patrick.net

Do you really think it is this simple? It looks like Miami condo market is having problems, and the high-end market in Silicon Valley is also having issues. Layoffs are accelerating in Silicon Valley, and there's less VC money. Don't you think there are a lot of negative factors for some of these regional markets?

JFP says

Don't you think there are a lot of negative factors for some of these regional markets?

Yes, I do. History has also shown that you don't have bubbles back to back in the same sector

To get a national price decline like we saw back in bust ..38% national declines, you need mass amounts of supply and distress supply

We don't have that capacity anyone to get the distress supply up anymore

Look at 2006-2011.. that is supply chain you would need for price declines

I have tried to model out 7 years each year that goes by and the worst I can come up with nationally is

22.7% declines in prices nationally and a lot variables have to go for that

That wouldn't be a bubble crash and demand in terms sales have been low this entire cycle and soon we will hit a demographic hot patch for housing, unlike this cycle which was demographic light 2008-2019

Mortgage demand is real now, now fluff and like I said in the article, this is why mortgage demand hasn't been as strong as people thought it would be

I wasn't kidding around when I said 2014, year 6 of the expansion was the worst level ever recorded in U.S. history when you adjust it to population

Buy now or be priced out forever!

Logan Mohtashami says

Yes, I do. History has also shown that you don't have bubbles back to back in the same sector

Very interesting.

JFP says

Don't you think there are a lot of negative factors for some of these regional markets?

Lot more positive factors. Home prices have just started to go through the roof again.

JFP says

Layoffs are accelerating in Silicon Valley, and there's less VC money

The one thing about hot price inflation areas and pockets where you have foreign dollars ... this cycle, the buyers have been so good in terms of the capacity to own the debt that you really need a job loss recession to create any new distress.

However, so many buyers have deep equity that the real distress loans would come from late cycle lending and mostly from FHA buyers or any low down payment.

There is no national debt leverage bubble in housing anymore on non capacity owning debt. A lot low quality financial people are renters in this cycle.

So the ability to create so many foreclosures is nothing like it used to be. Speculation is more driven early on by cash buyer not mortgages buyers, as the distress supply falls so had the cash buyers.

It's as different from one cycle to another as you can get

donny says

Buy now or be priced out forever!

The one good thing about the cycle is that the old marketing gimmicks are looked at as marketing gimmicks

It's all about capacity now!

Such a plus for America now

Ironman says

So, the national index is almost at the 2004 level...

Happy days!!!

We're saved!!

So this is a valid point that adjusting to inflation we are back to 2004 and not back to the peak

The point of the article is that the speculation factor in terms of having potential future distress properties is very low and we are back to late cycle lending leading to the biggest pool of distress loans, mostly will come from FHA loans or any low down payment loan

housing has crashed before although the reasons are different every time.. so this time would indeed be different.

In Cypress, CA (Orange County) prices seem to be back near peak.
Not sure if this is a good source but Zestimates shows this house http://www.zillow.com/homes/for_sale/Cypress-CA/44833_rid/any_days/33.820123,-118.026317,33.80274,-118.049384_rect/15_zm/0_mmm/
around 582K for 2006, its currently priced at 599k and stuff is not staying on the market very long here.

Rent in this area averages $2,600 to $2,800. I am looking to buy soon but 550K plus houses scare me lol.

Sheen42 says

Rents in this area are around 2600 to 2800, I am looking to buy soon but 550K plus houses scare me lol.

$550K for a house in OC is cheap. And yes, prices in OC have just surpassed their previous high in 2007.

Ironman says

Strategist says

And yes, prices in OC have just surpassed their previous high in 2007.

and you think that's a good thing even though wages haven't kept up with the same trend.?

Hell yes.

Mortgage debt to GDP is stabilizing -- at a 13+ year low:

The 2007 crash was mostly due to the subprime lending crisis. As long as you had a pulse, you would be strongly considered for whatever loan amount you wanted.

A housing crash (particularly here in the Bay Area) today, if it were to occur, would be driven by different reasons. It would be economy related, tech industry related, recession related, etc.

Ironman says

you can't have it all.

You can add them all together and it wouldn't be half the amount of mortgage debt

Logan,

As you may recall, I've been trying to get an investment property to rent out to a tenant. I'm in contract purchasing it (MLS#16010149) at 107K property in a working class neighborhood in Sacramento putting 20% down on a conventional. I should be able to rent it out @ $1100/month. My biggest hesitation is a sharp negative turn in the real estate market. Is it a good time to buy or should I cancel? I had a really tough time having an offer accepted because there are almost no houses in this price range, and when there are, I get beat out by all cash investors or higher bidders. What you say?

ChapulinColorado says

What you say?

If you're going for yield, do your cash flow data work and if it looks good for you do it. You're in contract now so you don't have to worry about cash buyers anymore. Investment property with 20% down so you're doing fine financially.

As long as you know home prices can't go up forever but you're playing for yield, go for it. The rental I have has gone up 80% since 2011, but I am only playing for yield not for capital gain, so that aspect doesn't mean anything to me.

ChapulinColorado says

I'm in contract purchasing it

...and now you ask questions? Always do your homework. IMHO the housing market will begin to mimic the wealth gap (more than it is already). So things are going to get UBER local. Blue collar Sacramento, eh? I think your negative exposure is low, but then again so is your upside potential.

Read this and other things like it and form your own opinion. Find out who your target market is and find out what's happening in their income strata. Don't ask Leroy... he has no idea.
http://forms.csus.biz/SBR/Sacramento_Business_Review/Home.html

and here is your gap.

http://www.huffingtonpost.ca/2016/05/30/250-million-condo-nyc-billionaires-row_n_10204348.html

The amount of available inventory in the suburban Sacramento area is mind blowing...

As mentioned above, make sure you are making your decision on cash flow and not real estate appreciation upside.

BayArea says

you are making your decision on cash flow and not real estate appreciation upside.

That above in BOLD

junkmail says

...and now you ask questions? Always do your homework

Actually I have been doing my homework (but I'm no expert, more of a hobby) and have been asking questions here for years, this is just one of my favorite blogs to read. But it's not as addicting as it used to be during the housing bull/bear debates with Roberto Aribas, ApocalypseFuck, and I kind of got bored of Flaming Ducky winning almost every debate-- ugh lawyers..! I had a different avatar I can't remember and just started using this one about 3 or maybe 4 years ago. I'm streaky, could spend months without coming and months I'm here almost daily, even if I don't post.

Logan-

Thanks for your input, just barely caught up today,,, Yes, I'm in it mostly for yield/ cash flow and to diversify my portfolio. Kind of made a big investment in California Northstate University a few years back and went super conservative on my 401k mostly in fixed instruments. My IRA's are mostly hedges in the hated commodities. My personal trading account is still tiny since I only add to that after I max out my 401K and Roth IRA. I don't have sufficient confidence yet to allocate too much in a middle class home, other than my own live-in home.

Still worried about getting this house since it will be my 3rd acquisition in 2 years-- I hate to admit I'm kind of an uber bearish-- don't want to loose. It's weird because everything I'm invested in I see it mostly as a hedge to everything everything else. I guess I'm not an investor but more of a "hedger".

I still haven't closed on that house yet, bank is asking seller for repairs. Supposedly, seller is doing that this weekend. Waiting for certificates for roof and bank approval of the property, I think it will close by the end of the month, so I can still walk if I chicken out, but still remain committed to closing.

Chapulin...

Go check out
https://www.biggerpockets.com/
The advice you're looking for is there. Don't engage with the site operators but rather the property investors there. Some really smart folks, they can help you out.

Leroy hasn't answered because his magic 8-ball, crystal ball umm graph machine is broken.

junkmail says

Go check out

https://www.biggerpockets.com/

Yeah, I've been using their phone app off and on for a year and have read the forum, blogs, and tools just like I have here at Patnet, mortgageimplode.com, ochousingnews.com, doctorhousingbubble.com and so many other real estate tools, it's not like I haven't done my homework. Experience and DIY is what I;m working on and managing the risk and not over-leveraging.

The property is great for the price and the potential yield is there... that depends a lot on the quality of the tenants of course, so I will have to do my due diligence.

ChapulinColorado says

I will have to do my due diligence

...is all I'm saying.

Just so we're clear, I can't give you blanket advice, you know that property better than anyone. You probably know Sacramento better than me... scratch that I KNOW you know Sacramento better than me. So you are your best counselor.

I will say this, I'm sitting on 500K and now looking for a 3 to 5 property, package deal (not in CA) through either an agent or a wholesaler. So obviously I think RE has some legs. For me it's all about revenue stream. I don't work anymore so I like to have a monthly income (hedge against inflation). So I'm putting my money where my mouth is. I'd follow through if I were you. General economy says you can't loose. Local economy could screw you. Almost pulled the trigger in North Carolina recently but the state seems to be in some turmoil right now and it's too risky.

Good luck!

See NYT, just 10 years ago!

http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html

Cool, another graph...
Not sure what you're saying?