I went and looked up the property info at the courthouse one lunch hour, as well as the neighboring homes.

Some of our neighbors had homes valued in the millions back then. But my landlord had bought the property back in like 1989 before Boeing took one of its periodic nosedives. He bought the property for something like $279,000 and it was valued as of the mid-1990s at something like $180,000. I think the housing industry term for this is "ouch."

He still managed to break even on it when he sold it to the neighbor behind us. He probably got a good sale on it because the dump was built in 1906 and the only way it would've fit housing codes if it was torn down and rebuilt would have been to build up into the neighbor's view. I'm sure my former landlord used that as leverage in the negotiations. Now, looking it up online, I see my ex-neighbor sold it in 2003 for an even 400 grand. And it's valued at $432,000 now.

The problem with this particular bubble is all those adjustable-rate mortgages out there. If the dollar goes kablooie, Alan Greenspan is going to have jack up interest rates. If those mortgages get adjusted upwards as a consequence, and people find themselves with a few extra hundred dollars a month of mortgage and no corresponding rise in salary, we may see a huge wave of defaults, exacerbated by the number of properties on the market as a whole lot of other people will be in the same boat.

 

Did anyone else read this as being about sending a kid to pirate school? 'Cause that would rock.

 

I live in Central NJ and the housing market in my town has been hot for a number of years now. Houses selling in days. 10% increase in value year to year. Lately though I am seeing "For Rent" signs everywhere -- outside apartments and multi-family rental homes. What does this mean?