DFW Home Prices keep going UP! (Paris: condos, loan, calculator)

[stan4]

Originally Posted by synchronicity

As a tangential bit, I assume you have some data on percentage of HNW households in DFW relative to other similar large metros? I don't have it and am too lazy to google. Just kinda curious.

The guy behind me and the guy in front of me and one house over - rarely home.

The guy behind me spends a lot of time in cooler climes (Colorado) and the Carib.

The couple in front and one over mostly live in Lake Tahoe.

Why they need 5-6000 sq ft houses in Texas is beyond me. But the guy behind me has one hell of an annoying dog, so the longer he's not around, the better.

[Wittgenstein's Ghost]

Originally Posted by synchronicity

Per the Case-Schiller indices, DFW's home price increases the last year or so are below the median for the 20 metro areas tracked. Yes, that's a bit of a scary thought.

I'm curious about this. I just took a look at the Case-Schiller numbers, and the 20 city composite has gone from 165 in 2014 to 182 currently, which is a 10.3% increase. Dallas has gone from 132 to 154, which is a 16.7% increase. I'm not an expert on how the Case-Schiller index is compiled, so it's possible that I'm comparing the Dallas numbers to the mean of the metro areas rather than the median, but it still seems like Dallas has seen much larger increases than the 20-city index.

As for the original question of what will happen if DFW home prices continue on this path: obviously, DFW would lose much of its appeal. However, I don't believe prices can continue on this path. I believe we are at some spot on a housing bubble right now. I don't know how big that bubble is, or when it's going to pop (or just flatten out), but the prolonged low interest rates in a time of economic growth have artificially inflated the amount of buying power most people have. This has driven prices up, and I don't think this level of growth is sustainable. In fact, I know it isn't. I don't know, however, if we will see a big pop like we did last decade, but there is no way that prices continue like this.

[stan4]

Originally Posted by Wittgenstein's Ghost

I'm curious about this. I just took a look at the Case-Schiller numbers, and the 20 city composite has gone from 165 in 2014 to 182 currently, which is a 10.3% increase. Dallas has gone from 132 to 154, which is a 16.7% increase. I'm not an expert on how the Case-Schiller index is compiled, so it's possible that I'm comparing the Dallas numbers to the mean of the metro areas rather than the median, but it still seems like Dallas has seen much larger increases than the 20-city index.

As for the original question of what will happen if DFW home prices continue on this path: obviously, DFW would lose much of its appeal. However, I don't believe prices can continue on this path. I believe we are at some spot on a housing bubble right now. I don't know how big that bubble is, or when it's going to pop (or just flatten out), but the prolonged low interest rates in a time of economic growth have artificially inflated the amount of buying power most people have. This has driven prices up, and I don't think this level of growth is sustainable. In fact, I know it isn't. I don't know, however, if we will see a big pop like we did last decade, but there is no way that prices continue like this.

There are places on this planet where real estate has only gotten more and more expensive over time.
Maybe not consistently at huge percentages per year, but it's never gotten cheaper. Usually these places involve very limited quantities of land (islands, peninsula, etc).

I agree it can't go gangbusters like this for long, but most places don't go gangbusters for more than a decade at a time.

[Wittgenstein's Ghost]

I'm not sure what the usefulness of discussing where rich people want to live is. Is the conclusion supposed to be that if rich people want to live here, and rich people can live anywhere, then this must be a great place to live? That seems flawed to me. I can't imagine anyone who has enough money to live anywhere, and zero ties to any particular place, choosing to live in DFW. That's not a knock to DFW, as I can't imagine such a person choosing to live in many "regular" cities. DFW is appealing to ordinary folks because of the combination of jobs, cost of living and public schools. None of these would be a big consideration for a very wealthy person.

If it is true that Dallas has a very large number of wealthy people relative to the population, I believe it is due to practical factors such as the business climate, convenient access to a large number of big companies, DFW airport or low taxation. I simply don't believe it is because DFW is just such a great place to be if we were to ignore practical matters.

[Wittgenstein's Ghost]

Originally Posted by stan4

There are places on this planet where real estate has only gotten more and more expensive over time.
Maybe not consistently at huge percentages per year, but it's never gotten cheaper. Usually these places involve very limited quantities of land (islands, peninsula, etc).

I agree it can't go gangbusters like this for long, but most places don't go gangbusters for more than a decade at a time.

Are there any major cities where this has occurred? My inclination is to say no. Areas that see big rises in hot times often see larger declines during the bust cycle. That is not always true, as some areas see rises due to genuine growth and a fundamental shift in the demand for real estate in those areas (often due to genuine scarcity in land), but typically riding a bigger wave means bigger trough ahead. The Case-Schiller numbers put the average home appreciation rate at about 3.5% over the last twenty years, which just barely beats the inflation rate of 2.9% over that time. According to Case-Schiller, Dallas saw an 8.5% appreciation rate from August 2012 to August 2015 despite the fact that inflation rates were below 2%. That isn't sustainable, and it looks like a bubble. Eventually, things will return closer to their historical averages, and that often involves an offsetting period of lower than average growth.

[EDS_]

Originally Posted by Wittgenstein's Ghost

I'm not sure what the usefulness of discussing where rich people want to live is. Is the conclusion supposed to be that if rich people want to live here, and rich people can live anywhere, then this must be a great place to live? That seems flawed to me. I can't imagine anyone who has enough money to live anywhere, and zero ties to any particular place, choosing to live in DFW. That's not a knock to DFW, as I can't imagine such a person choosing to live in many "regular" cities. DFW is appealing to ordinary folks because of the combination of jobs, cost of living and public schools. None of these would be a big consideration for a very wealthy person.

If it is true that Dallas has a very large number of wealthy people relative to the population, I believe it is due to practical factors such as the business climate, convenient access to a large number of big companies, DFW airport or low taxation. I simply don't believe it is because DFW is just such a great place to be if we were to ignore practical matters.

1. Vis a vis the rich people argument. Lots of rich people live here. They can live here or most anywhere else. Therefore DFW isn't the terrible place to live that a fair number of posters on CD claim or imply regularly.

Regarding the final two sentences in your first paragraph. I know a local guy who is literally a self-made multi-billionaire, our respective mom's have been friends since the '60s,.......this guy could move to Monaco or Paris or Blackhawk or the best NYC high rise tomorrow if he wanted. He lives here.

2. Obviously, practical matters alway matter.

[J.Thomas]

Thank you, Bernanke!!!

[EDS_]

Originally Posted by J.Thomas

Thank you, Bernanke!!!

So you think The Federal Reserve should have left rates high and not executed QE iniatives?

[J.Thomas]

Originally Posted by EDS_

So you think The Federal Reserve should have left rates high and not executed QE iniatives?

Well they already admitted QE scheme didn't work.

There is no reason for rates to be zero still.

They should go up.

[EDS_]

Originally Posted by J.Thomas

Well they already admitted QE scheme didn't work.

There is no reason for rates to be zero still.

They should go up.

The QE's did exactly what they were supposed to do - recapitalize the big bank's balance sheets, required reserve ratios and roughly 20% of QE did make it to the streets via loans. In an era when the gov is applying stress tests and whatnot it made/ made no sense for the banks to loan QE proceeds out at risk when they were able to make about as much and sometimes more at no risk internalizing most QE proceeds.

Short rates are still near zero because there is/has been a greater threat of deflation than inflation. It may be that the OMC hikes rates in December at bit but it's not a sure thing.