House Bubble 2.0?

[rborden]

By all appearances we may be in the brink of yet another major housing market collapse. The telltale signs all appear to be there.

Not much a financial guru so to speak, most of the jargon is beyond my comprehension but this is just a few of the articles that I subscribe to that come into my email box on a weekly basis.

From what I gather best, we may be headed for a major market correction and at worst a full out housing bubble burst and collapse like in 07-08.

Some of you other guys on here who deal with finances may be able to paint a better picture of all of this than my post did.


U.S. Household Wealth Is Experiencing An Unsustainable Bubble

Analyst Warns: 'Housing Bubble 2.0' About to Pop - Money & Markets

Housing Bubble 2.0: Red Flags Popping Up All At Once. Feels Like This May Finally Be The “Big One”. – Investment Watch

 

[MG0h3]

Glad I'm sitting on a lot of cash to buy investments with. Where I'm at in TX seems a bit more stable than other areas though.

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[13COBRA]

Kinda surprises me, as housing has been on a tear up here all year. I'd venture to guess the average house is listed for a week or less.

 

[08mojo]

Kinda surprises me, as housing has been on a tear up here all year. I'd venture to guess the average house is listed for a week or less.

I haven't researched this too much, so I am speaking out of turn, but isn't that one of the indicators? Houses around here are selling in the same manner: quickly and a lot are going into a bidding war. Normally, I wouldn't think this is a bad thing, but here's the problem: it's pushed the prices of homes artificially high.

We bought our house in 2010, when the market was near the bottom. The 'value' of our home has gone up to over 2.25x what we paid for the home. I certainly feel we got a deal on the house, as it was purchased in a depressed market, but I assure you it's not worth 2.25x what we paid for our home. The economy is good and people are moving for jobs. As a result, they have to find a home and they are paying too much. I don't think it's sustainable. Job cuts will come and the housing market will follow.

 

[13COBRA]

I haven't researched this too much, so I am speaking out of turn, but isn't that one of the indicators? Houses around here are selling in the same manner: quickly and a lot are going into a bidding war. Normally, I wouldn't think this is a bad thing, but here's the problem: it's pushed the prices of homes artificially high.

We bought our house in 2010, when the market was near the bottom. The 'value' of our home has gone up to over 2.25x what we paid for the home. I certainly feel we got a deal on the house, as it was purchased in a depressed market, but I assure you it's not worth 2.25x what we paid for our home. The economy is good and people are moving for jobs. As a result, they have to find a home and they are paying too much. I don't think it's sustainable. Job cuts will come and the housing market will follow.

I agree to a point. But I also believe that with houses moving quickly and a lack of houses on the market to satisfy demand, it creates a positive perception of the market to consumers...which is 80-90% of a bubble anyways.

 

[jrandy]

One of the biggest differences is the way people are buying houses. At least in the Bay Area, many are coming in with all cash offers (and over asking). The neighboring states to CA are seeing CA homeowners selling and moving to cheaper cost of living areas.

While this is driving up the prices of the homes for everyone, there's a lot of inventory with zero or small loans.

The last bubble screwed everyone over as the adjustable rates hit around the same time there was a correction. Since people became upside down overnight, crash.

While I agree that the market is rising at a rate that's hard to sustain, I don't think there will be another crash like 08, at least around here.

 

[SID297]

I hope not. I've been trying to get my parents to cash out of their second house. They got a smoking deal on it after 08. They could nearly double their money.

 

[B7BlownSnake]

I'm about to sell my condo and purchase a house here in Orange County. The market actually looks fairly normal here in Rancho Santa Margarita. House prices have stayed level for a little bit, and inventory and buyers are even. In the sub-500k market, things are a little overpriced because there are so many people looking in that range there's usually multiple offers at or above asking. In the 600-900 range, the houses are all pretty much priced right. They're on the market longer as there are less buyers there, and the only ones that are "overpriced" for the size are fully remodeled. The 1,000,000+ is definitely a buyer's market, prices seem pretty good and priced correctly based on location, lot, upgrades, etc.

My realtor and the few friends I have that are realtors were a little concerned about a bubble earlier this year as prices were all over the map, but they said there's been a correction recently (I would have made 20k more on my home if I sold 4 months ago, but the place I'm looking at would have been 50k more). Plus the interest rates are rising at a slower pace than expected and there are fewer ARM loans out there. I know there are other market factors, but I don't see a bubble bursting any time soon.

 

[Mpoitrast87]

Market is ridiculous where I am. Houses are selling for 100-120k over what they are actually worth. Which makes it impossible for people like me to buy a house as a first time home buyer. I'm waiting for the market to collapse.

 

[Coiled03]

Hoping for a major correction. I wouldn't mind getting a new house, or some stocks on the cheap.

 

[Blk04L]

IMO we aren't there yet. The economy is still going strong, for now. Oil is cheap. People are still hiring.

What we are seeing is a transition from a sellers to a buyers market. What's making it tougher is the rising interest rates while income has not kept up with the rise in house prices.
Most people can't reasonably afford homes now(in some locations anyways). It's why we've seen a rise in the ARM loans this year.

The days of seeing your house gain more value than the stock market is over now.
Seen it in Palm City, FL, homes selling in 2014 for ~300-350k were selling for 400-500k last year and early this year.

 

[03cobra#694]

It's a mad house here with all the new construction, but the suppliers are going to kill it again. I can see it, they just keep raising the prices on everything. We're getting another $8-12 a yard bump in concrete along with all the other stuff.

 

[IronSnake]

We are in a destination city. Volvo, Boeing, BMW, MB, all of them are moving and building manufacturing facilities, engineering hubs, head quarters, you name it.

The market has gone crazy mostly due to the influx of people. The rejuvenation of run down areas. Lastly, the revitalization of old areas of the city. It's good that they are bring areas up. But what ultimately happens is old houses get bought up, reno'd, and flipped. It's great if you own a home, not so great if you don't yet.

We bought last year in May, had to fight just to get our offer in. Got it, got the house, and have gained 55k in equity since then. We intelligently avoided all ARM's, have a fixed 30 at a rate 1.5% lower than the average (thank you seller credits), and are sitting good (minus having PMI bleh).

I think the market will correct. But ultimately areas of major growth won't stop, and my town is more than likely one of them.

 

[bigmoose]

Not the case here in RI. Yes the market is going up but mostly driven by low inventory and people who can afford it deciding to buy before rates go up again. Unqualified people are not the ones buying the houses here.

I used to live in Boston and have many friends who bought in Somerville. While that market is stupid I think that's also due to low inventory and a high population of highly paid people. Cambridge is blowing up with biotech and other highly paid jobs. Again, unqualified people are not the ones buying there either.

 

[Mpoitrast87]

Not the case here in RI. Yes the market is going up but mostly driven by low inventory and people who can afford it deciding to buy before rates go up again. Unqualified people are not the ones buying the houses here.

I used to live in Boston and have many friends who bought in Somerville. While that market is stupid I think that's also due to low inventory and a high population of highly paid people. Cambridge is blowing up with biotech and other highly paid jobs. Again, unqualified people are not the ones buying there either.

I understand high prices in major areas such as Boston. I live in a redneck town 1 hour south of Boston and prices are extremely high.

 

[jpro]

I don't think another crash is coming...prices will level off and decline but they won't crash & burn. The big issue with the crash in '08 was the % of subprime mortgages. That practice is now extinct, so the odds of an all out crash are not very high IMO

 

[black92]

It most certainly can't go any higher. Where I live, houses are pretty much sold less than a week after listing and for prices I never thought I'd see so soon. We were planning to sell last fall and move into a home better fit for us, but the market is too high for what you get. Doesn't help that interest rates are high too. We are going to wait another year and if the market softens a bit, then we'll make a move.

 

[MG0h3]

It most certainly can't go any higher. Where I live, houses are pretty much sold less than a week after listing and for prices I never thought I'd see so soon. We were planning to sell last fall and move into a home better fit for us, but the market is too high for what you get. Doesn't help that interest rates are high too. We are going to wait another year and if the market softens a bit, then we'll make a move.

Interest rates are incredibly low at 5.25

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[rborden]

I don't think another crash is coming...prices will level off and decline but they won't crash & burn. The big issue with the crash in '08 was the % of subprime mortgages. That practice is now extinct, so the odds of an all out crash are not very high IMO

Hopefully, you're right sir. I posted this in another thread about the interest rates. Seems like the practice has been slightly modified and brought back again.

Thousands line up for zero-down-payment, subprime mortgages

I've been renting for years and was toying with the idea of buying a house, had one picked out that I liked and had posted a pic of the basement in Pics and Vids, but the builder started doing monthly increases to the overall build price and that combined with the talk of a bubble scared me off.

I have plenty of money for earnest and a sizable down payment 15%+ but I have decided to wait for the time being. I'd rather buy low if there is a correction or a bubble burst again. I'm not in any hurry. Houses will be there later.

 

[CV355]

We sold our last house and the new owners flipped it for +50% within 3 months by putting down cheap vinyl flooring and tearing out all our landscaping. When I bought my first house, the neighborhood was a "$150's." Now, just 7 years later it's "Starting at Low $200's" Those are NOT $200k houses. They're shoddy-built cookie-cutters with thin slabs, garbage HVAC, and the most crooked framing you could imagine. Our garage framework was like 16, 19, 25, 30, 21, 17 on center.

We got a neutral deal on our current house, but the value has gone up about 10% since we've owned it. I would think that with the acreage, water, quality of construction, etc, we'd be somewhat stable here. If you could pick up my property and slap it down in the middle of our old neighborhood, it'd be in the $800k-$1M range by their dumbass logic.

What I want to happen is for development to continue to creep out of the Greenville area like a septic system leak and start to encroach on my town (it's 2 miles from suburbia now). Man that'd drive my value through the roof.