Housing Already Shows Signs of a New Bubble


By bgamall4   Follow   Tue, 5 Feb 2013, 5:10pm   2,795 views   56 comments
In Menlo Park CA 94025   Watch (2)   Share   Quote   Permalink   Like   Dislike  

http://finance.yahoo.com/news/housing-already-shows-signs-bubble-162120345.html

When housing began to simmer back in 2002, prices were rising around seven percent a year, then eight percent in 2004 and a stunning 12 percent in 2005. At the time, words like "bubble," and "unsustainable," were uttered with every monthly reading. No one had seen home prices soar like that since the mid 1970's.

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  1. bgamall4


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    17   8:52pm Wed 6 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike  

    iwog says

    Current home prices are very much sustainable. More so than nearly any time in history. It's ridiculous to shout "bubble" when a $200,000 property on a 30-year fixed loan has a PITI of $1200. I was paying $1200 rent 20 years ago!

    I have to disagree with this. Maybe not in Lafayette. But think about it. Without the prevalence of a 20 percent down mortgage, markets are being boosted by hedge funds paying cash and toxic loans with 3 percent or less down.

    40 percent of Phoenix purchases are cash from mostly hedge funds. That is a massive manipulation that is unsustainable. The housing market being made up of skittish hedge funds and toxic buyers cannot be stable. It simply cannot remain stable. It will have massive spikes and massive crashes.

  2. JodyChunder


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    18   9:52pm Wed 6 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    bgamall4 says

    It simply cannot remain stable. It will have massive spikes and massive crashes.

    You still poking around Palm Springs, Mal? I stopped in there last weekend for an evening coffee on my way back from Joshua Tree where I keep a place. I hadn't been downtown there in years. It looked like a theme park.

  3. Philistine


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    19   9:59pm Wed 6 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    JodyChunder says

    You still poking around Palm Springs

    For some odd reason, we like Palm Springs. It's great for getting really hot and really drunk and lying by a pool and doing nothing. My kind of vacay.

    We have poked around Palm Springs looking to buy a house as a vacation rental/long term retirement house. Since specuvestors have ruined the traditional rental property market, we figured vacation rental might be the last edge of un-hyped investment opportunity.

    And then we woke up with a hangover and a sunburn and said, shit, we better get back to the gin before the headaches ruin our good time.

  4. thomaswong.1986


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    20   10:03pm Wed 6 Feb 2013   Share   Quote   Permalink   Like   Dislike (1)  

    underwaterman says

    iwog says

    One segment of the population that has done just fine is the top 1% courtesy of the Republican party.

    Totally agree with this one. What ZIRP has done has transferred wealth from the 99% to the 1% with the most going to the upper end of that 1%.

    Dont you all feel its a bit ironic that the most and highly inflated homes happen to be in the most UBER LIBERAL regions of the Country.. SFBA... and who has been the biggest cheerleader on Real Estate.. the liberals who distrust most real forms of investment infavor of Real Estate... after all.. it was Liberals like Clinton who Championed home ownership as a path to wealth and community... all talking points
    from the NAR.

  5. JodyChunder


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    21   10:07pm Wed 6 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    It used to be a real fun getaway back in the late fifties up until about '67. It might've been great after that, but I passed through only sporadically after the summer of '67. There is something about that terrain that made it a beautiful place to get stoned. I drank a quart of Rodrigo everyday before suppertime when I'd visit!

    It still retains some of it's original charm, but it's just a little too glossy; too slick in my opinion. Joshua Tree has more of what I like. If you're ever out that way, I recommend Sam's Pizza if you want a good curry. Just ate there last weekend. Honestly some of the best Indian food I've had in years.

  6. ELC


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    22   1:34am Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    underwaterman says

    What ZIRP has done has transferred wealth from the 99% to the 1% with the most going to the upper end of that 1%.

    How has it done that?

  7. ELC


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    23   6:01am Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    thomaswong.1986 says

    Dont you all feel its a bit ironic that the most and highly inflated homes happen to be in the most UBER LIBERAL regions of the Country..

    Conservatives are uber stingy, not to mention the ignorant rednecks on welfare. So yes, it doesn't surprise me a bit.

  8. Call it Crazy


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    24   7:44am Thu 7 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike (1)  

    bgamall4 says

    40 percent of Phoenix purchases are cash from mostly hedge funds. That is a massive manipulation that is unsustainable. The housing market being made up of skittish hedge funds and toxic buyers cannot be stable. It simply cannot remain stable. It will have massive spikes and massive crashes.

    Yup, and when these hedge funds find out how much FUN it is to be a landlord, deal with evictions and have to replace/repair all the items in the houses their tenants destroy when they move out, they'll look back at their 2% return on their previous investments and think, why the hell did I leave them.

    These hedge funds will exit this market just as fast as they entered....

  9. tatupu70


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    25   7:51am Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    bgamall4 says

    40 percent of Phoenix purchases are cash from mostly hedge funds. That is a
    massive manipulation that is unsustainable

    It's not manipulation, it's closer to risk free arbitrage. When price/rent ratio gets back into whack, the investor purchases will stop and you'll have a normal market again.

  10. iwog


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    26   7:52am Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    Call it Crazy says

    Yup, and when these hedge funds find out how much FUN it is to be a landlord, deal with evictions and have to replace/repair all the items in the houses their tenants destroy when they move out, they'll look back at their 2% return on their previous investments and think, why the hell did I leave them.

    Institutional landlords know exactly what expected costs are associated with rental real estate. Since they own hundreds of properties, these costs can be budgeted to an extremely high degree of accuracy.

    I currently have 7 renters and I have yet to experience a single case of tenants destroying the property when they move out. Even if they did, insurance would cover most of it.

  11. Call it Crazy


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    27   7:56am Thu 7 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike (1)  

    iwog says

    I currently have 7 renters and I have yet to experience a single case of tenants destroying the property when they move out. Even if they did, insurance would cover most of it.

    I think the difference is you hand selecting your tenants. You're the actual owner, so you have a vested interest.

    These institutional guys are letting someone else manage their rentals. A property manager won't be as critical as you are, they're just handling the "churn" of renters...

  12. iwog


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    28   8:02am Thu 7 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    Call it Crazy says

    These institutional guys are letting someone else manage their rentals. A property manager won't be as critical as you are, they're just handling the "churn" of renters...

    You think a property manager would keep his job long if he kept renting to tenants who destroyed the property?

  13. Call it Crazy


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    29   8:09am Thu 7 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike (1)  

    iwog says

    You think a property manager would keep his job long if he kept renting to tenants who destroyed the property?

    Well, he doesn't find that out until AFTER the fact....

    Is that a question on the rental application? "Will you destroy the place when you move out? Check "Yes" or "No"...

  14. Call it Crazy


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    30   8:13am Thu 7 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike (1)  

    Remember this article??

    Och-Ziff hedge fund looks to exit landlord business
    http://www.reuters.com/article/2012/10/17/us-foreclosed-hedgefunds-idUSBRE89G1TE20121017

    ....."One of the first big hedge funds to try to profit from a rebound in the U.S. housing market by investing in foreclosed homes is looking to cash out, even as other institutional investors are still getting in."

    ....."Earlier this year, proponents of investing in foreclosed homes were projecting a return of at least 8 percent a year from renting them out.

    ....."But the New York-based hedge fund is looking to sell now because the returns it is generating from rental income are less than expected and it is looking to take advantage of a recent rebound in home prices in northern California, the sources said."

    I expect more to follow that same pattern....

  15. edvard2


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    31   8:43am Thu 7 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    As a homeowner. I have absolutely no doubt we are in a bubble again and here's why:

    1: There is no inventory. If inventory were normal, there would be less competition.
    2: Interest rates are ridiculously low. They can't stay low like that forever. But in the meantime that has meant:
    A: Market is flooded by investors buying up every low-ball home in existence
    B: Money is artificially cheap.
    3: Again- Investors are buying a lot of the stock. At some point the equation isn't going to work as well for them once the market catches up and levels off. Many will then sell all at once, cheapening the market.
    4: Banks are not releasing a lot of their real estate holdings on the market but probably will once the market picks up sustained steam.

  16. Call it Crazy


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    32   9:47am Thu 7 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike (1)  

    robertoaribas says

    Even the article says they are selling them precisely because prices have gone up... Investors selling when prices are much higher than when they bought, there is concept you might try next time around!

    You still have reading comprehension problems... it never ends...

    Call it Crazy says

    "But the New York-based hedge fund is looking to sell now because the returns it is generating from rental income are less than expected

    They're NOT selling because they want to make a quick buck..

    They're selling because the return on investment wasn't what they thought it would be.....

  17. gbenson


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    33   10:40am Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    robertoaribas says

    Agents are piss poor at handling rentals

    Ain't that the truth. I am on the HOA board at one of the place and one of the worth landlords we have in there is a real estate agent. He just told me he's renewing the lease on one of his 'great tenants' because he doesn't want to see her leave.

    These are the same tenants that are the subject multiple complaints from other owners, won't follow the rules, have moved in a few additional family members, and are trashing his place. He's going to be on the hook for $10k in repairs once she moves out (if he's lucky).

  18. ELC


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    34   10:46am Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    robertoaribas says

    Even the article says they are selling them precisely because prices have gone up...

    Incredible. You're obviouly seeing only what you want to see. This is what the article said. "But the New York-based hedge fund is looking to sell now because the returns it is generating from rental income are less than expected and it is looking to take advantage of a recent rebound in home prices in northern California, the sources said. "

    They're trying to get out with their skin while they still can. They're smart and not in denial. Blackstone's probably shitting their pants too but no one's written anything about it yet. They're in way deeper.

  19. Call it Crazy


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    35   10:51am Thu 7 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike (2)  

    ELC says

    robertoaribas says

    Even the article says they are selling them precisely because prices have gone up...

    Incredible. You're obviouly seeing only what you want to see. This is what the article said. "But the New York-based hedge fund is looking to sell now because the returns it is generating from rental income are less than expected and it is looking to take advantage of a recent rebound in home prices in northern California, the sources said. "

    They're trying to get out with their skin.

    Thanks for pointing that out to him.... I wasn't going to try a third time to try and penetrate his "rose colored glasses"...

  20. ELC


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    36   11:06am Thu 7 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    Call it Crazy says

    Thanks for pointing that out to him.... I wasn't going to try a third time to try and penetrate his "rose colored glasses"...

    Blackstone's not looking to good lately either.

  21. ELC


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    37   11:13am Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    underwaterman says

    They have to keep lowering mortgage rates to keep the system afloat.

    I wonder at what point, if any, the dumbed down public will start figuring out that, "if it sounds too good to be true it probably is."

  22. Call it Crazy


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    38   11:16am Thu 7 Feb 2013   Share   Quote   Permalink   Like (3)   Dislike (2)  

    robertoaribas says

    Say, did you miss the point that they are selling at a profit? Funny that someone who sold a year ago didn't notice that little factoid?

    If they were making the profit they wanted on the rents, they wouldn't have sold.... just so happens, they got lucky because housing prices ticked up, so they didn't lose their shirts when they exited the game....

    I hope YOU will be so lucky with your empire!

  23. edvard2


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    39   2:44pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

  24. edvard2


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    40   2:45pm Thu 7 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike  

    thomaswong.1986 says

    Dont you all feel its a bit ironic that the most and highly inflated homes happen to be in the most UBER LIBERAL regions of the Country.. SFBA..

    Could be that those places are actually really nice places to live versus some hell-hole in the middle of nowwhere....

  25. JodyChunder


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    41   4:57pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    ELC says

    underwaterman says

    They have to keep lowering mortgage rates to keep the system afloat.

    I wonder at what point, if any, the dumbed down public will start figuring out that, "if it sounds too good to be true it probably is."

    Ugh. I bet you're one of these lofty-minded gimpers who go around calling people sheeple and shit like that...Most people with an IQ above room temperature readily comprehend that rates have been suppressed to keep the shit to shoe-level.

  26. ELC


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    42   6:03pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    JodyChunder says

    IQ above room temperature readily comprehend that rates have been suppressed to keep the shit to shoe-level.

    Still upset that i don't like your tits?

  27. JodyChunder


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    43   6:10pm Thu 7 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    ELC says

    Still upset that i don't like your tits?

    Tee hee! Why would I be upset over another man's opinions of my beautiful physique? I'm just generally grossed-out by anyone fancying themselves somehow a peg or two above the fray. Especially a FLA cracker. That makes it, like...somehow...just so much worse.

  28. waiting_for_the_fall


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    44   7:57pm Thu 7 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    robertoaribas says

    Underwear licker:

    You really are a disgusting creep. What would your colleagues think if they read the crap you write on this blog?

  29. bgamall4


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    45   9:16pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    robertoaribas says

    maybe a longer term horizon than 3 days?

    I would watch this stock price very carefully. They may be in over their heads with real estate. http://www.reuters.com/article/2012/10/17/us-foreclosed-hedgefunds-idUSBRE89G1TE20121017

    Sorry Robt, I see you supplied this link. That is what old age will do for you! But, they got scared for a reason. Perhaps it is because there are no first time buyers?

  30. Mick Russom


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    46   9:20pm Thu 7 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    iwog says

    I currently have 7 renters

    You even talk like you own them. You have them working for you and redeeming credits in your general store too? Hows it feel to live off the backs of others.

  31. Mick Russom


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    47   9:24pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    edvard2 says

    Could be that those places are actually really nice places to live versus some hell-hole in the middle of nowwhere....

    SFBA sucks, especially for families. It used to innovate. now is SillyConScammy. Its workers arent that great, and the cost of living and doing business stinks. For the cost of living the schools are a horrorshow. The weather is kind of crap compared to say SD, and raising a family here stinks. Cant wait to cash out. Soon, less than 24 months. Enjoy your suburb of shanghai and all its conspicuous consumption and the like. Anti family dump. Burned out husk of its former self and ultra corporate.

  32. JodyChunder


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    48   10:18pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    Mick Russom says

    Cant wait to cash out.

    Where you headed, if I might ask? Even just a general...reason I ask, there's a lot of handsome country out this way for a fair deal.

  33. bgamall4


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    49   10:36pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    robertoaribas says

    Well, my last home closes tomorrow. I don't plan to pursue anymore after that. If Phoenix does another crazy bubble, I'll sell a few in a couple years. If it flatlines, I'll just keep renting them. I suppose if it absolutely crashed again, I'd have to re-evaluate, and consider buying more. I feel great about what I've accomplished over the past 2 years, but, this ain't buying stocks or bonds. I'll be out there early tomorrow hauling off trash, cleaning up, steaming carpets, etc. It feels good thinking this may be my last rehab!

    The other hedge funds are holding on for one reason, another housing bubble. And that could happen, but will the people bite? That is the question. Bernanke wants this, thanks to Mike Whitney:

    [“Federal Reserve Chairman Ben S. Bernanke said the Fed will take action to speed growth and a rebound in a housing market facing obstacles ranging from too-tight lending rules to racial discrimination….Bernanke said while tighter credit standards after a collapse in the subprime mortgage market were appropriate, “it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery.”…

    Bernanke said housing-finance authorities have taken steps to “remove barriers to the flow of mortgage credit” and referred to efforts by the Federal Housing Finance Agency and by Fannie Mae and Freddie Mac to clarify rules surrounding mortgages that go into default.]

    The questions is, whether Bernanke will get the bubble to escape gravity.

  34. ELC


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    50   4:37am Fri 8 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    robertoaribas says

    If Phoenix does another crazy bubble

    Isn't it doing it right now?

  35. ELC


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    51   4:45am Fri 8 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    robertoaribas says

    I'll be out there early tomorrow hauling off trash, cleaning up, steaming carpets

    If the market crashes and this time people can easily get loans you'll be cleaning up for the man.

  36. ELC


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    52   12:22pm Fri 8 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    robertoaribas says

    If the market crashes and this time people can easily get loans you'll be cleaning up for the man.

    which makes utterly no sense... If people can easily get loans, prices will go up.

    My definition of sanity would be that prices go down, rates go up, and financing gets easier. The shouldn't result in prices going up or rents going up. Quite the contrary. And as I'm sure you know all markets transition from insanity to sanity then back again. Right? Or do you believe we're in the sane part of the cycle.

  37. Call it Crazy


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    53   12:59pm Fri 8 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike (2)  

    ELC says

    Quite the contrary. And as I'm sure you know all markets transition from insanity to sanity then back again. Right? Or do you believe we're in the sane part of the cycle.

    If your asking about sanity... asking Roberto is asking the wrong guy....

  38. David Losh


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    54   1:05pm Fri 8 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    From what I read this week, Blackstone is one of the main buyers of European commercial foreclosures, they buy them, and resell them for a profit.

    Banks are now selling to smaller investors who will pay more so they can get rental income from the properties.

    It's all specualtion, and these headge funds are collecting profits they can reinvest.

    At some point Real Estate will be played out, and hedge funds will move on to something else.

  39. ELC


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    55   4:29pm Fri 8 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    bgamall4 says

    They may be in over their heads with real estate.

    Slumlording is best suited to white trash. They're the only ones I've known to be successful at it.

  40. bgamall4


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    56   6:38pm Fri 8 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    robertoaribas says

    I don't believe rates are going up any time soon.

    Interesting statement. This is one thing we know, the Fed wants rates to go up. Bubbles are profitable on the way up the interest rate ladder. Once interest rates start going up, a bubble will offer teaser rates and the whole mess will start over unless people focus on what happened the last time.

    In the UK they blew 4 housing bubbles in 40 years. That is one every 10 years. Wall Street is learning almost all this from the UK Square Mile, the seat of financial evil.

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