Housing market spot check

[FIREd]

Down here the RE market is a bit slow (though it's always a bit slow here, maybe because we 're in the south!), but prices keep going up at a moderate pace (according to Money magazine, we are now in the top 15% RE markets in the US for home price appreciation). Early summer was bad for RE, lots of properties for sale and in foreclosure, but since early September, things have stated to move again. The 3 houses for sale on my street sold with a week of each other (though after small reductions in asking prices), "for sale" signs are rarer, and I haven't seen an "auction" sign for a few weeks now.

 

[Culture]

Historically I thought 4x average income - now we're 8x.

Yikes! I have no idea what the right numbers are, but I was at 2.0x when I bought my house in 1990, and I am at 0.72x now on it's appreciated value. I feel sorry for those of you who live in over-appreciated states and have to choice but the pay the local prices.

 

[unclemick]

Sooo - has everybody read today's Yahoo about Detroit housing - reminds me of some ex mining and logging towns growing up out West.

Or - 'Will the last person leaving Seattle please turn out the lights.' Always remember that one since I had left and gone to Denver.

heh heh heh - my BIL is a mining engineer and has lost money on every house they've owned for 30 yrs. Buy high, move low. Renting south of Seattle. And you wonder why I say don't buy if you can rent at a decent price. 'Agile, mobile and hostile.' .

 

[travelover]

Sooo - has everybody read today's Yahoo about Detroit housing - reminds me of some ex mining and logging towns growing up out West.

Or - 'Will the last person leaving Seattle please turn out the lights.' Always remember that one since I had left and gone to Denver.

heh heh heh - my BIL is a mining engineer and has lost money on every house they've owned for 30 yrs. Buy high, move low. Renting south of Seattle. And you wonder why I say don't buy if you can rent at a decent price. 'Agile, mobile and hostile.' .

Yea, I've got houses in my neighborhood (metro Detroit) that have been on the market for a year. They keep changing agents and dropping the price, but - no buyers.

 

[FinallyRetired]

True but everyone has to live somewhere.

That's why this housing bubble is different than the stock market bubble. In the stock market, people can sell and hide away in cash for a while. But a house is not liquid, it may not sell very fast if at all, and even if one sells, there is the problem of having to buy somewhere else.

I think the housing bubble will resolve itself in a different way than everyone is speculating. Sure, prices will come down, but I don't know if they will regress to that inflation curve for a long time if ever. The US housing market has been of a different nature than those in other countries, where renting is much more common, and where properties are often left to heirs instead of selling on the open market. I recall when I lived in Holland that houses were leased by families for 100 years, since few could afford to outright buy them (may be different now). I don't know if the US market will go this way, but as the population keeps increasing, construction decreases, and people have a harder time finding affordable housing, I think the rental market may be the next bubble.

 

[HFWR]

Yea, I've got houses in my neighborhood (metro Detroit) that have been on the market for a year. They keep changing agents and dropping the price, but - no buyers.

Could be that Detroit, Cleveland, and others turn into ghost towns. I remember, however, many rust belt cities were in similar condition in the 70s/80s, and have since reinvented themselves to an extent. Heck, NYC was a basket case not that long ago.

Wonder what happens when water shortages become untenable in the SW and Kalifornia. Go [-]west[/-] midwest, young man?

 

[unclemick]

Therein lies a big advantage of ER - a J O B is not required!

That opens up a lot of flexibility location wise.

heh heh heh - my Mom was born in Detroit and later wanted to go back at times. 'Mom - Detroit is not like the 1920's anymore when you were a kid.'

 

[FinanceGeek]

I agree that the Leavitt-town type developments have limited long term (or for that matter, short term) appeal.

You're buying into a commodity product, and appreciation potential is unlikely to be much greater than mobile homes...

 

[W2R]

Could be that Detroit, Cleveland, and others turn into ghost towns. I remember, however, many rust belt cities were in similar condition in the 70s/80s, and have since reinvented themselves to an extent. Heck, NYC was a basket case not that long ago.

Wonder what happens when water shortages become untenable in the SW and Kalifornia. Go [-]west[/-] midwest, young man?

Therein lies a big advantage of ER - a J O B is not required!

That opens up a lot of flexibility location wise.

EXACTLY!!! It's as though there is two different countries within our country. In the expensive east/west coast areas, jobs pay a lot but expenses and housing are high, so effectively the dollar has less value. In the cheap middle America areas, high paying jobs are rare but expenses and housing are low, so effectively the dollar is more valuable. Yet, the "exchange rate" is $1:$1!!

For those of us who can somehow manage to enjoy living in middle America, and have no ties elsewhere, moving to middle America for ER is a no-brainer. For various valid reasons, it seems that most people can't do it, though.

Now, if I had had half a brain when I was younger, I would have spent my working years on the East or West Coast. Instead, I am here in New Orleans which is cheap but not quite as cheap as the midwest. Too soon old, too late smart. I couldda hadda V-8.

 

[unclemick]

I agree that the Leavitt-town type developments have limited long term (or for that matter, short term) appeal.

You're buying into a commodity product, and appreciation potential is unlikely to be much greater than mobile homes...

Slidell, LA - in the 70's on and off tied with Prescott??, Arizona as the fastest growing spot in the US(based on housing permits).

The sub - division house held value/went up more than the single/one off houses.

Can't prove it - but I suspect the quality/reputation of the developer was the key - different developments, different reps, 'known' commodity.

When I got take out at Domino's Pizza - their delivery map(behind the counter) had the area layed out by subdivision development names - and they always asked if you called in an order.

Strange - neighborhoods named after developers names.

heh heh heh

 

[jazz4cash]

Yup, each week I scan the new development section of the LA times and each week it's the "best time to buy ever" and prices are slashed by $100k at a time!

Well that's pretty accurate. The only better time being ......next week.

One of the Realtor-gurus in our 'hood (suburbs of DC)has started publishing a monthly newsletter tracking home sales in the neighborhood. It shows only 5.5% decline for homes that have sold. Sales vs. asking price is 98.2% which is also fairly stable. Look between the lines and the inventory is 50% higher than a year ago, most of them being priced too high for the current buyers market. This area is much more stable than others job-wise, so I expect more of a flat market for several years, except for new construction. New construction premium is maybe half of what it was at the peak from my observation. Developers in the new condo/townhome market are slashing prices like mad. Today's paper had a story titled "Builders Using Auto Dealer's Sales Tactics".......auctions, lotteries, etc.

 

[unclemick]

Keep us posted - my nephew got back(to Coronado, CA) last weekend from a house hunting trip in D.C. - nailed by military rotation - supposed to have made an offer on a house according to my sister - didn't talk long cause the Saints lost/ the Pats won and she hadn't called CA yet.

He thought he had CA nailed via TAR? - until they(Navy) made him an offer he couldn't refuse. The only other time they rolled the dice(not renting) was Norfolk in the 90's - gambled on house ownership for three years and won.

heh heh heh

 

[FIREd]

EXACTLY!!! It's as though there is two different countries within our country. In the expensive east/west coast areas, jobs pay a lot but expenses and housing are high, so effectively the dollar has less value. In the cheap middle America areas, high paying jobs are rare but expenses and housing are low, so effectively the dollar is more valuable. Yet, the "exchange rate" is $1:$1!!

I think my wife and I have the best of both world: high paying jobs in low cost middle America! And that's why we are not in a hurry to move out of here!

 

[W2R]

I think my wife and I have the best of both world: high paying jobs in low cost middle America! And that's why we are not in a hurry to move out of here!

That sounds wonderful! I don't blame you for not wanting to move. I wouldn't either!

When I bought my house in 2002, I planned to retire here and live in it until I drew my last breath. I bought it with that in mind. It's within walking distance of a nice grocery and other businesses, but a quiet and a nice neighborhood in which to grow old. Katrina changed everything for a lot of people, me included, but I think that Frank and I will enjoy retiring to a place with even lower cost of living - - southern Missouri.

 

[jazz4cash]

Keep us posted - my nephew got back(to Coronado, CA) last weekend from a house hunting trip in D.C. - nailed by military rotation - supposed to have made an offer on a house according to my sister - didn't talk long cause the Saints lost/ the Pats won and she hadn't called CA yet.

He thought he had CA nailed via TAR? - until they(Navy) made him an offer he couldn't refuse. The only other time they rolled the dice(not renting) was Norfolk in the 90's - gambled on house ownership for three years and won.

heh heh heh

In addition to inherent stability of the DC area, there is another factor which is the military base realignment and closure (BRAC) that is shuffling things about. A good place to exchange thoughts on housing, neighborhoods, schools and commutes is City-Data.com Forum: Relocation, Moving, Local City Discussions

 

[FIREd]

We actually are a beneficiary of BRAC down here... Keep all those families coming, it's good for our RE market...

 

[TargaDave]

I think my wife and I have the best of both world: high paying jobs in low cost middle America! And that's why we are not in a hurry to move out of here!

Same here and we even have a great college town to reside in. BUT, it's 8 hours to our favorite stretch of ocean-bay-intercoastal. The middle America thing just doesn't work for us anymore. So damn the hurricanes, Nor-easters, flooding, insurance rates, lofty home-living prices, rising water levels, tsunamis, decaying causeway bridges, crowded tourist seasons, and whatever else is out there; we're goin. All a matter of personal preference.

 

[Grizz]

I think the housing bubble will resolve itself in a different way than everyone is speculating. Sure, prices will come down, but I don't know if they will regress to that inflation curve for a long time if ever. The US housing market has been of a different nature than those in other countries, where renting is much more common, and where properties are often left to heirs instead of selling on the open market. I recall when I lived in Holland that houses were leased by families for 100 years, since few could afford to outright buy them (may be different now). I don't know if the US market will go this way, but as the population keeps increasing, construction decreases, and people have a harder time finding affordable housing, I think the rental market may be the next bubble.

I like your angle on this as I have actually spent some time considering this possibility and even talked with a friend who recently moved to my city from France. The things that seem to be preventing such a scenario from happening are twofold. First, compared to Europe, land is relatively plentiful and very inexpensive in most places here in North America.

Secondly, we have an abundance of trees which have and will continue to go down in price as the bubble deflates and construction slows. Construction has already gotten much cheaper overall, and because we build with wood, we get cheap houses that are like the second little pig's. The house that you grew up in will withstand a fair bit of abuse, but I doubt that it will be around in 200 years like many Euro homes, so really there is certainly a value to the construction, but since it's built of wood, there has to be a lower price tag placed on the structure as decay has to be figured in to its price,and since wood does have a finite lifespan, I don't think that construction can slow down forever unless we choose igloos.

I can definitely see a greater number of renters than there currently are, but IMHO that won't be due to land or construction costs but will be because mortgages will be very difficult to qualify for until the memory of those subprime mortgages that caused the collapse of the housing market is well behind us.

 

[audreyh1]

Fascinating discussion!

One thing that I have really wondered about.....

Home square footage seems to have really ballooned. You can notice a significant increase with each generation. Houses built 30 years ago are much smaller, and houses you see in the inner parts of cities are really quite tiny. And yet families have been getting smaller and smaller......

Houses these days just seem to be ENORMOUS!!!! It's like people think it's essential to their happiness to have a huge square footage - even in retirement communities.

Well, I have wondered whether this rapidly increasing square footage is a part of what has driven house prices over the past decade.

Audrey

 

[W2R]

Fascinating discussion!

One thing that I have really wondered about.....

Home square footage seems to have really ballooned. You can notice a significant increase with each generation. Houses built 30 years ago are much smaller, and houses you see in the inner parts of cities are really quite tiny. And yet families have been getting smaller and smaller......

Houses these days just seem to be ENORMOUS!!!! It's like people think it's essential to their happiness to have a huge square footage - even in retirement communities.

Well, I have wondered whether this rapidly increasing square footage is a part of what has driven house prices over the past decade.

Audrey

Yes, and have you noticed the increase in numbers and sizes of bathrooms? I have to admit that I am guiltier than most in this respect, since I love large bathrooms and utterly adore large showers with all the bells and whistles. But people managed reasonably well 50-100 years ago with one tiny, spartan bathroom in their homes and a line forming outside the door.

 

[Grizz]

Fascinating discussion!

One thing that I have really wondered about.....

Home square footage seems to have really ballooned. You can notice a significant increase with each generation. Houses built 30 years ago are much smaller, and houses you see in the inner parts of cities are really quite tiny. And yet families have been getting smaller and smaller......

Houses these days just seem to be ENORMOUS!!!! It's like people think it's essential to their happiness to have a huge square footage - even in retirement communities.

Well, I have wondered whether this rapidly increasing square footage is a part of what has driven house prices over the past decade.

Audrey

The reason that more square footage is desireable to many is because it is human nature to believe that bigger is better, both for the luxury of space, but mainly because having the biggest house on the block is a good ego boost. Exact same reason big 4X4 SUV's sell in big southern cities.

Houses have gotten bigger since the pioneers. This bigger is better mentality has been around for a long while, and by the time the 1960's came around, the technology certainly existed to build big (today sized) houses. The bigger houses haven't driven up prices at all, its only been the lenders with a cavalier attitude toward giving loans. Typically back then (at least where I live) you needed a bare minimum of 10% down, and you'd need a letter from your employer to prove a good long term job coupled with a debt vs income formula determining that you could handle the loan with relative ease. No such thing as a mortgage over 25 yrs. Also, interest rates weren't what they are now, and because of all of these factors, in order to have a fairly impressive house, a fireplace and maybe a sunken livingroom would do the trick.

 

[NotSoonEnough]

Yes, and have you noticed the increase in numbers and sizes of bathrooms? I have to admit that I am guiltier than most in this respect, since I love large bathrooms and utterly adore large showers with all the bells and whistles.

My 80+ yo Mom just finished remodeling her new/old condo. The biggest change was to enlarge the master bath by expanding into an unused closet space and installing a big walk-in shower. I asked her why she was spending so much money on the shower considering how little time she spends in a shower each day... She laughed and said, "At my age I can have whatever shower I want to afford." I don't argue much any more...

[Edit]

And I should also say, after seeing what she did and how well it turned out, I am considering the same sort of adjustment at my place too...

 

[Puzzley]

But people managed reasonably well 50-100 years ago with one tiny, spartan bathroom in their homes and a line forming outside the door.

Still that way at our house, since we live in the old family farmhouse. Not much of a line with just two of us, though...

 

[travelover]

....... Home square footage seems to have really ballooned. You can notice a significant increase with each generation. Houses built 30 years ago are much smaller, and houses you see in the inner parts of cities are really quite tiny. And yet families have been getting smaller and smaller......

Houses these days just seem to be ENORMOUS!!!! It's like people think it's essential to their happiness to have a huge square footage - even in retirement communities.............

I can attest to that. My neighbors recently tore down a little 2600 sq ft house like mine and put up a 5000 sq ft McMansion. It is designed with the garage doors to the back so the front of the garage can appear to be part of the house. Gives it an enormous look, which I suspect was the intent.

 

[HFWR]

I can attest to that. My neighbors recently tore down a little 2600 sq ft house like mine and put up a 5000 sq ft McMansion. It is designed with the garage doors to the back so the front of the garage can appear to be part of the house. Gives it an enormous look, which I suspect was the intent.

I think I'm gettin' a woody...

Tell 'em "good luck" with that $1000/mo electric bill...