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Patrick too quiet on housing bubble 2.0?


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2018 Nov 27, 10:54am   9,674 views  52 comments

by whitewater   ➕follow (0)   💰tip   ignore  

I remeber the fever pitch on Patrick in 2006-2008.

I don’t see the fever pitch of emotions and debate and discussion for housing bubble 2.0.

Why? I offer possibilities:

1. It’s too early. Another 2-3 years before enough people wake up and then it will pop.

2. We are too busy making money.

3. We are too busy trying to survive from corporate layoffs and small business squeeze.

4. We are lethargic because we have seen this before and we don’t care as much. The novelty of calling it when no one else would admit it is gone.

5. It doesn’t exist. Housing is affordable and in line with personal income and there is no crisis looming.

What says Patrick?

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21   MrMagic   2018 Nov 27, 6:26pm  

Strategist says
There is no housing bubble. It's just a pause. The biggest price jumps in California homes are yet to come, and they will come in 2019/2020.


Is that what ITB and XHB are telling you this year?
22   Ceffer   2018 Nov 27, 6:35pm  

I was surprised at how many people of modest means I ran across during the liar's loan years who decided they were going to be real estate moguls and bought multiple speculative properties with no money down. The ones I knew pretty much got wiped out to a man/woman by the downturn.

One lady who had a small unit in a mobile home park wound up with four houses. Two went to foreclosure, two they kept, but they wound up living in the tiny mobile home shack. One at Lake Arrowhead depreciated, but they kept it, then it almost got burned down in those Lake Arrowhead fires, which further depreciated it.
23   Strategist   2018 Nov 27, 7:30pm  

MrMagic says
Strategist says
There is no housing bubble. It's just a pause. The biggest price jumps in California homes are yet to come, and they will come in 2019/2020.


Is that what ITB and XHB are telling you this year?


They're telling me it's the greatest buying opportunity you will ever have.
25   steverbeaver   2018 Nov 27, 11:55pm  

My observation is that housing is in a downturn and may accelerate its plunge, or it may drift along... my prediction is until most boomers are sick and dying from old age at the latest, or a strong economic downturn happens.
26   clambo   2018 Nov 28, 3:50am  

In some spots there was a lot of building and easy access to capital caused a bubble in home values; this happened where I am presently.

The place I am in is wonderful and in a great area; the lady I spoke to has the identical floor plan but she bought her place at the peak for $250,000 (c. 2007) She says she'd like to sell it but she is still a bit underwater.

The place I am in however sold for $80,000 c. 2008.

It seems that prices in my location are just almost getting back up to about 2007 prices now.

I think the median home where I am is about 9 times the median income; in Santa Cruz it's probably about 20 times the median income. But, people like Reed Hastings (Netflix CEO) can live in Santa Cruz and commute over the hill to work.
27   fdhfoiehfeoi   2018 Nov 28, 8:26am  

APHAman says
More importantly, in order for a bubble to be a bubble, you need to have an overproduction of the very thing that is being bubbled. That’s what usually pops the bubble, eventual oversaturation. And then there’s an abundance of whatever bubbled left in the wake.


Like inflation? See QE, Venezuela, etc.
28   fdhfoiehfeoi   2018 Nov 28, 8:48am  

My friend paid about 1 million for a 3/1 probably around 1,000 sqft in Point Loma this past year. Yes, Point Loma is a nice area, with million dollar homes, but this wasn't one of them. If there's no bubble, then that house should have sold for WAY less.

To answer the OP, people didn't understand root cause then, only it's affects, and as the affects today are different, they think there is no housing bubble even though we are once again seeing record prices(see above). Nothing goes up forever, it's always unsustainable, and a crash will always follow. Since the re-incarnation of our latest central bank in 1913 we have had an economic crash every 10 years. That's not changing anytime soon. The world has hyper-inflated currency and built up debts at levels never seen before in history. Each crash will be progressively worse until the root cause is dealt with.

Another example, I'm make more money than I did two years ago, with no change in my expenses, but my check isn't going as far(inflation).

29   Nobody   2018 Nov 28, 11:11am  

The bubble bursting for 2006 was pretty predictable. We had everyone who should not have qualified for the loan got the loan and the loan on equity
to squander. Everyone borrowed and spent and spent without any thought into how to pay back without selling their house. When it came time
to pay back, everyone panicked. Everyone tried to sell their house only to realize that there was no buyer who can afford the price.
The average housing price was more than 10 times the average local annual salary. And the bank was tightening the credit. No one could
buy the house.

This one that seems to be bursting right now looks more like a normal cyclical and mild. The cost of building new houses are going up
because of the tariff. The Chinese Yuan is losing its value, so there are less cash buyers now. As a matter fact, there are more Chinese sellers
who are desperate to sell right now. So it is a good time to wait for the better properties out there. You are an idiot to buy right now. But
idiots make up the majority of our population, and they were the major force of the 2006 bubble. I doubt the learning ability of idiots,
so they already bought the properties in 2018 or will buy properties in 2019 and lose money.

2019 maybe the year that Chinese economy finally tanked. We have been saying this forever, and Chinese government has dodged it for the longest time.
Chinese buyers who bought the properties brought the money they borrowed in China. So I am wondering if they are forced to pay them back. Or
they can just default without any repercussion. In that case, the housing market will experience a mild down turn, and it will stabilize. But you should not
see the bubble again. But I could be wrong.
30   fdhfoiehfeoi   2018 Nov 28, 1:44pm  

My friend invited me over shortly after moving in. I ask his wife how it's going with the new house, and she says something like "Fine as long as we both get raises".
31   fdhfoiehfeoi   2018 Nov 28, 2:04pm  

Agreed. Just because everyone has debt doesn’t make debt a financially sound decision.
32   MrMagic   2018 Nov 28, 2:52pm  

NuttBoxer says
My friend invited me over shortly after moving in. I ask his wife how it's going with the new house, and she says something like "Fine as long as we both get raises".


Perfect example of people buying "payments" instead of buying "houses".
33   rootvg   2018 Nov 29, 2:49pm  

Patrick says
I'm at work, will reply after.

We are selling in Danville and headed to Pennsylvania. I can work from anywhere and my wife with her considerable background in higher education IT can reasonably expect to find an opportunity there. We're fed up with California. The half million we'll make here will set us up quite nicely for retirement.
35   MrMagic   2018 Dec 4, 9:50am  

Toll Brothers Slumps Most Since May After Home Orders Plunge.

Toll Brothers Inc. reported its first drop in orders since 2014, led by a big falloff in California demand, a sign that high-end property markets are cooling. Shares slumped.

The luxury-home builder’s fiscal fourth-quarter results, announced Tuesday, included a decline in orders of 13 percent from a year earlier. The average estimate from analysts was for an increase of 5 percent.

Toll Brothers is heavily focused in segments and geographies that are cooling -- high-end homes and California, specifically. In California, which is facing an affordability crisis and a decline in foreign demand, orders fell 39 percent.


https://www.bloomberg.com/news/articles/2018-12-04/toll-brothers-home-orders-plunge-led-by-slowdown-in-california
36   Malcolm   2018 Dec 4, 10:46am  

For those guessing the bottom can’t be that far down, please reflect that “The economy is too strong for housing to crash,” is what the bulls were saying in 2007.

When the economy is inflated because of paper wealth, it can crash when the paper wealth evaporates. Anyone buying in the hot areas is buying a life of servitude.
37   rocketjoe79   2018 Dec 4, 5:25pm  

I'm in the NorCal foothills, in a planned, gated, area. Bought my house 4 years ago for almost exactly $200/sq.ft. Last week the house next to mine sold for $315/sq.ft.
Same essential square footage, wildly different layout. I was gobsmacked it sold for full asking price. My guess is that some bay area folks cashed out for a retirement place with amenities. Sheesh. Good for me, I guess, my home value just went up dramatically.
38   NoYes   2018 Dec 4, 6:25pm  

The weather and beaches at my home in Carlsbad, Ca haven't crashed yet. What...me worry? The only thing I see crashing around here are the waves around the surfers. The most undesirable places will be the first crasher's. PS...I was born in the keystoned state. That hole crashed for me loooong ago. Even Iron City beer sucks today. Location, location, location....don't invest in plastics. We just have to stop the left wing nuts from crashing it.
39   mell   2018 Dec 4, 6:51pm  

10-20% price cuts in the bay area from peak asking price. Bigger correction coming.
41   MAGA   2018 Dec 5, 6:03pm  

I'm looking forward to more unemployed Realtor's.



42   whitewater   2018 Dec 6, 11:17am  

Seattle real estate drops average of $70k in 3 months.

https://www.seattletimes.com/business/real-estate/seattle-home-prices-drop-by-70000-in-three-months-as-market-cooldown-continues/

Who remembers if Seattle is the canary in the coal mine in housing bubble 1.0? I have a vague recollection it was.
43   anonymous   2018 Dec 6, 1:14pm  

whitewater says
Who remembers if Seattle is the canary in the coal mine in housing bubble 1.0? I have a vague recollection it was.
I thought it was San Diego.
45   B.A.C.A.H.   2018 Dec 7, 6:39am  

What happened to my eyeballs was social media.
46   everything   2018 Dec 7, 11:29am  

Well, the pump still needs extraction so we are not there yet. It sounds like flipping is getting over with, not where I live though. It's likely the flipping and HELOCS may come back to bite a few, and if they let people borrow until they are underwater some people will .. eventually walk.

Oh, we haven't had the job losses yet either. I think housing busts and recessions play out differently. Many mortgages are financed into low rates, many wised up to the last bust and got into a good play, settled down into something they could afford. Banks are not holding back either, with interest rates finally coming up, they are finally starting to bank.

It will take more time, fed is turning dovish, yet trying hard to put a soft landing to this thing.
47   JZ   2018 Dec 7, 7:58pm  

Price/Rent > 30 looks like a bubble to me.
House is priced at double income under current rate. Jay Powell swears he will fight wage inflation and I believe him. So income is capped, rate isn’t dropping, price stays high, what happens? Nobody buys anything, and builder activity drops. If the rent seekers can NOT fleece the W2 buyers by appreciation, they will fleece them by raising rent. So price stagnate, buyers can NOT afford, rent keeps rising so that cap rate can justify the price. Rent rise causes inflation, and Powell need to raise harder. They kept cutting rate and ask “why there is NO inflation”, now they raise rate and they will get puzzled why raising rate causes rent t go up.
Bubble or NOT depends on sustainability. Currently, house price stays but rent keeps rising. Is this sustainable?
48   whitewater   2018 Dec 8, 8:07am  

Seattle has peaked and is falling.

51   epitaph   2018 Dec 12, 3:38pm  

Are we ever going to get Logan back?
52   mell   2018 Dec 12, 4:08pm  

epitaph says
Are we ever going to get Logan back?


Not if housing goes south. He was too bullish.

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