patrick.net

I seriously do not think banks will be handing out money as freely as they have done during the last bubble, even with these government programs. A bubble in the short term will be very small compared to the last one. People memories are not that short. It's going to take another 60 or 70 years to have anything approaching the last bubble in housing.

jaz5 says

also read that the FHA (government backed subprime) is lowering costs of their insurance

Where did you read this? I have read the opposite that FHA fees in many categories have gone up, and that further increases were under consideration.

Short answer is no.
Long answer is that I have firsthand experience with what it takes to buy a home now. You need stellar credit- as in over 700+ ( used to be 600+ or so), a fairly hefty down payment- as in 20% or so, and proof of financial health. None of those things were required before.

What I do think is happening right now is a couple of things.

1: The economy to some extent "seems" to be improving. That makes people- primarily the minority of those who have saved for years and have good financial standings- suddenly feel comfortable about buying a home.

2: There is less inventory mainly because a lot of homeowners are severely underwater and can't move up or sell lest they take a huge loss. So many would be home sellers are not selling. This in turn makes it "Seem" like there is a bubble. There was never a supply problem during the bubble and yet prices went haywire- mostly because lending standards were lacking.

3: The bottom of the market has been propped up by investors, many of whom will likely stop buying once the bottom comes off its lows or foreclosure inventory starts to ease. That would also present another possibility: With all those investors out there, what are they going to do if there is any appreciation? A lot of them will sell, and like all things humans do- they'll do so all at once and flood the market.

So the bottom line is that there are not many homes for sale at this time and the very few people who now qualify to buy them are fighting over that supply. That doesn't mean there is a bubble. Remember that a huge chunk of the population won't qualify as they did during the bubble.

Lastly, its not safe to say we're out of the woods yet. Another reason that things seem to be heating up again is again- people feel more comfortable about things. Mainly because its been awhile since there was any headline risk. With some signs that the job market might have stalled-out and the problems in Europe that haven't gone away and could potentially grow worse, all it would take would be more headlines like those to scare people back onto the sidelines.

edvard2 says

Long answer is that I have firsthand experience with what it takes to buy a home now. You need stellar credit- as in over 700+ ( used to be 600+ or so), a fairly hefty down payment- as in 20% or so

You don't NEED 20% down.. I don't think any banks will turn you down with 10% down payment.. as long as the appraisal comes in ok. You will just have to pay a hefty PMI premium.. cause rates have risen recently... But i get your point...

99% increase in 1 year

edvard2 says

There was never a supply problem during the bubble and yet prices went haywire- mostly because lending standards were lacking.

I would argue this point. I recall people camping out for days in Florida for the privilege of buying a condo. People writing essay's to the sellers on why they should pick there offer over others. While this may not have affected all areas, there were certainly supply issues in some. They are probably the same areas that have been hardest hit by the bubble collapse. Las Vegas, Florida, etc.

i called the bubble during the bubble in 2005-2006 - when everyone was arguing it wasn't a bubble.

this isn't anywhere near a bubble. this season isn't even close to the bullish behavior in 2009, let alone the bullishness in 2005.

drtor says

jaz5 says

also read that the FHA (government backed subprime) is lowering costs of their insurance

Where did you read this? I have read the opposite that FHA fees in many categories have gone up, and that further increases were under consideration.

FHA upfront MIP and annual mortgage insurance premium is being drastically lowered starting June 2012

http://www.bloomberg.com/news/2012-03-06/obama-plan-calls-for-lower-mortgage-insurance-premiums-for-home-refinanngs.html

Signs of bubble:

a. Price rises despite inventory is higher than historical norm and increasing;
b. Many incidents of over 20 offers for a house;
c. Queue to buy a launch;
d. Abundant flippers;
e. Prices are above affordability level.

Price rises due to limited supply obeys the law of supply and demand so is not a bubble.

Hysteresis says

i called the bubble during the bubble in 2005-2006 - when everyone was arguing it wasn't a bubble.

Yes, I remember. You were the only one who knew! If we had only listened to you, we wouldn't have been in this mess.

BTW, in the BA RE is much hotter now than 2009. But you're right, the RE bubble days are gone for a generation or more.

Very unlikely.

New bubble is going to be either in education or healthcare. Younger crowd worries about former, latter frightens me a lot more though.

There's a new bubble in seeing bubbles everywhere.

FortWayne says

Very unlikely.

New bubble is going to be either in education or healthcare. Younger crowd worries about former, latter frightens me a lot more though.

Quality Auto Repair Since 1979

No bubble in education. Technology will make education affordable for all. Imagine combining sites like http://www.khanacademy.org/ with software like IBM's Watson. For a price a fraction of what it costs now, students will have individual tutoring tailored to their strengths and weaknesses.

Healthcare is another issue entirely. How much would you pay to live an extra year - or five - or twenty?

Sam1000 says

drtor says

jaz5 says

also read that the FHA (government backed subprime) is lowering costs of their insurance

Where did you read this? I have read the opposite that FHA fees in many categories have gone up, and that further increases were under consideration.

FHA upfront MIP and annual mortgage insurance premium is being drastically lowered starting June 2012

http://www.bloomberg.com/news/2012-03-06/obama-plan-calls-for-lower-mortgage-insurance-premiums-for-home-refinanngs.html

The key is: "The Federal Housing Administration will lower mortgage insurance premiums for borrowers who refinance their loans", not for new FHA loans. Plus, it only applies to borrowers with FHA loans made (insured) before June 1, 2009. For all others insurance premiums will be increased.

rowemoore says

Hysteresis says

i called the bubble during the bubble in 2005-2006 - when everyone was arguing it wasn't a bubble.

Yes, I remember. You were the only one who knew! If we had only listened to you, we wouldn't have been in this mess.

BTW, in the BA RE is much hotter now than 2009. But you're right, the RE bubble days are gone for a generation or more.

what i knew was i couldn't afford the insane prices in 2005. $600k was a low priced house in east palo alto in the middle of gang-land USA. almost a million dollars for a median priced house in SJ. prices were out of my range for a decent house.

when i started seeing janitors buying $800k houses i knew things were fucked up. and that was a very clear sign to stay out of RE which i did. now i'm timing the RE market. a few years after prices -stop- falling, i'll seriously look at buying. now is not the time. i am --planning-- to miss the bottom. hopefully not by much, but once i am confident the bottom has passed, then it's time to buy.

what i didn't know was what would happen to prices and when. i didn't know if they could go higher or if it would collapse. bubbles can blow much longer than anyone can anticipate. but once it started to deflate it's just a matter of watching for prices to stabilize and 6 years later they haven't yet although i believe we're close to that point. in a few more years i'll be more certain.

also i invested most of my free cash in stocks in 2009. i'm extremely contrarian with respect to investing. anyone else that did the same(avoided RE in 2005 and bought quality stocks anytime from 2009-2010) would be doing fairly well today. what i observe is most people follow the herd and are also terrible emotional investors - two very bad qualities if you want to make money. if you bought RE around 2005-2007 and sold stock around 2009-2010; you shouldn't be investing.

rowemoore says

FortWayne says

Very unlikely.

New bubble is going to be either in education or healthcare. Younger crowd worries about former, latter frightens me a lot more though.

Quality Auto Repair Since 1979

No bubble in education. Technology will make education affordable for all. Imagine combining sites like http://www.khanacademy.org/ with software like IBM's Watson. For a price a fraction of what it costs now, students will have individual tutoring tailored to their strengths and weaknesses.

Healthcare is another issue entirely. How much would you pay to live an extra year - or five - or twenty?

but it already Is going high, so is healthcare.

San Francisco May 2012

Signs of bubble:

a. Price rises despite inventory is higher than historical norm and increasing NO
b. Many incidents of over 20 offers for a house YES
c. Queue to buy a launch ?
d. Abundant flippers YES
e. Prices are above affordability level YES

We are taking a step back and trying to play nice with our greedy blood-sucking landlord and see what happens at the end of the summer/fall/after election

FortWayne says

but it already Is going high, so is healthcare.

That is true. I am just saying the fix for education costs is easy.

For healthcare, there is no fix. It will go up and up and the richer you are the longer you'll live.

Neither of these rising costs would constitute a "bubble" in its actual meaning.

The bottom end has bottomed (I think most would agree) but I still believe the mid-high will continue to drift lower.

This mini bubble is simply a supply problem, as so many are underwater they just can't sell. So, while they wait and hope for a return to 2005 prices (not going to happen in this decade) their savings are being completely drained. Once they finally capitulate, they'll end up short selling or foreclosing.

I personally know of a couple families that are in this situation.

CrazyMan says

I still believe the mid-high will continue to drift lower.

Define mid-high.

rowemoore says

Define mid-high.

Sure.

You are 2 or 3 bong loads in and you realize that some Funions and Cheetos could, quite possibly, bring about world peace if everyone was craving them as badly as you at that moment.

CrazyMan says

This mini bubble is simply a supply problem, as so many are underwater they just can't sell.

That means they are stuck. No move up - No more property ladder to prosperity.

bmwman91 says

rowemoore says

Define mid-high.

Sure.

You are 2 or 3 bong loads in and you realize that some Funions and Cheetos could, quite possibly, bring about world peace if everyone was craving them as badly as you at that moment.

Okay, I agree, but what about the ho-hos?

rowemoore says

Okay, I agree, but what about the ho-hos?

Well, those depend on whether or not you are in a proper state to navigate the pastry aisle of the grocery store. It takes a strong man to resist the Siren's call of the other sugar-laden baked goodies that beckon from the shelves of THAT aisle.

rowemoore says

CrazyMan says

I still believe the mid-high will continue to drift lower.

Define mid-high.

Low Tier: Under $311,666
Mid Tier: $311,666 to $573,705
Hi Tier: Over $573,705

or thereabouts.

http://blog.redfin.com/sfbay/2012/03/case-shiller_only_the_bay_areas_high_tier_fell_in_december.html

Mountain View - BIG bubble - problem is not much inventory and too many people with too much
money.

Fixer-upper - listed for 860,000 reportedly getting offers for $965,000 3/2 on 5000 sq ft lot.

I can't compete with that :-(

Claire says

I can't compete with that :-(

Must be dishonest money from China.