0
0

Social effects of the bubble


 invite response                
2005 Sep 21, 3:01am   51,288 views  583 comments

by SQT15   ➕follow (0)   💰tip   ignore  

Per Jamie's request

What kind of social impact do you think there has been by the bubble? Are people any different because of the wealth effect? What about the social impact on people who have not bought into the RE market? Do you think what we are seeing is predictable human behavior that will occur again in the next bubble?

Is there a social impact we haven't discussed yet?

#bubbles

« First        Comments 307 - 346 of 583       Last »     Search these comments

307   KurtS   2005 Sep 23, 6:33am  

Do you know anybody that has lost money in real estate in California?

Well, didn't LA have a bust in the early '90s, where values dropped an average of 30%?
There was a similar bust in Vancover BC, where the prices tanked by 40%
Once again,

"But now look at the prices! It’s practically doubled in last couple of years...if I had NOT taken any of your advice and bought it 2003 or 2004, I’d be sitting pretty...Are you ever going to get it right? "

I hope you're not suggesting that a healthy level of caution has kept you from buying a home--forever?

Understandably, you're ticked off at these prices, as many are here. Quite a few here suspect the recent RE run-up is not normal at all, but due to a credit-driven speculative bubble. You can poke around for historical data and current figures to make the decision for yourself. The very fact that many people cannot afford a home today (especially here) highly suggests that real estate is abnormally high--and is indeed due for a correction. Unless we think cheap credit, speculation, and double-digit price gains will continue forever. Personally, I do not.

308   Peter P   2005 Sep 23, 6:42am  

Cathy, if you can afford the condo conservatively and if it can meet your needs for the next 7-10 years, buying is not necessarily a bad choice. It is not an investment property, right?

However, do compare the cost of renting vs owning before you make your decision.

(Not investment advice)

309   surfer-x   2005 Sep 23, 6:50am  

Cathy, can you afford it without a NAAVLP? Your payment is likely to be 3-5X your current rent payment, can you and are you willing to dish out that much?

310   KurtS   2005 Sep 23, 7:00am  

We are planning to pay 5 to 10% downpayment
Do u think the above is advisable to buy

I'm not qualified to give you "investment advice", but consider this:

Currently you pay $1350/mo.
While a $600K 30-yr mortgage @ 5.75% is roughly $3500/mo, plus taxes and HOA fees.
So, $4500/mo easy.

That's a rather big difference per month; is owning worth over $3K/mo more?
Many people think so, because assuming the market will always go up, they fear being left out in the cold if they do not buy now. Given the wealth of info out there...you should be able to make a decision that best fits your situation.
Caveat Emptor.
(not investment advice)

311   Randy H   2005 Sep 23, 8:35am  

Cathy, all of the advice from Kurt, Surfer & Peter is good. I'd only add that you should be careful to not get lured into leveraging your way in with too exotic of a loan. My rule of thumb is to use a 30-year fixed mortgage with 20% down as a baseline. If you can afford that, and you have the discipline to put some of that cash away safely, then you might consider an ARM so long as you are ready to refinance into a fixed once rates start heading up. But, I think going with less than 20% down is a mistake, if for no other reason, then to avoid PMI.

A financial planner friend of mine recommends that people only buy homes in this market if they can afford 15-year, fixed, 20% down, no-second, as a way to protect people from over-leveraging themselves and give them some protection from a long downturn in prices.

312   Peter P   2005 Sep 23, 9:01am  

A financial planner friend of mine recommends that people only buy homes in this market if they can afford 15-year, fixed, 20% down, no-second, as a way to protect people from over-leveraging themselves and give them some protection from a long downturn in prices.

Very good advice. This is one of my personal reference points too.

Use 15YR amortization to determine affordability, but get a 30YR FRM for the flexibility. Make sure that there is no prepayment penalty.

313   Peter P   2005 Sep 23, 9:34am  

Get hold of today’s New York Times.
They do the maths on the buying/rental dilemna.
I think you will be shocked at the conclusions.

NYT has such a larger reader base...
Psychology is changing...

314   KurtS   2005 Sep 23, 9:50am  

NYT has such a larger reader base…
Psychology is changing…

Not to mention the great reader retorts to the Wharton "study" in the WSJ.

315   OO   2005 Sep 23, 10:38am  

I have seen at least 3 loss cases in RE in CA, so people who claimed that they have never seen any losses in CA are just kids who haven't been around the block long enough. And mind you, I came to this country only 15 years ago, so the ugly stories I know only represent a small fraction.

One ex-colleague of mine bought a home in LA in 1990, and he didn't even see his home back to the price he bought at in 2000! He had to move for a job so he took a 8% loss on his home in 2000. Had he held it till now, he would have made a small gain, but think about the cost of interest, and the opportunity cost of the money he could have put into something else! Another ex-colleague of mine bougt a home in East Bay in 1987, the price didn't breakeven for him until late 1996.

So the general observation is, in bad times, you need to hold your property for >10 years after a dip. If that is your primary residence, that is probably ok. But how many investors will call it a good investment to wait 10 years to see the price breaking even? How many 10 years do you have in your life?

316   Peter P   2005 Sep 23, 10:49am  

I have seen at least 3 loss cases in RE in CA, so people who claimed that they have never seen any losses in CA are just kids who haven’t been around the block long enough.

Very well said. One of my father's friend said that his home lost 50% of value after the tech bust. The house of my friend's friend lost millions in value just a few years ago.

317   Peter P   2005 Sep 23, 10:52am  

Those two cases were in the Bad Area / Silly Valley.

318   KurtS   2005 Sep 23, 11:20am  

But how many investors will call it a good investment to wait 10 years to see the price breaking even? How many 10 years do you have in your life?

Important distinction this time...RE has become "Dot-Com II". While I think most investors won't hold off until the bitter end, I'd venture to guess many haven't even caught wind of the change (such as my coworker). When investors do run for the door, I anticipate an inventory build-up that will pale past booms/busts.

319   SQT15   2005 Sep 23, 11:28am  

I've posted examples before of people I know who also had to ride out the down market for 10 years just to see the house return to the purchase price. Also the post I put on this thread about the guy who's already dropped his asking price $100,000 should be a good indicator that right now is not the time to buy, but in 2-3 years you might look at the market again.

320   Peter P   2005 Sep 23, 11:28am  

Important distinction this time…RE has become “Dot-Com II”. While I think most investors won’t hold off until the bitter end, I’d venture to guess many haven’t even caught wind of the change (such as my coworker). When investors do run for the door, I anticipate an inventory build-up that will pale past booms/busts.

Exactly. It seems that many people are trying to time the top of the boom. They will not hesitate to sell if they are convinced that the peak has arrived or has passed.

321   Peter P   2005 Sep 23, 11:29am  

500 comments? OMG! We should celebrate!

322   Peter P   2005 Sep 23, 11:38am  

Cathy, you should use your own judgement. We can only provide decision support. You need to make a decision based on many factors that are unknown to us. Moreover, most sources of information are biased one way or the other.

323   Escaped from DC   2005 Sep 23, 2:29pm  

Cathy, the words of Peter P, just above this post, are the best advice that you could have received.

324   SQT15   2005 Sep 24, 4:01pm  

Sleepless

You sound like I feel. Even though I live in Ca, my area used to be affordable until all the bay area folks came in and bought everything for exhorbitant prices and bid everything up. You're absolutely right that nothing is being solved, only transferred to a new location. I think a lot of these people really don't have a clue. They think they're economically savvy, but they'll end up with multiple properties that will likely go down in value and probably face foreclosure or bankruptcy. I won't feel sorry for the greedy who get burned. I only feel bad for people who got pressured by their peers and their own fear into buying something they couldn't afford.

325   Peter P   2005 Sep 24, 4:26pm  

Frankly, my hope is a very sharp cutback in housing prices due to rising interest rates, but mostly due to tightening of credit, etc. I’m sick of people getting lucky in the market and then further trashing market fundamentals.

Market has its ways to punish excesses.

I realize that most of you are in CA and I apologize, I don’t mean to pick on Californians. It could be anywhere, but it happens to be that most people coming here (and AZ, NM, TX, NV) are people cashing out down there. Can’t you go to Iowa or Kansas instead? Thanks for letting me vent

Cali-phonier deserves such bashing.

326   OO   2005 Sep 24, 7:54pm  

Hi sleepless,

I lived in Seattle before. No worries, there will be a big crash up in the Pacific Northwest. In 1989 when many CA residents were driven north by the last bubble, Seattle properties literally tripled overnight. Then in 1991, after two years of flirting with the rain and the 9-month-out-of-a-year-overcast, and lack of jobs aside from Boeing + MS, most Californians had no choice but to move back down. Then, Seattle properties went down 2/3. Ask any Seattle native and he will tell you the same thing, just don't tell them that you are from CA!

Seattle's jobs cannot support the current house price, period. MS is no longer a payroll/stock option powerhouse, Amazon, Starbucks are low-ball employees, Boeing moved its HQs to Chicago. I know how much my Seattle friends are making, but some of the prime areas in Seattle is already at par with the prime areas down here. It is just ripe for an even bigger crash than CA.

I like Seattle, but the current Seattle property valuation just disgusts me. I was reading some article on Seattle Times which claimed that Seattle's property cycle is sustainable because "land is limited", what a big JOKE. Everyone knows that the land supply is virtually unlimited if you drive eastwards along I90 into the Snohomish County. When I was up there, Seattleits kept griping that Seattle was having exactly the same urban sprawl problem as LA. Limited land, yeahright.

327   Escaped from DC   2005 Sep 25, 4:48pm  

"Time to start TAXING people for having kids, not giving them BREAKS (or at least take away the breaks).:"

Amen.

328   dantestein   2005 Sep 26, 9:59am  

Well, I made an offer on this tiny 1 bed 1.5 loft in downtown San Jose' for $489K (980 sq ft). I could have gotten it year and a half ago for about $300K.

Somebody asked why I thought the prices were expensive back then. Well, 300K is a lot of money! And than I started reading about how Real estate market has maxed out and how people were moving out of the bay area and how doom is near ... Well, last I heard, San Jose' just made the 10 most populous city in the country and I haven't seen an inkling of deflating real estate prices. I guess I'm just tired of waiting. I've been waiting for prices to go down for 6 years.

It comes down to this, no matter what people say, immigrants (like myself) will always come to the bay area (or other metropolis). We're not moving to Lincoln Nebraska. I heard the chinese food there is terrible :). Anway, as long as this great country allows immigrants, the population will increase... mostly in places like the bay area, LA, NY, ... And they're going to need housing. Supply and demand. I predict that housing prices will continue to climb unless Bush builds a wall around North America. I could be wrong, but most of you (especially patrick) has been wrong as long as I've been reading these comments...

Wish me luck...

329   surfer-x   2005 Sep 26, 10:02am  

Well, I made an offer on this tiny 1 bed 1.5 loft in downtown San Jose’ for $489K (980 sq ft). I could have gotten it year and a half ago for about $300K.

Hey man, if you dig the place and aren't looking for an investment device, rock on. If not, you've got big brass balls my friend. Good luck either way.

330   dantestein   2005 Sep 27, 1:47am  

Damn... I didn't get the place. I got outbid... I really can't go any higher so I guess I'll be renting for rest of my life.

Hmmm... Lincoln Nebraska is looking better everyday.

331   Peter P   2005 Sep 27, 7:02am  

I could be wrong, but most of you (especially patrick) has been wrong as long as I’ve been reading these comments…

Well, if you expected the market to crash within a day of us putting up the site...

BTW, why downtown San Jose? It is a horrible place.

332   Peter P   2005 Sep 27, 7:07am  

And Bush is effectively building a wall around America. Greencards are not as attainable as they used to be. There are very few opportunities for new foregin students to stay here permanently nowadays.

333   Peter P   2005 Sep 27, 7:09am  

For 489K, you can almost get a nice 1BR in Palo Alto. Think about it. Palo Alto. Not crappy San Jose downtown.

Disclaimer: I live in San Jose downtown and I fear for my life every day.

334   surfer-x   2005 Sep 27, 7:11am  

San Jose is tops on my list of places that would benefit from carpet bombing, Berkeley is second. Ahhh San Hosebag, the city without a soul.

335   Peter P   2005 Sep 27, 7:24am  

San Jose is tops on my list of places that would benefit from carpet bombing, Berkeley is second.

LOL

Ahhh San Hosebag, the city without a soul.

Yep. Zombie city it is.

336   surfer-x   2005 Sep 27, 7:43am  

What is it about San Jose that makes it this way?

I'm going to catch hell for this, but it's the people who are devoid of style and substance, the town which is ugly, filled with sprawl and just ugly, did I mention it's ugly? The gangs, the malise, the police who act like nazis, the polution, the people, the traffic, and now the ass reaming you are taking in housing. Forget it. I don't even buy gas in Santa Clara county, I'll push my car to the next county if I have to.

There might in fact be nice people in San Hosebag, I've just never met them.

337   Peter P   2005 Sep 27, 7:44am  

What is it about San Jose that makes it this way? I don’t spend much time there, but when I’m there, I just want to leave.

To be fair, I heard that it is much better than 10 years ago...

Still, I do not know what went wrong there. Way too many red light runners. People look scary. Too many younguns. I think it is time to instigate a curfew for teenagers there.

Even Milpitas feels much better than San Jose.

338   surfer-x   2005 Sep 27, 7:45am  

To me, Milpenis and San Hosebag are the same city, same goes for Crapatino.

339   Peter P   2005 Sep 27, 7:46am  

There might in fact be nice people in San Hosebag, I’ve just never met them.

I live there. But I am not so nice.

340   Peter P   2005 Sep 27, 7:47am  

To me, Milpenis and San Hosebag are the same city, same goes for Crapatino.

Pretty much. But I feel less threatened in Cupertino.

341   surfer-x   2005 Sep 27, 7:50am  

As crappy as San Hosebag is, it's much much better than Pismo Beach. Whatever you do, don't move here, it's horrible.

342   Peter P   2005 Sep 27, 7:53am  

As crappy as San Hosebag is, it’s much much better than Pismo Beach. Whatever you do, don’t move here, it’s horrible.

I have been there on my honey moon trip. I liked it. Cracked Crab has pretty good cracked crabs.

343   Peter P   2005 Sep 27, 7:59am  

Yeah, it seems to me to have a very “concrete jungle” feel to it. Does the sun even shine if you’re anywhere downtown?

It is more like a concrete swamp. It gets super noisy when wind blows from the south and planes take off towards the city.

344   surfer-x   2005 Sep 27, 7:59am  

I have been there on my honey moon trip. I liked it. Cracked Crab has pretty good cracked crabs.

They've paved the whole area and put in a Walmart. I kid I kid, I freakin love it here, beyond beautiful. :) :)

345   surfer-x   2005 Sep 27, 8:10am  

5 years in Lincoln, Nebraska or Des Moines, or Bismarck

Actually it is my understanding that there are a lot of immigrants in these places, work in the meat packing industry.

346   surfer-x   2005 Sep 27, 8:11am  

I suppose I could be shot for saying such a thing, but doesn’t Mexico have restrictions such that an American expat can’t buy beachfront property.

Kind of, you can't exactly buy property as a non-mexican in mexico. It's held in trust by a bank.

« First        Comments 307 - 346 of 583       Last »     Search these comments

Please register to comment:

api   best comments   contact   latest images   memes   one year ago   random   suggestions   gaiste