| BlueStreak |
Just back from spending the holiday weekend at the NC coast. Kind of nice getting away and spending time grilling, fishing, boating and just relaxing. No paper, TV or computer either.
It was the usual mad-dash Friday to get to the coast. Everyone trying to leave early, roads jammed and patience running short. And we had it coming home today.
So I pick up the paper today and the lead article in the business section of the Raleigh paper talks about coastal NC and the price of real estate. Prices in some coastal areas up some 420% in 4 years. Other areas up 150-160%. Waterfront access, deep water, great view and the price is unbelievable. I know other parts of the country are the same. I was reading about Vegas the other day....man have those values gone up!
So what is your take? Are these values going to hold or have prices reached levels they can't sustain? Years ago I said these levels of increase can't continue and the prices have continued to go up. I'm in no rush or need to sell, but I keep asking myself should I be looking for something to invest in? I hate to miss ride, but I surely don't want to buy when the market is at max value. |
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| G. COLTON |
As you see interest rates start to rise then you will see realestate prices level. There may be some places with a regression but not many. Especially those prime vacation spots and waterfront. They are not making anymore of that type of property. Many, many people these days have been able to sell an appreciated piece of property and then move to a retirement area and pay cash for what they want.
The places that might, and I emphasize might, decline in value are those that are just places to live.
Now this is all predicated on the assumption that there is not a drastic fall in the economy. If the economy was to see a major pullback then all bets are off.
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| Ceenit |
I don't think values will continue to increase at this rate, but you know what they say about land...." they aren't making any more of it...."
It also depends on the location. We just sold a house on Emerald Isle and made a 100% profit after 6 years (and I'm told now that we could have asked more).
I agree with G. Colton, the current low interest rates and relative upbeat of the economy has the land and housing market hitting on all 8 cylindars.
NC and Virginia Coastal sites tend to be very good bets. It is doublful that you will lose money, and you are very likely to beat the stock market......but depending on hurricane season, there could be some short term dips in price. |
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| csimo |
I agree with G. Colton's general comments, but I have a darker take on things.
There is an entire segment of the population that refinances their mortgage every year and banks on stripping the equity out so they can pay off their credit card bills or buy things their income will not support. I know a few of them and I just can't imagine living like that myself, but I'm from a different era.
We know interest rates are rising and the powers in charge intend to continue to raise them. This leads to a very dangerous situation.
As interest rates rise the equity stripping routine just won't work. That will lead to people either being forced to sell their homes or worst case foreclosure.
I believe there are enough people in this situation that it will force a decline in real estate values.
The combination of a zero savings rate and 105% mortgages just doesn't add up in my book. The piper will have to be paid sooner or later. |
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| renov8r |
I have read all the article too, even one or two scholarly "papers" on the topic. There are some very ominous factors that have lead to the current boom in real estate prices.
The obvious boost comes from the very very low real intrest rates, coupled with an unprecedented period of expansion of credit. Other factors are the shrinkage of other tax shelters/incentives to build rental units, distate for the stocks/other equities, easing of lending, shifts in income/demographics.
There are some good effects of real estate boom, but IT WILL BURST, in some places VERY VERY VERY BADLY.
When one examines the "wreckage" of ANY past bubbles, from the reccent dot-bomb wreckage, to the devastation of the S&L scandal, to the '70s housing blow-out all the way back to the 1600s "tulip bubble" in Holland lots & lots of patterns emerge. #1 -- items that should be quite ordinary/run-of-the-mill get swept-up in the crazy prices. Examaples if this would be the various "internet portals" that were all valued like broadcast networks or something before the burst, ordinary 3-4 bedroom homes with NO "high end features' being priced 3.5,4,5+ TIMES the "local median income", non-FDIC insured investments getting investors lined-up outside S&Ls, regular old flower bulbs selling for more than a HOME...
#2 -- rapid turn-over. Whether you're talling homes that are "flipped", stocks that are oversubscribed on IPO, or "bulb traders" that are selling their holding before they bloom these are signs that people are no longer "investing" but simple engaging in a frenzy that is not sustainable.
#3 -- credit that has been made too easy. Think back to the dot-bomb bubble -- the reason the steam went out so fast was that margined accounts made it way too tempting to avoid paying cap gains and instead leverage your gains in Cisco into a much more leveraged position in Yahoo, and then leverage those gains on Amazon or something. Just like the '70s real estate boom was fueled by 'assumable mortages' which short circuited the rising mortage rates. And the explosion of the Dutch mercantile banks (remember who was financing the whole colonial trade network...) meant that cash was flowing into the new 'exchanges' driving Tulip mania. This is UNDISBUTABLY the case with current mortgage options -- from the 'classic' 30 year fixed that is depressed to compete with CRAZY low teaser rates on ARMS, to the ridiculous schemes to do 100% finance (no money down) with no PMI penalty, to various "balloon" & intrest only loans and even brokers who routinely fudge data for no-doc loans and look-the-otherway when the give owner occupied rates to "flippers" and other investors there is WAY TOO BIG a storm brewing for their NOT to be huge losses -- those losses will eventaully be the next Lincoln S&L or Enron...
I could go on & on. The key thing to remember is that EVEN NOW the rise in real estates is NOT UNIFORM -- in areas where the selling price has not shot up too far past the historic norms of 2-3 times the "local median income" things are probably NOT in danger. In areas where they have, the prices will very likely FALL -- the only way they won't is if there are below normal dependacies on MORTGAGES, i.e. a large number of cash only deals. If you look at RENTS they have NOT risen. In fact, for most non-owner occupied rental buildings there has actually been a DECLINE in rental rates. This means that the "stupid renters" (who generally are hurt when real estate values rise) are actaully doing BETTER. The money that 95%++ of all people use to either pay rent or mortgages comes from the same place -- wages. And WAGES have been pretty darn stagnant in most of the country.
There are some that will never change in regards to real estate. Avoid "musical chairs" -- when the 'music stops' make sure you ONLY one place to sit -- nothing more, nothing less. LOCATION LOCATION LOCATION -- the places that are undesirable will be all the more undesirable when prices are coming down, and places that are desirable will decline less. "Never be the diamond in the rough" -- it is always better to have the more affordable house in the nicer area than the "showplace" in the marginal area. When the edge of development stops moving further out you don't want to be past the edge. Areas that experience the fastest price rise are generally more susceptible to the fastest decline too. In some "resort areas" you might have to look hard to find the folks old enough to remeber the "sleepy fishing village" or the "isolated mountain hideway" days -- but those were the state once before and with the right shift in affordability lots of folks could get wiped out. For second homes people will "cut and run" if they have to do what is needed to keep up the payments on their main home. Intrest rates will effect the folks that have adjustable loans MUCH more harshly and quickly than folks that have fixed rate loans.
Finally, in addition to watching the rates it is CRUCIAL to also watch what is happening with a whole host of numbers that are widely reported. The local realtors generally have data on both the percentage of asking price paid and the average time on the market. When looking at the seasonally adjusted number that tells a great deal about who frenzied the market is. Similar information can be gleaned from the employment data -- if people lose jobs, expecially the crucial construction segement where the new housing is being created, it is a good bet that prices won't hold steady. If that is combined with data from new hosuing starts and the total sales of existing houses you will know as much about the hard-core real estate numbers as anyone. There are micro-breakouts of bankrupticies by court that tell alot about where people are having a tough time. Similarly data on foreclosures and reposostions pinpoint where people are keeping up.
What is the "worst that could happen"? Things could spiral down pretty quickly. In literally a matter of weeks one could see most any neighborhood experience drops of 30%. This might happen essentially all-at-once, as buyers see their own purchasing power diminish and are forced to make lower offers for the home they want and accept less for the home they need to sell. Prices might not recover. PERIOD. Ever. The timelines and demographics look very very very very very very unchanging. ONCE the decline hits generations could be locking into paying off a mortage that they are essentially "upside down" on... |
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| mdx99 |
Greed is human nature, this bubble is no difference than the dot.com bubble. I am looking at one more year of bloom the most.
Low interest rate is the only reason keeping it alive for now and Greenspan will jack it up 1/4 point at a time. |
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| renov8r |
Back during the Clinton administration the elimination of certain classes of US Government debt meant that consumer rates that used to be uniformly pegged to rates set directly by the Federal Reserve System had to look elsewhere for their benchmark.
Some decided to track other rates, inclduing 30 day moving average rates, while others decided to track the rates of specific regions of the Federal Reserve System. Overall this has meant that there is a somewhat wider range of rates that are still legitimate and traceable to some economic board.
It is also has meant that the effects of changes that the Fed makes to its "benchmark" overnight rate tend NOT to ripple through the economy as quickly as they might otherwise do.
While on the surface this might seem like a good thing, there may be a vary serious "dark side". The Federal Reserve System has, for probably 30 years, been just about the only way to fight inflation and recession in the US economy. After 9/11 the Fed acted quickly to keep the US economy highly liquid. They've done a superb job of fighting inflation -- economics PhDs will study how this happened for generations. BUT the huge evaporation of paper gains that happened in the wake of the dot-bomb bubble AND 9/11 was largely countered through the "wealth effect" of folks re-financing to take advantage of record low mortgages. WHEN (not IF...) the mortgage rates climb there will be a HUGE negative effect on all the spending that goes with the housing boom. The Fed has almost ZERO control to turn this around/ limit the damage.
As I said above, the folks involved in the building industries will see layoffs. The folks in companies that also benefit from new housing will suffer. From retailers like Home Depot to appliance makers to even folks in "basic industires" like copper for wires, USG for drywall, timber companies et cetera will ALL hit the skids at the same time. Some of these companies are already not in good shape -- Maytag has been sold to a private equity firm, Sears is in a whacky merger with KMart, the asbestos layers want to rain hell upon the drywall companies...
There is an almost certain effect that as housing slows/stops lots of related companies will go belly-up. The only real question mark is how quickly will this happen. If I thought this were going to happen in the next three months I'd be hedging by shorting the stocks of companies involved directly or peripherally in building boom. It could be 6 months out, maybe 5 years. Gravity will eventaully win. A wee bit of 'science' and a lot of my gut tells me that factors that literally no one can predict will be the triggers. If there is a run of particularly 'harsh' weather and/or a spike in energy costs and/or some terrorist attack in the US things could start to slide to hell.
There is some chance that as particular markets that are now INSANELY OVER VALUED start to come down the steam could escape slowly and declines would be absorbed by folks getting MORE house for the SAME high price, but though that may not see the same steep fall off in PRICES the true value of real estate would still see overall declinces...
quote:
Originally posted by mdx99
Greed is human nature, this bubble is no difference than the dot.com bubble. I am looking at one more year of bloom the most.
Low interest rate is the only reason keeping it alive for now and Greenspan will jack it up 1/4 point at a time.
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| keremoner |
| As a real estate analyst, I am cautious but not worried in general. Even though short term interest rates have little to do with long term rates, we can expect the long rates to close the gap with short rates as the Fed keeps the rates rising. I hope that they have learned a thing or two from the slow down of 2000 and don't go crazy with the rates, especially since inflation is still rather tame. My worry is the prevelance of interest only ARMs that will need to be refinanced at significantly higher rates. In some areas, that should be sufficient reason to put the brakes on the "good times". In markets where job growth and population trends are favorable, this will be just a slowing down of the appreciation rates we have seen in the past 4 years. For example, here in the D.C. area (as well as in some other markets) there definitely is NOT a bubble since it is all demand driven appreciation. However, affordability is what will put the brakes on this run. Inside the beltway, average home price is well above $500K with newer homes selling in the million dollar range. Unless you have a a lot of equity from your previous home or household income of over $200K, you'd be hard pressed to afford these homes. That is why FannieMae is experimenting with 40 year loans and probably will go to 50 year terms to make things a little easier. Interest only loans are simply not a wise course of action. Overall, the home ownership rates and population trends are plusses. Demographics and trends wise D.C. is about the most favorable market, but I would be a little careful in most other areas in case the economy slows down seriously. |
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| mdx99 |
| History tends to repeat itself, as this real estate bubble is going to burst, the next bull stock market is warming up, money needs to be invested somewhere. It could be a slow process since interest rate is still very low and can't just shoot up in a few months. So if you are not too greedy, it should be okay, plenty of time to bail out.:1: |
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| keremoner |
quote:
Originally posted by mdx99
History tends to repeat itself, as this real estate bubble is going to burst, the next bull stock market is warming up, money needs to be invested somewhere. It could be a slow process since interest rate is still very low and can't just shoot up in a few months. So if you are not too greedy, it should be okay, plenty of time to bail out.:1:
The critical difference between stock market bubbles and real estate is this:
People can't use stocks as shelter. Real estate is a necessity and the price increases are normally purely demand driven. So unless a severe recession happens, don't expect prices to do much more than flatten out in most markets. Speculation, unlike with stocks, is a very small part of the real estate game. And one last important thing: Stock prices are manipulated on a daily basis by company officials by misreporting earnings in a myriad of ways as well as by market makers (the big players). Real estate can't be manipulated that way. |
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| Maik |
Well, Kere, I am hoping (and betting) you are right...my wife and I are embarking on a journey to build our dream house. We will be completing the buy side of the transaction in the next few weeks as we finalize our selections. Construction to be complete in approx 12 months. If this was a year ago, I would have been extatic, as my home would continue to appreciate, while the cost of the new home is fixed.
While cautious, I do not believe that my house will decrease in value during the upcoming year. As a practicle matter, I have assumed no increase in value for the purpose of running my financial model. If it does in fact go up, a bonus. If it goes down, oh well. |
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| mdx99 |
quote:
Originally posted by keremoner
The critical difference between stock market bubbles and real estate is this:
People can't use stocks as shelter. Real estate is a necessity and the price increases are normally purely demand driven. So unless a severe recession happens, don't expect prices to do much more than flatten out in most markets. Speculation, unlike with stocks, is a very small part of the real estate game. And one last important thing: Stock prices are manipulated on a daily basis by company officials by misreporting earnings in a myriad of ways as well as by market makers (the big players). Real estate can't be manipulated that way.
I hope you are right as well.
History said it all, My house went from $420,000 from 1990 to 300,000 in mid 1990 and back up to $800,000 now. Fortunately I don't move anywhere. Demand is affected by affordability, as interest rate rises faster than income, real estate got to come down as well. |
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| Maik |
quote:
Originally posted by mdx99
I hope you are right as well.
History said it all, My house went from $420,000 from 1990 to 300,000 in mid 1990 and back up to $800,000 now. Fortunately I don't move anywhere. Demand is affected by affordability, as interest rate rises faster than income, real estate got to come down as well.
Problem is, affordability is a relative term.
I asked the developer of a new developement about the "typical profile of their buyers" and his response certainly floored me. He said that the typical buyer was 30-35 years old, using a $600,000 to $650,000 mortgage, two car payments of $500 each, about $30,000 in installmemt debt and little or no savings.
I wonder how they sleep. But the point is, these people are one layoff or injury away from disaster, and that will ultimately force the end of the boom. |
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| mdx99 |
quote:
Originally posted by Maik
Problem is, affordability is a relative term.
I asked the developer of a new developement about the "typical profile of their buyers" and his response certainly floored me. He said that the typical buyer was 30-35 years old, using a $600,000 to $650,000 mortgage, two car payments of $500 each, about $30,000 in installmemt debt and little or no savings.
I wonder how they sleep. But the point is, these people are one layoff or injury away from disaster, and that will ultimately force the end of the boom.
Does it sound familiar? It mirrors buying high selling low and on margin as in stock market to me. I hope they are not sitting on those interest only mortgage or adjustable rate mortgage, that would really fuel the bubble. |
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| Maik |
| Maybe its just me, but it seems to me that anyone who "needs" an adjustable rate mortgage when rates are this low really needs to buy less of a house. When rates are this low, there is little or no up side to an adjustable rate mortgage. I only wish I had a buck for everyone who has used the excuse that they plan to refinance or move. What will happen when they need to do something and they owe $100,000 more than the house is worth and rates are up? |
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| xfactor |
quote:
Originally posted by Maik
Maybe its just me, but it seems to me that anyone who "needs" an adjustable rate mortgage when rates are this low really needs to buy less of a house. When rates are this low, there is little or no up side to an adjustable rate mortgage. I only wish I had a buck for everyone who has used the excuse that they plan to refinance or move. What will happen when they need to do something and they owe $100,000 more than the house is worth and rates are up?
ARM's are supposed to be a short term tool. A bridge to not only get first time buyers into a 'starter home' that averages 500k in this area, but to get credit challenged individuals a chance at ownership. Many sub-prime lenders are making a killing at these interest only loans. It seems many buyers are not getting out of these bad loans fast enough. Prohibitive pre-payment penatlies also play a role. In any event, a buyer must understand that any investment has a level of risk... |
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| mdx99 |
quote:
Originally posted by Maik
What will happen when they need to do something and they owe $100,000 more than the house is worth and rates are up?
That's what created the foreclosure in the early 90's, they simply walk out of their mortgage. |
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| trixie |
There is little doubt that we are in a major housing boom. I live in the exploding Phoenix suburb of Goodyear. Our desert hamlet of 35,000 is projected to hit 300,000 by 2020. Although open desert and marginaly profitable cotton fields mostly occupy the city area, that kind of growth is hard to imagine. However, if the boom continues, who knows.
I have a hunch that your 420% figures are flawed and need qualification. I suspect that four years ago vacation fish camps occupied the area. Today, they are building million dollar dream homes in the same area. Does that mean that real estate values have gone up by 420%? I don't think so. It only indicates that the average house price has gone up by 420%.
I ran across an article on MSN on the subject just a few days ago. The article listed areas that have seen the largest home price increases in the last three years. Most of the communities at the top of the list are in the San Joaquin Valley of California. None of the cities listed are those that you would consider untouchable. You know, those to die for locations like Santa Barbara or Silicon Valley suburbs of Saratoga, Palo Alto, etc. All of the cities are in less desirable areas that have become flee locations for those that can no longer afford to live on the coast. Number 1 was Fresno at 49% over three years. Other cities included Modesto, Hanford, Salinas, Bakersfield, and San Bernardino. These are all working class communities that have been flooded by immigrants from the bay area. Having grown up on the CA coast, I've seen California ruined by high home prices. Although it is great to have a rush of equity, our home boom is going to kill us all. And California is the first to die. |
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| keremoner |
quote:
Originally posted by Maik
Maybe its just me, but it seems to me that anyone who "needs" an adjustable rate mortgage when rates are this low really needs to buy less of a house. When rates are this low, there is little or no up side to an adjustable rate mortgage. I only wish I had a buck for everyone who has used the excuse that they plan to refinance or move. What will happen when they need to do something and they owe $100,000 more than the house is worth and rates are up?
We, Americans, love to live above our means unfortunately. |
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| renov8r |
...and it is crucial that you understand what numbers you are looking at. While there is something truth to kere said about stcoks being easier to manipulate, the reality is that there is A WHOLE LOT OF HYPE that gets thrown around in regard to real estate sales numbers.
That 420% increase in "averaging selling price" almost certainly reflects the fact that "pre-boom" there were nothing but a few 'fish shacks' changing hands & mid-boom those shacks were sold for 'land value', a GIANT mansion was built on the land and the resulting 'luxury vacation retreat' sold for more than 4x the land value.
A similar thing happens as "fringe development" transforms former agriculutural land into spanking new McMansions. That cotton farm that sold for under $100K and acre for 50+ acres is now subdivided into about 200 homesites that will each sell as complete homes for $500K or more.
This is not "secret manipulation" but simply the way developers make money. It is quite different than the sales of existing homes -- the kind of built out place like Fresno.
The fact remains -- prices have risen way way way faster than wages and THIS WILL NOT LAST... Countrary to the those who thing that the demographics are favorable, I see MANY factors that are all TEMPORARY. In places like the suburbs around DC the primary influence on wages has been the ridiculous over spending on (mostly fake) "computer security" -- both the firms that sprung up to suck at the public trough post 9/11 and the firms that try desperately to plug the holes in the corporate & personal info-security are nearing the end of their "firework ride" growth. When you look nationwide more and more families now have kids going to VERY pricey colleges -- that will siphon off tens of thousands of dollars from those familes and it won't go primarily to "working people" (the way spending on cars & houses does) but instead the tuiton will go into a the black whole of college costs. Some will be burned on ridiculous coaching salaries for football & basketball, some will go to ridiculous 'research journals' -- very very very little, if any, will go toward the "old fashioned" research that Universities used to do in science and healthcare.
I won't just pick on the 'elites' -- I also thingk that folks spending money on vacation homes & retireement homes are a NEGATIVE overall demographic trend -- these are people that are not going to be sinking the kind of money into an area that traditonal residential buyers will be. They won't "stuck up" on lawn care equipment, they won't redecorate dozens of times over the span of owing the housing. They will spend big up front and then go on the "mac & cheese" diet. Not good.
FInally I will attack the spending that happens in Vegas and other gambling resort areas. FOr decades every one who has studied this has pointed out the HUGE flow of money form little guys to the TOP TIER of the gambling companies -- this sucks money out of the regular people and puts it into the walletso fot he Steve Wynn's of the world. The effect on the overall economy is dismal. WOrking people have less & less to spend on the everyday goods and Steve Wynn can travel to Monacco...
quote:
Originally posted by trixie
There is little doubt that we are in a major housing boom. I live in the exploding Phoenix suburb of Goodyear. Our desert hamlet of 35,000 is projected to hit 300,000 by 2020. Although open desert and marginaly profitable cotton fields mostly occupy the city area, that kind of growth is hard to imagine. However, if the boom continues, who knows.
I have a hunch that your 420% figures are flawed and need qualification. I suspect that four years ago vacation fish camps occupied the area. Today, they are building million dollar dream homes in the same area. Does that mean that real estate values have gone up by 420%? I don't think so. It only indicates that the average house price has gone up by 420%.
I ran across an article on MSN on the subject just a few days ago. The article listed areas that have seen the largest home price increases in the last three years. Most of the communities at the top of the list are in the San Joaquin Valley of California. None of the cities listed are those that you would consider untouchable. You know, those to die for locations like Santa Barbara or Silicon Valley suburbs of Saratoga, Palo Alto, etc. All of the cities are in less desirable areas that have become flee locations for those that can no longer afford to live on the coast. Number 1 was Fresno at 49% over three years. Other cities included Modesto, Hanford, Salinas, Bakersfield, and San Bernardino. These are all working class communities that have been flooded by immigrants from the bay area. Having grown up on the CA coast, I've seen California ruined by high home prices. Although it is great to have a rush of equity, our home boom is going to kill us all. And California is the first to die.
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| csimo |
This thread is amazing! When I posted my response (second or third reply I think) I was expecting to be in vast minority when I expressed that I thought real estate prices were in big trouble.
What I find is a consensus that real estate is in trouble. Amazing! |
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| keremoner |
You make some good points.
First, you need to be careful at what figures we are looking at. Need to compare apples to apples. How much is the same home selling for as compared to last year or 5 or 10 years ago.
Secondly, there are cities where the boom is built on dynamics that are unstable. An example is Vegas. Its economy is too heavily dependent on tourist dollars and California money. Scary at best!
Third, D.C. suburbs do rely on high tech salaries but that is actually a small precentage of the incredibly diverse economy of the area (government, biotech, and government related lobbying type businesses actually account for over 80% of the local economy). Also, with the shortage of technical field graduates, those salaries are likely to stay sky high.
Lastly, I agree that we need to live within our means. That means, if you cannot afford to buy a million dollar new shack without getting an interest only ARM, buy the 500K 50 year old shack. |
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| alphaforcex |
| I think it has to boil down to the city median income and the median house prices. I couldn't imagine how the house price could be 6x-8x the median income?? |
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| keremoner |
quote:
Originally posted by alphaforcex
I think it has to boil down to the city median income and the median house prices. I couldn't imagine how the house price could be 6x-8x the median income??
Sadly that is the case. Hence the prevelance of interest only ARMs. |
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| keremoner |
quote:
Originally posted by keremoner
Sadly that is the case. Hence the prevelance of interest only ARMs.
It is funny how the increases in rents have not kept pace at all. But I predict, if a significant enough portion of ARMs end up in foreclosure once the long rates have caught up with short rates, there will be a healthy increase in rents in most markets. |
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| mdx99 |
quote:
Originally posted by csimo
This thread is amazing! When I posted my response (second or third reply I think) I was expecting to be in vast minority when I expressed that I thought real estate prices were in big trouble.
What I find is a consensus that real estate is in trouble. Amazing!
For the LA guys, AM1040 news radio started a talk show about real estate bubble this afternoon, I heard high rate of escrow deal going sour due to buyer walkout. They also talked about speculation, changing hands before even the houses are built, sound familiar!
The word, "bubble " is becoming popular nowaday. |
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| cycler15 |
quote:
Originally posted by alphaforcex
I think it has to boil down to the city median income and the median house prices. I couldn't imagine how the house price could be 6x-8x the median income??
The average house in Los Angeles in 2004 sold for around $450k. The average household income for LA is somewhere around $50-60k. Those numbers may not be exactly accurate, but it's pretty darn close (I read an article in the LA Times a few weeks back and am trying to remember the exact numbers). So in LA the average house price is 8-9 times the average household income. I bought a condo 3 years ago and the value has more than doubled. I'm debating selling my condo, renting an apartment in Los Angeles, buying a house in the Inland Empire to rent out, then selling that house in 2 years and buying a house in Los Angeles. Hopefully the bubble will have burst by then.
Pretty soon all those people who did interest only loans will be in trouble and others will be able to swoop in and capitalize on their mistakes. |
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| alphaforcex |
quote:
Originally posted by cycler15
The average house in Los Angeles in 2004 sold for around $450k. The average household income for LA is somewhere around $50-60k. Those numbers may not be exactly accurate, but it's pretty darn close (I read an article in the LA Times a few weeks back and am trying to remember the exact numbers). So in LA the average house price is 8-9 times the average household income. I bought a condo 3 years ago and the value has more than doubled. I'm debating selling my condo, renting an apartment in Los Angeles, buying a house in the Inland Empire to rent out, then selling that house in 2 years and buying a house in Los Angeles. Hopefully the bubble will have burst by then.
Pretty soon all those people who did interest only loans will be in trouble and others will be able to swoop in and capitalize on their mistakes.
8-9 times the average household income is about right for the hot markets. I'm glad that here in Texas, the median house price is roughly 2-3x the median household income.
http://money.cnn.com/2003/12/08/pf/...dex.htm
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| BlueStreak |
Here is the article I referenced from the Raleigh paper.
http://www.newsobserver.com/busines...p-8859056c.html
It is also worth nothing NC hasn't had a direct hit from a serious hurricane for a few years. Sure, we've had a couple "close calls" and mild storms, but nothing like FL in '04. People get comfortable and think it won't happen here. I remember in '96 there was some cheap real estate after Hurricane Fran paid us a visit. |
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| greatscot |
quote:
Originally posted by trixie
I ran across an article on MSN on the subject just a few days ago. The article listed areas that have seen the largest home price increases in the last three years. Most of the communities at the top of the list are in the San Joaquin Valley of California. . . . All of the cities are in less desirable areas that have become flee locations for those that can no longer afford to live on the coast. Number 1 was Fresno at 49% over three years. . . . These are . . . working class communities that have been flooded by immigrants from the bay area. . . . California is the first to die.
Well, that's encouraging, I live in the San Joaquin Valley (Clovis, Fresno's eastern neighbor) and can echo your comments. We are being inundated by bay area"flee-ers" (DaleB being one of them :2: )consequently the housing costs have gone sky high. My next door neighbor is asking $500K for his place, and we aren't in the newest swankiest development here either. This is as you say, a working class community, but less desirable? That depends on your point of view. From a Realtor's point of view, it is very desirable, from a buyer's point of view, yes we don't have the big city attractions and high tech employers, but we are affordable in a high priced California market. |
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| DaleB |
quote:
Originally posted by greatscot
Well, that's encouraging, I live in the San Joaquin Valley (Clovis, Fresno's eastern neighbor) and can echo your comments. We are being inundated by bay area"flee-ers" (DaleB being one of them :2: )consequently the housing costs have gone sky high. My next door neighbor is asking $500K for his place, and we aren't in the newest swankiest development here either. This is as you say, a working class community, but less desirable? That depends on your point of view. From a Realtor's point of view, it is very desirable, from a buyer's point of view, yes we don't have the big city attractions and high tech employers, but we are affordable in a high priced California market.
Yup, there's a balance there somewhere. But tons more construction is underway in outlining areas in the 'valley'. I think for our situation, unless there is a serious economic problem of catastrophic proportions, things will just go right along the way they have.
There may be some slowing down, even leveling off for a short time, but the 'climb' will continue even if at a more gradual rate.
It's easier in an area like ours where there is still so much land available.
There is more commercial growth too, not just residential construction to support a bedroom community. That mindset is gradually changing, and maybe some tech industries will finally be inclined to move away from the Bay Area and SoCal, if they can get the qualified people they need. Sure, it's expensive here too, but it's all relative.
Colleges and universities in the area are also expanding, as are remote campuses.
That should help a lot.
Lots been said about the craziness of CA real estate, but in truth, there are still so many areas not even touched yet in this state.
And people still come here, with apparently enough money, borrowed or not.
As long as you have a 'base' to pay taxes, and enough incentives to draw people, it can continue at this rate for some time IMO. |
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| Fireblade6 |
For as long as I lived in San Diego, California.....I have seen a little down and mostly ups on the real estate market down here. What amazes me is that no matter how many new homes are built, there is ALWAYS a shortage. You will not believe how many real estate companies and agents come knocking on my doors asking me if I want to sell my house.
The average single family detached home here, stereotypically three bedrooms, two bath house is going for $620,000.00.
I just cannot believe that my house is worth over $950,000.00 I mean... it is a really nice five bedroom three bath three car garage house but COME ON... And I do not see the housing market down here in San Diego, slowing down or letting up. So all this talk about a bubble...may be there but I do not think that will affect the housing here in San Diego.
What I'm doing now is leveraging Equity and buying old houses..do add-ons to it and putting it on the market to sell it. I would invest in $70K and get about 140K back and more...It is crazy..I think I will be leveraging on this for as long as the market can bear it. |
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| Maik |
The same so called "experts" that keep saying that the prices will come down are the same experts that have been saying for several months now that mortgage rates will rise.
Mortgage rates hit a 5 year low last week, according to several articles I have seen. |
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| DaleB |
quote:
Originally posted by Fireblade6
What I'm doing now is leveraging Equity and buying old houses..do add-ons to it and putting it on the market to sell it. I would invest in $70K and get about 140K back and more...It is crazy..I think I will be leveraging on this for as long as the market can bear it.
Out of curiosity, FB, what has been your average turn-around time on these homes? |
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| Fireblade6 |
quote:
Originally posted by DaleB
Out of curiosity, FB, what has been your average turn-around time on these homes?
Hey Dale...How are you??? HOpe all is well in Clovis. The turn around time depends on the condition of the house and what kind of upgrade I do with it. If it is exterior/interior paint and carpeting and landscaping...I can flip the house within like 90 days.
If it is room additions, bathroom and kitchen remodel...I have to subcontract it out and depending on the materials and the contractors...it can take as long as six months....But then again...six to eight months to double your investments is pretty damn good...I dont know of any LEGAL investments that can do that in the market today...can you? |
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| trixie |
quote:
This is as you say, a working class community, but less desirable?
Greatscot, My comment regarding the desirability of the valley is not intended as an insult. My family too has fled the coast in favor of Fresno. But you must admit, the valley lacks the "wow factor" of some coastal communities. However, I'll bet when your bay area buddies come over to visit you in your $500K Clovis home, they all say the same thing--"Wow". |
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| greatscot |
quote:
Originally posted by trixie
Greatscot, My comment regarding the desirability of the valley is not intended as an insult. My family too has fled the coast in favor of Fresno. But you must admit, the valley lacks the "wow factor" of some coastal communities. However, I'll bet when your bay area buddies come over to visit you in your $500K Clovis home, they all say the same thing--"Wow".
Hi Trixie, no offense taken. As a long time board reader, you'll know I spent about 12 years on the central coast as a City Manager. Anyway, you are right, what you get for your real estate dollar is about the only "wow" factor here. But as you know, it doesn't matter where you live, its what you do (contribute) where you live, that counts. |
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| DaleB |
quote:
Originally posted by Fireblade6
Hey Dale...How are you??? HOpe all is well in Clovis. The turn around time depends on the condition of the house and what kind of upgrade I do with it. If it is exterior/interior paint and carpeting and landscaping...I can flip the house within like 90 days.
If it is room additions, bathroom and kitchen remodel...I have to subcontract it out and depending on the materials and the contractors...it can take as long as six months....But then again...six to eight months to double your investments is pretty damn good...I dont know of any LEGAL investments that can do that in the market today...can you?
Well, there is money to be made in lending money out for distressed property, etc. That's the first one that comes to mind.
Carrying back 2nds, is another. But that's usually long term.
What you are doing will continue to be a very viable option for a long time to come. And in CA you will never run out of properties. As long as you have the energy and time you should do very well. |
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| DaleB |
quote:
Originally posted by greatscot
But as you know, it doesn't matter where you live, its what you do (contribute) where you live, that counts.
Amen to that! :cool: |
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| mdx99 |
FYI
LONDON (AFX) - The downturn in the UK housing market appears to be becoming more entrenched, as a survey from the Royal Institution of Chartered Surveyors revealed that 49 pct of chartered surveyors reported falls in house prices in May.
The figure is the worst since November 1992 and is likely to spark fears of more sudden and sharp falls in house prices than the gradual edging downwards the market has seen over recent months.
"The upturn in buyers' activity at the beginning of the year has petered out against the backdrop of a slowing economy even though the jobs market remains secure," RICS said.
New buyer enquiries slipped after remaining stable over past months, the survey found. Completed sales for May were also down 29 pct from last year - a reflection of the market's fall in the latter half of 2004, it said |
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| DaleB |
quote:
Originally posted by xfactor
Interesting article...
http://moneycentral.msn.com/content...57.asp?GT1=6657
Good perspective. Those promoting the 'bubble' theory are talking about buyers and sellers.
What they overlook is the big picture. Most people are not buying or selling, they are just making payments. |
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