Sizing the Housing Bubble

[brewer12345]

That's not ugly-- that's deep-value investing!

We're waiting for the blue light to start flashing in our neighborhood... we can be patient... sometime in the next decade...

Screw my neighborhood. I already have a house there. I would prefer a nice wooded tract, condo in a sunny destination, etc.

 

[dumpster56]

Screw my neighborhood. I already have a house there. I would prefer a nice wooded tract, condo in a sunny destination, etc.

I just cannot do a condo, Too loud! The way they build these things today too much noise from the neighboring units.

We had a place once where the toilet and shower were next to our bedroom from the unit next door! Can you say water sounds toilet flushing sounds!!

 

[HFWR]

I'd be thrilled to trade - someday - yard work, fireants, watering restrictions, crabgrass my house in the burbs for a condo, but I fears the ASSociation fees would forever grow out-of-control, consuming the savings of getting rid of the yard...

 

[kcowan]

... a condo, but I fears the ASSociation fees would forever grow out-of-control, consuming the savings of getting rid of the yard...

Since it is self-government, be careful to buy in a building that consists of like-minded individuals. SW cousin bought in a building populated by gays and they spent like they were DINKs and her fees went through the roof.

But MIL lives in a complex with (mostly) other retirees and the fees are still very reasonable after 35 years.

 

[flipstress]

Yeah, HFWR, I've looked at condos but the fees seem too much for me.  I'm almost tempted to hire gardening/yard help during the several months of the year when I need it.  At least, it's just for a few months, while condo fees are for all year long.

 

[HFWR]

But I'm a cheap bastard I already do all the fertilizing, weedkilling, bush trimming, landscaping; only pay to have the lawn mowed. Worth $16/wk when it's 105 outside...

 

[wabmester]

Yeah, HFWR, I've looked at condos but the fees seem too much for me.

Same here. A lot of places have a condo glut, so I figure condo prices will take the biggest hit. But some of these new fancy high-rise condos have association fees close to $1000/mo. I wouldn't take one for free!

 

[flipstress]

Yikes, and I thought $250 condo fees were too much!

 

[OAG]

Yeah, HFWR, I've looked at condos but the fees seem too much for me. I'm almost tempted to hire gardening/yard help during the several months of the year when I need it. At least, it's just for a few months, while condo fees are for all year long.

Live in a Condo. Condo Fee $207 a month in Central Ohio. For that we get Irrigation, Lawn care, Trash Service, Water, Snow Removal, and Outside Maintenance. 80 Units in 20 Buildings. I do not know how that compares but did not seem too bad to me (first experience with this type of living and so far (approaching a year) so good). Very few young kids (either pre or post teens) around so most must be pretty "seniors". We looked for one that DID not have the pool and club house (to pay for). One we found is about 1/2 mile from public golf course and a new city pool.

 

[5j404]

Hey NSF     RE "You may have thought ugly was coming but ugly is here already."

The WSJ article  only tells half the story.... that castle is full of flaws. That house that wouldn't sell has been on the historic house tour in Herndon  and is very old and is a "Money Pit" waiting to happen,  as well as the fact that a 100+ town homes have been aproved to  be built as neighbors..   

 

[mb]

Sales in Silicon Valley are slowing but prices seem to be hanging in there. A RE flyer that I got in the mail today listed the following sales between May 31 and August 15:

List Price/Sale Price (in k$)

734/775
739/745
739/795
739/739
849/830
898/960
940/940
1049/1065
1098/1100

So most sales were still above the List Price.

The other thing that seems to be happening is that the market is segmenting with the further out neighborhoods slowing more that the close in neighborhoods. (I'm in a close in neighborhood.)

MB

 

[jazz4cash]

Me and DW are visiting Washington DC right now, she bacame a citizen recently. Of course I had to look at the housing market.  While a rabbit hutch here cost $600k I have noticed plenty of reduced signs and people offering $10 - $15k off closing closts.

I live very close to DC and while there is TONS of inventory on the market and prices have slipped some from year ago, I expect things to go more flat than down as Fed Gov't appears to be ramping up in some areas. Due to the military base realignment we have thousands of military and civilian employees relocating to Ft Meade, MD and Ft Belvoir, VA, for example.

 

[wabmester]

Sales in Silicon Valley are slowing but prices seem to be hanging in there.

Depends on how you look at it.   Most areas are still showing a price increase vs last year, but the OFHEO just came out with their latest report, and they say that the *rate* of appreciation has taken the largest drop since they've been tracking appreciation for the last 30+ years.

Report

Appreciation for the most recent quarter was 1.17 percent, or an
annualized rate of 4.68 percent. The quarterly rate reflects a sharp decline of more than one
percentage point from the previous quarter and is the lowest rate of appreciation since the fourth
quarter of 1999. The decline in the quarterly rate over the past year is the sharpest since the beginning
of OFHEO’s House Price Index (HPI) in 1975. The figures were released today by OFHEO Director
James B. Lockhart, as part of the HPI, a quarterly report analyzing housing price appreciation trends.
“These data are a strong indication that the housing market is cooling in a very significant way,” said
Lockhart. “Indeed, the deceleration appears in almost every region of the country.”

HI, CA, FL, and NV had the biggest cooling off.

Edit: here's Silicon Valley:

San Jose-Sunnyvale-Santa Clara, CA Rank=106 Annual=10.29, Quarter=1.79, 5-Year=46.89

 

[Spanky]

Sales in Silicon Valley are slowing but prices seem to be hanging in there. A RE flyer that I got in the mail today listed the following sales between May 31 and August 15:

List Price/Sale Price (in k$)

734/775
739/745
739/795
739/739
849/830
898/960
940/940
1049/1065
1098/1100

So most sales were still above the List Price.

The other thing that seems to be happening is that the market is segmenting with the further out neighborhoods slowing more that the close in neighborhoods. (I'm in a close in neighborhood.)

MB

It's really amazing. Part of the reason is that jobs are heating up in Silicon Valley. My brother was let go by Sun Micro System, Inc. in Colorado. It took him less than a week to find a job in the valley.

 

[Jay_Gatsby]

I live very close to DC and while there is TONS of inventory on the market and prices have slipped some from year ago, I expect things to go more flat than down as Fed Gov't appears to be ramping up in some areas. Due to the military base realignment we have thousands of military and civilian employees relocating to Ft Meade, MD and Ft Belvoir, VA, for example.

Yep, seen that as well. The folks in the military, however, aren't buying luxury condos or $600k+ houses. They're buying $250k condos and townhouses in the far suburbs (even around Baltimore if they work at "the Fort") and are commuting long distances just to own a piece of property. Closer in towards DC, there are numerous unfinished and late-model luxury condos, as well as McMansions in far-flung Virginia suburbs for sale (as evidenced by TV infomercials on Sunday mornings touting various local properties). They're still overpriced in my mind, so I wouldn't consider touching them until their prices drop at least another 15-20%. Most folks I know that are in the market for a house in the DC area are also waiting for prices to drop.

 

[mb]

Depends on how you look at it.   
San Jose-Sunnyvale-Santa Clara, CA Rank=106 Annual=10.29, Quarter=1.79, 5-Year=46.89

Agree, the data that I have seen is that we are still up year over year but the price change is now flat but prices not yet decreasing. That seems to be supported by the data that you posted. (I didn't read the article.)

If the 2nd derivative remains constant we will start going negative shortly but I haven't seen that yet. We might see it first in S. San Jose and other regions where the average sale time is much longer than in say Sunnyvale.

My WAG is that we will drop about 20% over the next year or two but that we will not have the large decline like that seen for example in Houston in the 80s.

MB

 

[wabmester]

We might see it first in S. San Jose and other regions where the average sale time is much longer than in say Sunnyvale.

Sacramento seems to be dropping faster than just about any other region of CA (they even passed San Diego recently in price drops). One theory is that Sac had a large influx of "investors" from the BA who are now exiting the market, so the contraction is starting even further south.

 

[Brat]

I know that this is a topic resurrection, but I found a great link for those who are watching the real estate market: find the current housing inventory in many local markets, total, single family, condo by price bracket. I found it very interesting.

http://www.paperdinero.com/Inventory.aspx

 

[jIMOh]

It was interesting reading through the first two pages and last page, thx for bumping.

It's a credit bubble more than a housing bubble. If rates go up, the bubble pops quicker.

We just bought our house (new contruction) 15 months ago (dec 06). There is a market house sitting across the street which listed at 330k and they are now asking 290k for it. Demand is low for sure.

The bubble will not burst if employment remains strong. I think we are at 3% unemployment now. Anything less than 5% unemployment is considered a strong job market. If people can afford to pay their bills (stay employed), anything bursting will be the result of CREDIT and not the actual housing market.

 

[wabmester]

I know that this is a topic resurrection, but I found a great link for those who are watching the real estate market: find the current housing inventory in many local markets, total, single family, condo by price bracket. I found it very interesting.

http://www.paperdinero.com/Inventory.aspx

You want links? I got links!

Here's a nice inventory and price tracker:

http://www.housingtracker.net/

Here's a price predictor!

http://www.thebubblebuster.com/

 

[tryan]

Interesting to see lenders stepping-up mortgage modifications in the hope of heading off the hemorage .... I imagine this works if the loans are still in-house. If the secondary market already has your loan ... tough luck.

http://www.msnbc.msn.com/id/17949352/

 

[brewer12345]

The bubble will not burst if employment remains strong. I think we are at 3% unemployment now. Anything less than 5% unemployment is considered a strong job market. If people can afford to pay their bills (stay employed), anything bursting will be the result of CREDIT and not the actual housing market.

Agreed. But the early stages of a credit contraction are already unfolding. It remains to be seen how far it goes. My suspicion is that it will get worse than the Fed wants it to, which will result in rates cuts later this year.

 

[justin]

The bubble will not burst if employment remains strong. I think we are at 3% unemployment now. Anything less than 5% unemployment is considered a strong job market. If people can afford to pay their bills (stay employed), anything bursting will be the result of CREDIT and not the actual housing market.

I don't think the folks that paid $800k for a 4 BR in a so-so neighborhood a year ago will be able to appreciate the nuanced semantic distinction you make between housing and credit bubble implosions after they lose a few hundred thousand dollars.

 

[Mwsinron]

Agreed. But the early stages of a credit contraction are already unfolding. It remains to be seen how far it goes. My suspicion is that it will get worse than the Fed wants it to, which will result in rates cuts later this year.

I dont see them cutting rates if inflation continues at its present rate. I dont see how they can without it getting out of control.

 

[jIMOh]

I don't think the folks that paid $800k for a 4 BR in a so-so neighborhood a year ago will be able to appreciate the nuanced semantic distinction you make between housing and credit bubble implosions after they lose a few hundred thousand dollars.

this is my point- even if the value of the house decreases, it's only a paper loss unless the house is sold.

you only lose money on an investment/asset if you sell it.

The credit bubble is popping (sub prime). If someone paid for the 800k house with interest only terms, the fine print says it's interest only for 10 years, then reammortizes to a 20 yr fixed loan the last 20... that's a credit problem... not a housing problem, IMO. Someone extended too much credit to the borrower.

I don't think rates are going anywhere too soon. If employment remains strong, that will drive the economy and should be what drives the economy.