Does it exist? Discuss. I've noticed a lot of online buzz both supporting supporting it's existance and against it. It seems rather clear that the majority of those who are for it did not gain obscene amounts of paper equity over the last 15 years, and those against are more less inclined to convince themselves that they won't lose all their gained paper equity. Since Bigsoccer isn't a real estate blog where all who visit share the same point of view, I'd love to get the opinions of those around these parts. If your view is rather one sided on the issue an indication whether you currently rent or own would also be appreciated.
Our home in ex-urbs New England is currently worth 2.5 times what we paid for it in 2000. Take of that what you will.
Prices on condos here in the Washington Area have dropped pretty sharply over the last year or so. I'd say there's a bit of a bubble, but at least here, there's not any open space left anywhere near the city, while the population is continuing to grow quickly, plus we've got the most educated and richest workforce in the country.
You don't say. I wonder how much wages have gone up in that period? With rising interest rates, it's tough to believe that these prices are going to be sustainable in the long run.
Prices seems to be coming down a bit... about 5-10% from what I've heard. But what does that mean when prices increased 15% in the previous year? Not much. It doesn't seem to be a bubbe, yet. I think in order to have a bubble right now, the economy would have to take a downturn while interest rates crept up a little more. The creative financing of 2004 and 2005 won't come to bear until all those interest-only loans start wearing out in five years. By that calculation, I would expect a bubble, if any, to really begin in 2008/early 2009 as people want to sell that extra house or condo they've been paying interest-only on for 3 or 4 years. But in certain areas (S. Cali) I think prices could drop 20-30% over two years.
A bubble doesn't have to burst spectacularly for something in retrospect to be seen as a bubble. For example, I can well see prices being stagnant for the next 6-10 years (and thus losing significant value in real terms). If that happens, I think what's happened over the last few years could well be looked back on as a speculative bubble.
I wouldn't assume any ARM out there is in itself a junk loan. A 5% - 10% drop on top of the loss from not keeping up with inflation. And if the house was valued at $250k, went up 15% and then came back down 10%, they're almost back to where they were 2 years ago. In fact, factoring in inflation, they house would be valued less than 2 years ago. It just depends on exactly how the valuation changes and how much inflation is. The thing to me is that prices only say so much. They only measure the sale price. They don't factor in other things that happen in a slow(er) market like the seller paying closing costs, the seller having to spend $10k in repairs to close the deal, and other things like that. It also doesn't factor in how the slower sale time can affect the sellers costs. For example, they may have already bought another place and are paying 2 mortgages. Things like that can quickly eat into gains. Those don't pop up in the final sale price but do make a big difference in what money the seller may or may not be making on the deal.
5/1 ARMS are not junk loans. I am too lazy to do any googling, but my understanding is that there is a lot of academic research that shows that historically, there has never been a 5 year period where it would not have been better to have a fixed over an ARM. If you have a 5/1, your break even point is likely to be a few years after that (meaning the point, factoring in rate increase, it would have been better to have a fixed) and significant percentage people are going to refi or move in that time. A lot of the bubble proponents cite recent rise of "exotic" loans as the cause of the bubble. However, what they don't acknowledge is that those loans are not going anywhere and banks aren't suddenly going stop offering them. For better or worse, the days of people marching into their local savings and loan and putting 20% down on a 30 year fixed are over. A lot of bubble proponents are also salivating over the day when all of the ARMs reset and people go into foreclouse. However, they don't realize is that if a lot of people find themselves in financial difficulty because of adjusting loans, the mortgage industry is very likely to come up with a financial product to rescue those people (with some pain, of course). That said, I think there is a strong chance that you will see a decline in prices in the short term. Unfortunatly I am the jackass that just bought a house in So Cal a week ago. Cest la vie.
http://www.mortgagenewsdaily.com/752006_Housing_Bubble_Watch.asp The U.S. Census Bureau in conjunction with the U.S. Department of Housing and Urban Development released data on the sales of new residential property in May. Again a pleasant surprise. The preliminary April estimate was revised upward to 1,180,000 and preliminary figures showed that May was sailing along at a level 4.6 percent higher than those revised April figures. This was down 5.9 percent from figures a year earlier but still an indication of a strong market for new homes. The median price of new homes sold in May was $235,300 and the average was $294,300. These were both down from April 2006 figures of $238,500 and $298,300 figures respectively. There is currently a 5.5 months supply of new homes on the market at present absorption rates, compared to 5.8 months in April. In May one year ago, however, the supply was 4.2 months - a year-over-year increase of 31 percent.
You're out of date. The June figures were pretty weak, May's were revised downwards and inventories are at record levels: http://www.realestatejournal.com/buysell/markettrends/20060727-walsh.html
It really depends on which area you're living in. San Francisco, DC, NY, LA, and Boston are all overvalued markets. However, in other parts of the country, housing is undervalued. Home prices in my area never really took off. As a result, the market here is felt to be undervalued by about 10%. Look for this potential gain to be realized over the next 2 years. Be careful. Protect your capital.
Chicago is finally beginning to cool off a bit. I wouldn't qualify the Chicagoland area (overall) as undervalued or overvalued, but discretionary spending and some hesitency to buy a high priced piece or property leads me to believe you'll see a relative leveling off of property values over the next 8-12 months. Commerical and large residential builders are still in good shape as long as they don't overprice their properties. Individiual residential construction is definitely seeing a glut of overprices houses in the $1.5-2 million range, and in the suburbs, anything over $4 million that hasn't gone on the market yet will be hard pressed to get full value upon completion. No more specs that high for sure.
DC's cooling off in weird ways. High-end homes aren't moving unless they are on lots big enough for subdividing. The bottom seems to have fallen out of the condo market, with all sorts of units coming on line now. The sweet spot still is the middle-class home area, where demand still is fairly strong. I expect that demand will really pick up in 2009, when the new administration starts and the BRAC alignments start to kick in. Sachin
When I bought my .19 acre lot here in Utah three years ago, I resented paying $68K. I thought I was being totally ripped off, but I bought the lot anyway because it was close to my previous neighborhood, etc. Total price to build my house: $255K for 4,000 sq.ft. finished, including a legal accessory apartment in the basement that produces income. Now I can't find a building lot for $250K around here. The nomad in me wants to take my equity and build a new house, but the increased real estate prices have me pretty turned off. And I don't think we even have a bubble technically here in Utah. Everyone who can't afford the more expensive markets are flocking here.
By in large, I wouldn't revise any of that statement, at least not for another 2-3 months at the earliest, if then. I assume you're seeing trends that lead you to disagree with my assesment? If so, I'd definitely like to hear them.
Had not seen you response. I do not disagree with your assessment. Let's talk again in two or three months to see where we stand. Is that a deal?
My take on it from watching SLC is that there isn't a bubble, at least not yet. It seemed like the Salt Lake Valley didn't see the price increases that other areas had hit. I was out there with a friend from DC in spring 04 and on the way back from seeing the Kennicott mine we drove past some new houses advertising starting from $150K. As you can imagine, that got him commenting on how you couldn't buy a cardboard box under a bridge in NoVa for that. Anyway, it seems like the last 2 years the real estate market in the are has been picking up a lot. That's not to say it was bad before then. And I'm sure there were areas, especially on the edge of the metro, that were doing really well in terms of price growth. But it seems like things started to pick up a couple years ago and have really boomed this last year in terms of pricing. Do you know what's driving it? From here my guess would be strong job growth and the supply of housing in the areas is probably strained, especially in terms of the land and at that land that's convienient to a freeway. I'f think that things like the west valley highway (toll?) could help in making that area more attractive. But it seems like what little land there is between the Wasatch Front and the Great Salt Lake as you go north is really more or less developed all the way to Odgen. And the same with land convieniet to I-15 as you south to Provo. Granted that's not developed all the way but it's getting there. And with the Wasatch and the Oquirrh Moutains boxing things in there's only so much space in general. You probably already know people locating out in Tooele to find cheaper housing. I wouldn't be suprised if 10 - 20 years from now, some people start to move to places like Herber City, Brigham City, Logan and others to get away from over priced Salt Lake City. It just depends on how things go. But we've seen the same thing happen in other cities.
Just an example of that even though we can talk about nationwide numbers, the situations in each market can vary. http://www.denverpost.com/business/ci_4527539 The average home price in Gillette [WY] is just shy of $200,000, said Traci J. Conklin, a real estate consultant in Gillette. Five years ago the average price was about $160,000, she said. It's causing hardship for the Michigan transplants. At least four of those interviewed said they had not been able to sell their Michigan homes, though all had been in Wyoming for months. The Nolans' house in Davison [MI], near Flint, was appraised at $160,000 last year. They are asking $120,000 and making mortgage payments on the now- empty home. "You always heard that housing is a guaranteed investment. Well, not in Michigan," said Ramona. Apartment rents in Wyoming are soaring, said Leann Carothers, southwest regional manager for the Wyoming Department of Workforce Services. "As demand goes up, the cost goes up," Carothers said. "Apartments that were renting for $300 to $400 five years ago are now over $1,000."