Sizing the Housing Bubble

[Alex]

Dude, I'm just not keeping up. Let me consolidate your comments & questions into one post:Yes, your tax dollars at work. Data provided for taxes is probably pretty accurate, but surveys are usually crap whether they're paid for by the govt or by TH's former employer.
Yes, I think so. I enjoy writing. I think the personal info provides credibility, although I "went public" to deal with a particularly antagonistic poster.

Asking & responding to questions on this forum forces me to organize my thoughts, figure out what I'm doing & why, and understand it well enough to explain it to someone else without inviting comments like "Hairball!"

If filling in survey ovals with #2 pencils or blue-black ink makes other people feel happy & fulfilled, kindly send me names & addresses and I'll send them my surveys.
Nope. I wouldn't be surprised either, but I'd be a lot more confident in the quality of the data.

Thanks for your reply, I appreciate your candor. It is especially nice to have a civilized discussion without being insulted by an arrogant, overbearing, 'forum' bully. Especially when the bully has serious anger issues and a propensity for one word replies like - Hairball! ( maybe he has one in his throat?) Does this forum have an 'Ignore' feature?

At any rate, I agree that the Census data is far from perfect - but it is close enough for government work (pun intended..haha) and as reliable as anything else that the Gov't puts out. I believe that if we were to compare the gov't data to private sources (if we could find them) the numbers would be comparable.

That being said, I still maintain that all real estate is local. Some areas will be more effected than others and some won't be touched at all. A nice home in a popular area with good schools, plentiful jobs, and low crime is always going to be valuable. In ten years we will all be wishing we could of bought at today's prices. It is and always will be about location.

 

[cute fuzzy bunny]

Thanks for your reply, I appreciate your candor. It is especially nice to have a civilized discussion without being insulted by an arrogant, overbearing, 'forum' bully. Especially when the bully has serious anger issues and a propensity for one word replies like - Hairball!

Really? Can you point out where I demonstrated any anger, arrogance or overbearing anything towards YOU?

I pointed out that a particular paper you referenced might not contain the most trustworthy of data. Backed up by my decades of experience running exactly these sorts of 'studies' and 'surveys'.

Your response was to attack me personally.

I gave you the benefit of the doubt in presuming you just had a hairball that made you feel personally attached to the quality of the external data point that you provided.

Does this forum have an 'Ignore' feature?

Oh how I wish.

I hope you preferred this detailed response to your note, rather than the one word response I was prepared to offer.

Butthead.

 

[Scrooge]

Folks, you have to make allowances for the fact that some of us are still working and are stressed out. Heck, I haven't had a chance to shoot a coworker in weeks! 

 

[haha]

IMO property taxes are the most pernicious kind of tax. They're set according to some arbitrary formula that's not related to your ability to pay, and about which you can do nothing (usually). As we've seen recently, they can rise at a _much_ faster rate than inflation.

The advantage I can see from the POV of the taxing authority is that the taxpayer cannot escape property taxes. No fiddling, no creative accounting, just pay up or move. And in his new home he will be taxed by that local taxing authority. 

Ha

 

[haha]

my wife laughs at me when i tell her that our place is worth what someone will pay for it when we have to sell it, not some magical number she reads about

I bought an apartment in NYC for $135,000 in 2003. People in the neighborhood are asking $240,000 now for places that aren't renovated and ours has been completely renovated. She says we won't get a penny less than $250,000. I tell her I'll believe it when i see it.

Is this near a subway stop? Does it have AC? Walk-up or elevator? How big, and br/bath #.

This price seems quite good to me, anywhere but Staten Island. Your wife is probably right!

BTW, why are you selling?

Ha

 

[Alex]

Really? Can you point out where I demonstrated any anger, arrogance or overbearing anything towards YOU?

I pointed out that a particular paper you referenced might not contain the most trustworthy of data. Backed up by my decades of experience running exactly these sorts of 'studies' and 'surveys'.

Your response was to attack me personally.

I gave you the benefit of the doubt in presuming you just had a hairball that made you feel personally attached to the quality of the external data point that you provided.
Oh how I wish.

I hope you preferred this detailed response to your note, rather than the one word response I was prepared to offer.

Butthead.

don't stress Bugs, How do you know I was even talking about you? Guilty consciounce? Maybe you're just an avocado?
PS- I do like your new signature- Butthead is a good choice for you.

 

[spideyrdpd]

Hi
Its gotta be overpriced or not in a great area. We run the gamet of really expensive areas in fort lauderdale to slums. I find it hard to believe she cant atleast break even but then again not everyone paid a fair price when they bought

That contradicts a little of what I heard from a friend in the Fort, that has had her home on the market for 9 months and can't sell it. It does not seem to be over priced at all and is in a nice area. She has to move and will most likely end up taking a loss or breaking even over what she paid 2 years ago in order to sell it.

So you see depending on who you talk to the answers to the housing situation are different.

SWR

 

[brewer12345]

Is this near a subway stop? Does it have AC? Walk-up or elevator? How big, and br/bath #.

This price seems quite good to me, anywhere but Staten Island. Your wife is probably right!

BTW, why are you selling?

Ha

I'd be willing to bet that al bundy is in Queens, Brooklyn or the Bronx, and a fair bit away from fashionable areas. Contrary to popular belief, it is possible to live relatively inexpensively in the boundaries of the 5 boros if you don't insist on Manhattan.

 

[al_bundy]

Is this near a subway stop? Does it have AC? Walk-up or elevator? How big, and br/bath #.

This price seems quite good to me, anywhere but Staten Island. Your wife is probably right!

BTW, why are you selling?

Ha

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.

we're not selling, but my wife says that if we sell in a few years to buy a house we will get that much money. I remember back when co-ops were the rage in the late 1980's and early 1990's and my mom bought one for 80% off the original asking price and values fell when people tried to flip.

my mantra is don't count your money until you have it in your hand.

I remember a few years ago is when I first heard of the strategy of buying more than you can afford on an ARM and selling a few years later for a profit before it resets. Fine for the first people, but if too many people are selling at once than it can be a problem. And there are always people who have to sell their home for whatever reason.

 

[cute fuzzy bunny]

don't stress Bugs, How do you know I was even talking about you? Guilty consciounce? Maybe you're just an avocado?
PS- I do like your new signature- Butthead is a good choice for you.

Hmmm...lets see...specifically mentions my post then pretends she isnt talking about me...passive aggressive. Then makes inappropriate use of the term 'avocado' trying to "fit in", indicating a self esteem issue and a yearning for group acceptance.

Gosh I wish I was interested enough to get me to decide which one to pick on.

By the way, I cant remember the name you used to use before, what was it again?

 

[haha]

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_estate/housing_market_values/index.htm?cnn=yes

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

 

[REWahoo]

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/index.php?board=6;topic=8643.88#msg158275

 

[wabmester]

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]

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]

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]

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]

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]

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]

Are you testing us?

Ha

Yes, via repetitive repetition.