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There is no real estate bubble !


By StuckInBA   Follow   Wed, 6 Sep 2006, 3:39pm PDT   4,982 views   160 comments
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tombstone

I now agree with the housing bulls. There is no housing bubble.

The bubble is no longer "is", it is now "was".

Yes, I think it's time to officially declare that there is no longer a housing bubble in USA. There was one, whose size, implications and aftermath are the only remaining questions. The MSM has jumped on the bandwagon. The bulls (NAR, CAR and their mouthpieces) have no clue as to how to describe the situation.

The depth and speed of the unwinding process seems to have surprised everyone. Take a look at the DQ charts for Bay Area.

http://www.dqnews.com/ZIPSJMN.shtm

San Mateo and Santa Cruz have -ve YOY gains for the median. Santa Clara is holding to a 0.1% gain. The price per SQFT is also rapidly trending downwards. Sales have fallen over the cliff. No matter how faulty and lagging these indicators are, they will make headlines. I was hoping to see that (-ve YOY median in Santa Clara county) happen by the end of this year. Seems like we are way ahead of schedule.

Maybe we all wish this to get over quickly, but we know it won't. Still, do you think it's happening faster than you had expected ? Or slower ? Or about the same ?

- StuckInBA

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astrid   Fri, 8 Sep 2006, 5:16am PDT   Share   Quote   Permalink   Like   Dislike     Comment 121

Peter P,

Excellent point. Mass psychology was extremely important in creating the housing bubble and odds are it'll be extremely important on the way down.

People will be much less eager to buy when their FB friends are $150K underwater on their mortgages.

Peter P   Fri, 8 Sep 2006, 5:19am PDT   Share   Quote   Permalink   Like   Dislike     Comment 122

People will be much less eager to buy when their FB friends are $150K underwater on their mortgages.

I think they may even puke, literally.

DinOR   Fri, 8 Sep 2006, 5:22am PDT   Share   Quote   Permalink   Like   Dislike (2)     Comment 123

Frank,

Very "quaint" listing you have there! "Cozy" some might say. I have a term for the type of people that put this kind of filth on the market; "Rip Van Flipper". I swear it's like they've been asleep for a hundred years, woke up, found there WAS a housing "boom" going on and decided now was a good time to cash in!

Earth to Rip!

(Go back to sleep and try in another 100 years)

DinOR   Fri, 8 Sep 2006, 5:30am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 124

Is this pathetic or what! I almost feel like feeding the squirrels my damn self when I hear some HB or realt-whore go on about the SEVETEEN int. rate hikes and how it's derailing their "feedbag"!

Had the Fed the courage to do what was necessary and institute some MEANINGFUL increases much of the damage could have been avoided!

The bottom line was that everybody and their long lost brother KNEW the Fed was going about this thing with kid gloves and had absolutely no fear they would accelerate the cost of money. Happy now?

skibum   Fri, 8 Sep 2006, 5:40am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 125

DinOR,

Well, the realtors need to find Some way, any way, of jump-starting their income. I hear of solidly experienced realtors who haven't had a commission in months. Did you see the Fed minutes from the last meeting? Only 2 members wanted to raise rates. Everyone else was sanguine about current inflation, and wanted to wait to see what the previous (paltry) rate increases would do. Boy, we're in for a mess.

Claire   Fri, 8 Sep 2006, 5:48am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 126

Could someone remind me what the rent to house price ratio should be? I am trying to figure out from our rent what houses should really be selling for.

Peter P   Fri, 8 Sep 2006, 5:52am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 127

Could someone remind me what the rent to house price ratio should be?

You should compare only post-renovation price and rent. It makes a big difference.

The price/rent ratio for fixers are very high because one can always renovate a purchase but your options for a rental are very limited.

Phil   Fri, 8 Sep 2006, 5:55am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 128

Thanks DinOR for the info.
I saw flatlands there so I am not sure what is the view that all are talking about. I dont understand people wanting to move from California to live in OR. I stopped by at OSU to meet up with a friend who is doing his PhD there so I assume he has been in OR for a while. He told me that the weather there is such that you have drizzle all the time. It just does not rain and stop and thats the kind i really hate. And so is Seattle. I saw a lot of propaganda that Seattle is not the wettest place in the US and such.

Peter P   Fri, 8 Sep 2006, 6:00am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 129

It just seems that rent is much more sensitive to renovations/appliances/amenities than price.

HARM   Fri, 8 Sep 2006, 6:02am PDT   Share   Quote   Permalink   Like   Dislike     Comment 130

Could someone remind me what the rent to house price ratio should be? I am trying to figure out from our rent what houses should really be selling for.

Claire,

I recommend you read through the March, 2006 thread: Housing Price Rules-of-Thumb. It covers this exact topic extensively.

DinOR   Fri, 8 Sep 2006, 6:11am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 131

Phil,

I believe Hilo, HI is the wettest place in the U.S and although many places in the "lower 48" get more rain than the PNW we have the most days with rain! I can't remember the exact year (I think it was 1997 or 98) Seattle didn't HAVE A SUMMER! It rained up to and through mid-August, they had a few clear weeks and the dreaded rain started the day after Labor Day! Great place huh?

Peter P   Fri, 8 Sep 2006, 6:12am PDT   Share   Quote   Permalink   Like   Dislike     Comment 132

That is an interesting question, whether rent is more sensitive than price to frills?

More interestingly, this varies from person to person.

If you absolutely do not need newer bath, kitchen, and other frills, it is LESS sensitive to you.

Peter P   Fri, 8 Sep 2006, 6:15am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 133

We might buy a pig stye intending to fix it up, but I can’t say I would rent one.

In a bubble, the "potential" is usually priced into the house. So you do not save too much with a fixer. When the bubble bursts, fixers will just sit there. You may be able to get one at a steep discount.

Peter P   Fri, 8 Sep 2006, 6:16am PDT   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 134

Do people demand more when renting?

You cannot change the rental.

expect less when buying?

They expect more in appreciation. So proportionally less in everything else.

Peter P   Fri, 8 Sep 2006, 6:17am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 135

Yes, and varies with income levels and price levels. The more “you” make and spend the more is expected?

Not necessarily. It is probably more related to how much TV one watches. :)

FormerAptBroker   Fri, 8 Sep 2006, 6:20am PDT   Share   Quote   Permalink   Like   Dislike     Comment 136

mike Says:

> Where I live in the Thousand Oaks/Westlake area, where a joint income of
> $250,000 is not unusual, I have a feeling the prices will drop over the next
> few years but not as much as one would expect or I once thought. A
> $650,000 property might drop to $525,000 but that’s it.

Odds are that prices will drop a lot more since there is no reason for anyone to buy a house while values are dropping when they can rent in the same area for half as much.

Fifteen years ago people who lived in Thousand Oaks/Westlake made a lot more money than average and that didn't stop the average home price from dropping ~50% from 1990 to 1994.

Prices will stop dropping when people (like me) can buy the homes and rent them out at a profit. As a rule of thumb most investors won't buy real estate until the monthly rent is more than 1% of the purchase price.

Then goober Says:

> I think Randy H. is dead on! The wealthy look out for themselves and
> other “haves” no matter which way the lean politically.

"The Wealthy" may "look out for themselves" but they can not control the economy. The "wealthy" did not do very well trying to stop the price of S. Cal Real Estate from dropping in the 90's (lots of "wealthy" people lost millions) or stop the huge drop in tech stock prices a few years back (I have some "wealthy" Borrowers who lost tens of millions from 2000 to 2001).

Peter P   Fri, 8 Sep 2006, 6:26am PDT   Share   Quote   Permalink   Like   Dislike     Comment 137

But will consumers switch and value saving their a$$ to valuing overvalued real estate?

Of course. Greed and fear.

DinOR   Fri, 8 Sep 2006, 6:27am PDT   Share   Quote   Permalink   Like   Dislike     Comment 138

"In a bubble, the "potential" is usually priced into the house."

Wow, is that ever true! When I think of all the listings I've had to endure over the last 3 or 4 years that featured "the potential" I could just feed squirrels!

Tell you what, when you finish the barn, deck, garden, RV parking, 2nd. bath, guest house, garage and converted chicken coop please feel free to give me a call!

It just fries me when I see people that have sat on their @ss (apparently for years) attempt to cash in on the "boom" and think they can charge what thoughtful and diligent owners are getting! (This is coat tailing in it's lowest form).

DinOR   Fri, 8 Sep 2006, 6:39am PDT   Share   Quote   Permalink   Like   Dislike     Comment 139

Jon,

Excellent points. The big difference I see is that if we've been conned in the traditional sense, once our bank account is depleted the con has to move on and find a new mark. When it comes to FB's it's the con that never ends! The minute they scratch out the check for the mortgage payment/s they have 29 days, 23 hours and 59 minutes until it's "bohica time" all over again!

DinOR   Fri, 8 Sep 2006, 6:40am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 140

bohica*

(Bend Over Here It Comes Again)

HARM   Fri, 8 Sep 2006, 7:09am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 141

Jon, excellent commentary on FB denial mentality. We should coin a new term for it (something more succint than "FB co-dependent denial syndrome") then add it to the HB Glossary. Right up there with "Escalation of Committment".

skibum   Fri, 8 Sep 2006, 7:11am PDT   Share   Quote   Permalink   Like   Dislike     Comment 142

newsfreak Says:

It would appear you believe the Fed commission has no balls or no guts.

Most definitely. Now I'm picturing a bunch of economists sitting in a room without nads or innards. Just limbs, heads, and muscle. Presumably Janet Yellen has no balls as it is.

skibum   Fri, 8 Sep 2006, 7:14am PDT   Share   Quote   Permalink   Like   Dislike     Comment 143

HARM Says:

Jon, excellent commentary on FB denial mentality. We should coin a new term for it (something more succint than “FB co-dependent denial syndrome”) then add it to the HB Glossary. Right up there with “Escalation of Committment”.

We need to see FB's on Dr. Phil.

FormerAptBroker   Fri, 8 Sep 2006, 7:17am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 144

Good new post from the So Cal Mkt. Guy at:

http://www.housingbubblecasualty.com/

Randy H   Fri, 8 Sep 2006, 7:32am PDT   Share   Quote   Permalink   Like   Dislike     Comment 145

I said:

I think Randy H. is dead on! The wealthy look out for themselves and other “haves” no matter which way the lean politically.

then FAB said:

“The Wealthy” may “look out for themselves” but they can not control the economy. The “wealthy” did not do very well trying to stop the price of S. Cal Real Estate from dropping in the 90’s (lots of “wealthy” people lost millions) or stop the huge drop in tech stock prices a few years back (I have some “wealthy” Borrowers who lost tens of millions from 2000 to 2001).

now I reply:

a) Wealth is relative, not absolute.
b) Just because the "wealthy" lost in absolute terms during the 90s real-estate downturn, does not mean they were no longer wealthy, comparatively.
c) In fact, the massive acceleration in wealth concentration with the top 1% occurred at almost that exact moment. These may just be interesting correlations, but many economists believe it was the early 90s recession that widened the gap between the rich and the not-rich.

Conclusion: just because FAB knew some rich people who lost $10s of millions, the odds are overwhelming that not only were they still "rich" compared to every else afterwards, but they were even richer, comparatively.

Randy H   Fri, 8 Sep 2006, 7:33am PDT   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 146

***correction:

The first quote is a response to my original quote.

DinOR   Fri, 8 Sep 2006, 7:37am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 147

FAB,

Yeah, how is it that a $1,088 payment becomes $1,660 again? SoCalMortguy and I are definitely on the same wavelength. Maybe I should just say the same things that catch his eye are typically among the first things I would notice too.

"New Spanish Tiled Roofs". WTF?

Oh! I get it, as opposed to the "old" roof meaning this are soon to be repartments?

DinOR   Fri, 8 Sep 2006, 7:38am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 148

-this
+these

FormerAptBroker   Fri, 8 Sep 2006, 8:20am PDT   Share   Quote   Permalink   Like   Dislike     Comment 149

Randy H Says:

> a) Wealth is relative, not absolute.
> b) Just because the “wealthy” lost in absolute
> terms during the 90s real-estate downturn, does
> not mean they were no longer wealthy, comparatively.
> c) In fact, the massive acceleration in wealth
> concentration with the top 1% occurred at almost
> that exact moment. These may just be interesting
> correlations, but many economists believe it was the
> early 90s recession that widened the gap between
> the rich and the not-rich.

I agree with all of this except that "the early 90s recession that widened the gap between the rich and the not-rich." since over time every country throughout history had had a wide gap between the rich and not-rich that just kept getting wider until there was some kind of revolt (it got wider during the recession, but the recession did not "make it wider", just like the planet is warmer, but the guys driving around in Hummers paid for with HELOCs over the past few years did not "make it warmer"). The US will be no different and the gap between rich and not-rich will just keep getting wider until there is some kind of revolt (this will hopefully not happen until I am dead). The point I was trying to make is that the "wealthy may look out for themselves" but they can not change macro economic forces and just like Tom Perkins (who just built a cool new boat for ~$150 Million) could not save his wealthy friends who owned tech stocks in 2002 Gordon Getty will not be able to help his neighbors who own $20 Million + for Pac Heights homes.

HARM   Fri, 8 Sep 2006, 8:21am PDT   Share   Quote   Permalink   Like   Dislike     Comment 150

New thread: Quotes that will live in Infamy

Peter P   Fri, 8 Sep 2006, 8:25am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 151

“There is not too much sex on TV; just a lack of scenes where the girl says no”

There is now too much sex on TV.

Randy H   Fri, 8 Sep 2006, 9:04am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 152

I agree with all of this except that “the early 90s recession that widened the gap between the rich and the not-rich.” since over time every country throughout history had had a wide gap between the rich and not-rich that just kept getting wider until there was some kind of revolt (it got wider during the recession, but the recession did not “make it wider”, just like the planet is warmer, but the guys driving around in Hummers paid for with HELOCs over the past few years did not “make it warmer”).

This process is not magical, somehow preordained by the mystic ether. It is a macroeconomic process, likely constrained and guided by sociological and circumstantial factors. Recessions indeed are one cause of this phenomenon. Another, much slower, cause is disproportionate economic growth. But loss factors have a bigger effect on the system than gain factors.

I didn't know that was controversial, or that anyone disputed it. I admit I was wrong.

And what does global warming have to do with it? The analogy is a non sequitur. Everyone knows the reduction of global piracy has caused global warming.

Stan   Fri, 8 Sep 2006, 9:05am PDT   Share   Quote   Permalink   Like   Dislike     Comment 153

AustinGal,

I'm following your comments for a couple of reasons.....I, too, am watching the Austin/San Antonio market to see if it's the right place in which to purchase. Also, you seem to follow the same sites I do....

Here's one that confirms the MA situation and is a pretext of things to come:

http://business.bostonherald.com/realestateNews/view.bg?articleid=154892

Add to the mix FOUR cities in TX are in the top ten for increased foreclosures, it's begining to sound like the same song is being played across the nation. This is a GREAT time to be on the sidelines, flush w/cash. I'm going to sqeeze....and sqeeze.....and sqeeze this market for everything it's worth. This type of opportunity comes along but once in a person's life....holding all the cards in a real estate deal.

My personal favorite tactic is to decide on two or three houses and then submit a "Multiple Buyer's Offer" on all of them at the same time. If anyone is interested in the details....let me know....I'll be happy to share. Now, know this....you won't be getting any Christmas cards from the sellers but you will dictate the terms, especially PRICE.

Great Site....love the info and comments!

Stan   Fri, 8 Sep 2006, 9:52am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 154

If this isn't a sure sign of the times, I don't know what is:

http://www.sellyourpreconstruction.com/

Developers are going directly to the public to sell pre-construction sites. The last time I peeked, they would NEVER deal with the "unwashed masses" and only work with the "high class" professional brokers.

A caption from the home page reads....."Finally....Buyers meet sellers in the booming Real Estate market."

Question: If it's a booming real estate market, would they need such a site?

Dunno....maybe I'm just too stupid to figure out this here real estate thing. I'd better play it safe and go to a mortgage broker or real estate agent and trust them to tell me what I should do

Stan   Sat, 9 Sep 2006, 1:14am PDT   Share   Quote   Permalink   Like   Dislike     Comment 155

Yep, here's the answer to the current market situation.

"This isn't a soft landing, it's harder than a soft landing," Toll told Reuters in an interview. But he denied the market was headed for a more dramatic decline in prices as some observers fear. "We are not crashing," he said.

He argued that demand for housing and consumer confidence in general have been hurt by concerns about terrorism, the war in Iraq and the response of the U.S. government to Hurricane Katrina.

Robert Toll, chairman and chief executive of Toll Brothers

Source: Reuters

Now that he's shared his expertise, it's clear as a bell. Last year when sales were soaring and there was no end in sight, terroism and the war had no effect. I know everyone across the country is in a state of complete panic over the Fed's response to Katrina......GIVE ME A BREAK!

Then, further in the interview he says:

"Next year, the company expects to build between 7,000 and 8,000 homes at an average price of $635,000 to $645,000. That's down from this year's expected production of 8,600 to 8,900 homes at an average price of $685,000 to $690,000."

Now, the average price will go down; but consider this:
Hard costs for land cannot be discounted, so where will they adjust their costs to maintain profit margins? Does materials and labor come to mind? If so, people will be getting a house with lower quality materials; put together with cheaper labor.....sound like a quality issue to you?

With so many new homes with SERIOUS structural defects, and rising, will this add to the problem? I don't think I'll be buying a Toll House....cookie maybe; but not my home.

astrid   Sat, 9 Sep 2006, 4:45am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 156

You could be drowned by your own vomit or fluid filled lung.

surfer-x   Sat, 9 Sep 2006, 9:29am PDT   Share   Quote   Permalink   Like   Dislike     Comment 157

Still no ‘pop’ here in the Westside of Los Angeles. Santa Monica, Brentwood, the Palisades are all are just humming along. Homes are sitting longer. Some by quite a lot.

Faggot, fuck off back to Craigslist. Is Sherman Oaks still Prime?

astrid   Mon, 11 Sep 2006, 4:04am PDT   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 158

brahma,

Nothing wrong with vegetarianism. The problem is when they start proslytizing, especially when they proslyetize with misleading information. Also, they're a pain in social gatherings.

Peter P   Mon, 11 Sep 2006, 6:28am PDT   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 159

Try some vegetarian Indian cuisine, the vast array of vegetarian dishes possible will show how evolutionally deprived this country is when it comes to vegetarian cooking.

I have tried many different type of veggie cuisines and I do like some. Truffles, for example, are truly wonderful.

I actually like veggies a lot (esp. arugula, broccoli rabe, chards, exotic mushrooms) but I like to cook them with chicken broth and/or bacon drippings.

However, there is no point restricting myself to just vegetables when there are so much out there.

Sorry, I do believe that the detiny of a farm animal is to be harvested. BTW, how do you know that you are not being cruel to vegetables when you harvest them?

Often meat itself is tasteless but the seasonings provide the taste, aroma and flavor.

Try kobe beef and toro. They have more flavor than seasonings.

I heard somewhere that many vegetarians have converted after trying kobe beef.

Peter P   Mon, 11 Sep 2006, 6:34am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 160

I guess you will never grasp the hidden truth of animal cruelty until you yourself truly are victimised in a very bad way by lets say..the system…with very little possibility for redemption or recourse for no fault of yours.

I am sorry but animal cruelty really does not bother me. Do you know how many humans are suffering as we speak? I do not have time or energy to worry about food being mistreated.

No fault? How can you be sure?

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