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At least in my area, I don't think it's a bubble this time- it's just a lot of demand. Both pent up demand from people who couldn't buy during the recession who are now back on their feet, and demand from the influx of new people moving to the area due to our strong job market. And though prices seem high, they are still not where they were at the height of the bubble a few years ago. Price growth is steady to strong but it just doesn't appear out of control- and as others mentioned, this time around it's a more stable situation- the people getting mortgages have passed the new tougher guidelines, you have far fewer people getting ARM's, etc.
Where I'm at more houses were sold last year than in 2007 at a higher median price. The economy where I'm at is better than most other places.
Wages haven't gone up to support higher house prices. Low interest rates make higher prices cost less per month in interest. There is a lot of construction here.
I don't think wages have gone up anywhere ...I think it would be big news otherwise.
I think what we see is the poor and middle class moving out of higher cost areas and they are being replaced by wealthier individuals or people that had equity in a more expensive city or country.
Prices in certain markets are definitely over priced. Definitely not a bubble like before, but I know the #'s are skewed such that average annual appreciation rates are not normal nor sustainable. In San Francisco, for example, average rates were in the 5% yoy rates for the past 40-50 years. Now, I am seeing those rates in rural areas of Monterey, CA.
My feeling is that when rates start to climb, we'll see another implosion. It happens time and time again with regional boom and busts: Houston, Hawaii, southern California, etc... It will happen again on a national scale.
Remember, housing prices CANNOT go up faster than median wage inflation. Just do a simple thought experiment to vet this out.
This is so true. I have two rentals paid cash and was trying to buy a third one but needed financing. I was putting down 40%,had over 750+ credit AND had verifiable income that's well above the debt to income ratio needed to qualify. However, they put another new law into effect that prohibits banks from lending to investors who are buying in a community with less then 60% owners living in the community. I was floored when I heard of this! So I had to wait till I finally had enough cash on hand for the third property. I'm hoping to finalize a contract on a property this week.
Banks indeed have tightened their qualifications. Its to a point where I would even call it "ridiculously and unnecessarily strict." Could the housing market go into another depression? Sure but I would be extremely surprised given all the measures the government and banks have taken to prevent it.
Yup. But never the less the doomsday sayers came out in full force saying another housing bubble will pop in response to my post. lol. With the standards in place today we aren't going to be seeing a housing bubble like we did from the 80s-2000s in our lifetime. Banks, politicians, and the people of this generation will not allow it.
Remember, housing prices CANNOT go up faster than median wage inflation. Just do a simple thought experiment to vet this out.
They can but they will revert below it as a correction. This is not the new normal. If you want them to go up and stay up then the wages need to go up to pay for them. But you are leaving out another factor. Work force participation. We have declining wages do to outsourcing and we have declining work force participation. This means consumer debt needs to be going down. Personal debt hit 100% of GDP back in 2008 I think it was. More debt has a percentage that is bad even if all the borrowers look good because the total debt needs to be going down not up. Any economic contraction will tend to cause a domino effect that will tend to fail a bunch of banks.
Quote:
Originally Posted by mililani
My feeling is that when rates start to climb, we'll see another implosion. It happens time and time again with regional boom and busts: Houston, Hawaii, southern California, etc... It will happen again on a national scale.
Printing money is pumping up houses stopping it will trigger a correction.
Quote:
Originally Posted by mililani
Prices in certain markets are definitely over priced. Definitely not a bubble like before, but I know the #'s are skewed such that average annual appreciation rates are not normal nor sustainable. In San Francisco, for example, average rates were in the 5% yoy rates for the past 40-50 years. Now, I am seeing those rates in rural areas of Monterey, CA.
The next one is never like the last one so we can say, this time it is different. We can say this time it is the new normal last it wasn't because...
Well personal debt needs to be going down by the amount of dropout from the workforce and the lowering of wages, by the amount of loss of income. That will tank the economy. You want growth up the minimum wage by the ratio of monetary base expansion 2008 until now.
Yup. But never the less the doomsday sayers came out in full force saying another housing bubble will pop in response to my post. lol. With the standards in place today we aren't going to be seeing a housing bubble like we did from the 80s-2000s in our lifetime. Banks, politicians, and the people of this generation will not allow it.
personal debt hit 100% of GDP back in 2008. Milestone Posting Work force participation is in decline. Wages are in decline dew to outsourcing. Debt needs to be coming down. Any increase in interest rates will tend to trigger a correction.
We wont have a bubble like last time but this time it is a different kind of bubble. But bubble it is.
We have local real estate markets and a national financing market,? So when a local market was not over heated during the boom that ended in 2007 (state restrictions on cash out financing keep that cash fuel from driving a bubble) and financing dries up, prices fall while demand is still there but buying is delayed. When financing eased some in the past two years pricing recovered from the financing driven local price decline. We do not have a bubble in DFW at this time
But MY opinion is, in many areas....the price of housing is exceeding the levels of the previous bubble.
And yes, the exact same mechanism may not be in play......but the greed and irrational elevation of housing prices, much led by the Fedgov, will end up leading to another, possibly severe correction:
Rather than requiring home owners to put 10% or 20% down to own a house, the agencies typically require 5% or less. More people accessing mortgages means more demand for houses – and the price goes up.
This is, of course, what happened in the lead-up to the last housing bust;
We have local real estate markets and a national financing market,? So when a local market was not over heated during the boom that ended in 2007 (state restrictions on cash out financing keep that cash fuel from driving a bubble) and financing dries up, prices fall while demand is still there but buying is delayed. When financing eased some in the past two years pricing recovered from the financing driven local price decline. We do not have a bubble in DFW at this time
I read an interesting paper on a paper written back in 1988. It said three phases to a housing bubble. first is the hedge phase it is when you can make money on your property, you buy property rent it out and pay the mortgage the taxes and the upkeep and have extra left over. The second is the brake even phase. Interest only loans. The last is the Ponzi phase. Negative amortization loans, 125% equity loans etc.
When the Ponzi phase of a housing bubble pops then the brake even phase tends to go bad too and part of the money making phase goes bad as well. My local market had more houses sold last year at a higher median price than in 2007.
The first part of a housing bubble looks like a normal market.
You may still be in the first phase of a housing bubble in DFW but you are in a bubble.
The bubble isn't done popping until prices drop below the starting point.
The bubble was re-inflated. It wasn't allowed to finish popping.
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