Sizing the Housing Bubble

[haha]

Quote:

Originally Posted by al_bundy 1br in queens in rego park 1 block from subway, AC, elevator and maintenance includes gas and electric. Nice concrete building, very little noise heard from neighbors. around 750 sq ft total.

Thanks, Al.

Ha

[lazygood4nothinbum]

hey, girls, get a room.

[cute fuzzy bunny]

Some data from the NAR...

http://money.cnn.com/2006/07/25/real...ex.htm?cnn=yes

And if you dont like the data or find some issues with it, I promise I wont take it personally

[REWahoo]

Quote:

Originally Posted by Cute Fuzzy Bunny And if you dont like the data or find some issues with it, I promise I wont take it personally

Good, because you are a little late in posting your redundant duplication:

http://early-retirement.org/forums/i...3.88#msg158275

[wabmester]

Quote:

Originally Posted by Cute Fuzzy Bunny And if you dont like the data or find some issues with it, I promise I wont take it personally

You might if your name is Ingo Winzer.

Ingo seems like a good guy. * He even went to MIT. * But he wants me to pay $1669 to figure out which metrics he used to determine that Alex's region of LA is 57% overvalued. * I have a problem with that data. *

[haha]

Quote:

Originally Posted by REWahoo! redundant duplication

Are you testing us?

Ha

[nfs]

Search turns up nothing along these lines so I'll post a link.

If you want a really bearish view of housing, try http://thehousingbubbleblog.com/.

They are brutal.

[Martha]

I talked today to the real estate developer we have invested with in the last few years. As might be expected he is very irritated with the popular press talking up the real estate bust. As a result he claims that many first time home/condo buyers aren't buying but instead waiting for a better price. Buyers are also waiting for interest rates to drop. However, the population growth in the Phoenix area has far outpaced real estate availability. So there are lots of buyers out there, but they aren't buying.

He thinks this will continue for a while and could contribute to price drops.

He also thinks that speculators are out of the market now and when you sell you will be selling to a buyer who wants the property to live in. However, the speculators are selling, competing for buyers. This has happened to some extent in one of our condo developments. Although the develpment isn't all sold out yet, some of the early speculative buyers are trying to sell their units too.

Our condo units still keep selling, though the sales have slowed. Part is the natural summer slowdown in the southeast. On the other hand, rents have increased dramatically so we continue to make money every month.

[Alex]

Quote:

Originally Posted by wab You might if your name is Ingo Winzer. Ingo seems like a good guy. He even went to MIT. But he wants me to pay $1669 to figure out which metrics he used to determine that Alex's region of LA is 57% overvalued. I have a problem with that data.

I'll do it for free. He pulled it out of his arse. You just saved $1,669 - now go buy a new hat.

[al_bundy]

this whole housing bubble nonsense is easy to figure out without all the newspaper stories

take the average first time homebuyer. can they afford a decent home in your area on the average salary if they were buying for the first time with today's rates? how long would it take to save for a down payment?

NYC area $400,000 average price of a home is pretty expensive at 6.7% interest

if an average couple would buy my place for $250,000 like my wife thinks, it's still a nice chunk of change and a long time to save up 15% - 20% down

[wabmester]

Quote:

Originally Posted by al_bundy how long would it take to save for a down payment? NYC area $400,000 average price of a home is pretty expensive at 6.7% interest

After this thing pops, people will be asking "how did this happen?"

1) Creative financing requiring no down payment (or even negative down payments in some cases).

2) Creative financing requiring low upfront interest payments (IO's and neg amorts)

3) Speculation which fed on the rising prices caused by (1) and (2) and then fed on itself.

I posted an article by a federal reserve economist back a couple of pages back that showed these trends.* *Basically, lenders started taking much more risk in 1992, and people who normally wouldn't be home owners became home owners.* *Now we get to see what happens after those new owners discover that they really couldn't afford to buy a house....

[NYC Guy]

Average Manhattan 2 bed price is about 1.2 mill.

Prices are not going down at present.

[Scrooge]

Quote:

Originally Posted by wab Now we get to see what happens after those new owners discover that they really couldn't afford to buy a house....

A related problem that I think I have noticed is that even some people who would *normally be able to buy a house the old-fashioned way, don't any more.

For example, there is a young couple (no kids) in Baltimore. *They make more than $100K/y between the two of them. Last year they were in the market for a ~$300K house, which was reasonable since they should have been able to afford it under most regular circumstances.

However, in years past, they would have spent a couple years saving for a downpayment, which would have taught them self-discipline and other useful skills, and then gotten a fixed rate mortgage. Instead, they went out and got some kind of ARM with no money down. They have effectively no savings and continue spending all of their money on cars, toys, restaurants, etc. What will happen to them when their ARM and monthly payments go up and prices go down? Considering that they have no equity or savings with tons of credit card debt, will they have to sell their luxury SUVs and buy used cars? Stop eating out?

In this particular case, I suspect that they are making enough money to be able to survive if/when they adjust their spending habits. However, I am not so sure about those who have more bought even more expensive houses in the last few years and have similarly imprudent lifestyles.

[honobob]

Quote:

Originally Posted by wab Well, I suspect that you invested more than $7000 unless you had one of those cool 0% interest-only loans.* *But you do have a point: leverage is great when the asset value goes up.

WAB* *1978 purchased Diamond Head condo with $2000 down with a 15 year fully amortized mortgage.* 9% ouch

1986* purchased Bay Area single family home with $5,000 total on a 30 year FHA fixed mortgage.* No fancy footwork here, anyone could have done the same.* 12% What was I thinking?







Unfortunately, leverage is really bad when the asset price goes down.You must have gotten this from a seminar.* I doubt you could explain what you mean.As for how you could have made more money: if you had invested the same amount in the stock market in 1986 with the same amount of leverage, I suspect you would have made more money.


Didn't 1929 deal with that leverage stock purchasing thing?* So you still haven't explained how to turn $7K into $900K.

My point is that when I purchased in the 70's 80's 90's or 2000's It was always "how can people afford to buy at these prices?!!"* and I never heard "I should buy two cause they're half of what they sold last year"

You are scaring the children.* A home purchase is scary enough and maybe not right for all people or in all situations* but at least in California if you don't buy when you are able and have a need then you will most likely always be a renter.* You still need to buy what you can keep and buy smart but waiting for the day before the market jumps to buy usually doesn't work.

[REWahoo]

Quote:

Originally Posted by HaHa Are you testing us? Ha

Yes, via repetitive repetition.

[califdreamer]

Quote:

Originally Posted by REWahoo! Yes, via repetitive repetition.

What was that again?

[wabmester]

Quote:

Originally Posted by honobob Unfortunately, leverage is really bad when the asset price goes down. You must have gotten this from a seminar.* I doubt you could explain what you mean.

It means that many of my California neighbors who bought in the late 1980's found themselves with upside-down mortgages when the last bubble popped.* * That bubble took 6 years to finish popping.* *The average person lives in their house for less than 6 years.* *You want pain?* *Try paying a real estate agent to sell your home while you owe more than it's worth.

I don't know why you insist on pretending that you made $900K on a $7000 investment.* *Do you want the "children" as you call them to believe that you don't need to pay interest, taxes, principal, maintenance, and closing costs, and that houses always appreciate more than the rate of inflation?* * Sorry, that's not how it works.

Without a doubt, houses have appreciated at a remarkable rate over the last 8 years or so.* *Historically (since 1940-something), they appreciated at about the rate of inflation.* *You seem to believe that you'll be able to hold onto those remarkable paper gains over the next few years.* *I doubt it, but we'll see.

As I showed you with that nifty rent vs buy calculator, in normal circumstances you can expect a home to be a better investment than renting if you're able to live in the home for at least 8 years.* *These past few years have not been normal circumstances.* * And my guess is that the next several years won't be either, in the other direction.

Now, I'll admit that a house can be a great inflation hedge.* *You're protected two ways: your home will generally appreciate with inflation, and your mortgage payment does not.* *So while renters have their rents increase with inflation, home owners mortgage payments stay fixed (usually) and they "pay themselves" with the principal payments.* Sort of a forced savings plan.* That, combined with the various tax breaks, generally makes buying a house a pretty good deal. (Unless you buy at the top of a bubble, of course.)

[Texas Proud]

Well, I just read an article on Yahoo talking about how housing prices are starting to be flat or go down in a number of markets... and they mentioned Boston..

For all the people who say housing prices can not go down a lot have not heard about Houston in the '80s.. lot of overbuilding, lots of people buying houses with little down etc. etc... then it went POP..

I bought my house in 1986 at half the price the last owner paid two years earlier... and it has only caught up to that previous value THIS YEAR..

And if you owned a townhouse in certain parts of town you could not even sell them for $5,000... and they sold for $45,000 a couple of years earlier... and since that area of town has gone downhill, they still are not worth what they sold for when new..

I do not believe that this will happen in any place as it was the worst housing decline in history... but, I do think that people who only see prices going up are looking through rose colored glasses..

[honobob]

WAB
Have you ever purchased real property or invested in the stock market? *Are you under 30? *Your knowledge and experience seems to consists of what your (parents?) *neighbors went through or some graph/ report from ...bubble.com. *In my tract home subdivision the 1991 high sale was less than 9% above the bubble bust sale and recovered in less than 6 years.

Sorry, but this is how real property works.
The tenants have been paying my Taxes/Maintenance/principal/interest/insurance/maintenance for the last 24 years. *Had positive cash flow from day one of rental. *And since the mortgage was paid off in 1993 I've had all that exta money for other investments. *I was paying more than renting when I purchased in CA but was able to refi shortly after at no costs at 9 then 7.5 then 5.25 and prop 13 keeps my taxes low so in just a few years PITI was even with renting and for at least 10 years I'm at least $700 a month UNDER the cost of renting not even considering the income tax benefit. *My equity today from both is over $900K if I sell today or $810K if I sell ...(insert your bubble date here)......... or $1.8m sometime within the next 10 years.

You seem to think that appreciation was recently invented. *Prop 13 in 1978 was the result of the skyrocketing appreciation in the early 1970s *In Hawaii my property increased 300% from 1978-81. *Ca. doubled from 86 to 88. *Over 30 years of history are stacked against your guesses which are affecting your decisions HOW? *Wait to buy? *Higher interest rates could wipe out any savings if lower prices happen.

WAB *You are wrong. The problem is not buying at the top of the "bubble", it's selling at the bottom. *Just say No!

[eridanus]

Housing is different from the stock market! It may have happened in Japan but it can't happen here!

http://money.cnn.com/2005/09/19/real...rice_declines/

Take Los Angeles, where real estate has been turbocharged for nearly 10 years. But the early 1990s were a different story; the average house price in L.A. dropped from $222,200 in 1990 to $176,300 in 1996, a loss of 20.7 percent.

Furthermore, those are nominal prices, not real values.