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We all know that there is a bubble, many of us are suffering because of it. But when did the bubble develop? Where did the bubble start? My theory is that while a bubble existed in Florida before the depression, the nationwide bubble started in the 70's when inflation was running away thanks to the idiots who dumped the Gold Standard monetary policy. The first bubbles were created in California and NY/MA/NJ where good jobs and financial capital were abundant. As the property owners sold their bubble assests and moved south, a new bubble developed in Florida. Now frustrated Floridians overwhelmed by snowbirds and desperate refugees are fleeing to places like Arkansas, Tennesse, North Carolina- creating new bubbles based on old ones. Historically RE prices reflected the incomes of the locals, and went up parallel to inflation. After the bubble years RE prices have outpaced inflation, which has been eroding personal incomes. With today's outsourcing, and competitive global market incomes have been falling in real dollars, while real estate zoomed to the stratosphere. Does anyone have conclusive data when this whole process began, and where?
It might draw more response in Business & Finance. I'll move it to that forum since it's languished here in "General U.S." for a few days without replies.
I think it's better to define the bubble post early 90's for the simple reason that real estate prices fell in Los Angeles, San Francisco, south Texas and other areas in the early 90's, but they were mostly localized due to specific economic upheavals in those areas.
There was a bubble developing in the SF Bay Area in the late 90's/2000. I know... I sold my house for a great profit then in 2000.
There was no bubble in Las Vegas then, real estate was dirt cheap in 2000....actually, it was incredibly, unbelievably cheap. I paid for a 2254 sq. ft. two story home on .20 acre, 30X15 inground pool in its own fenced off area with palm trees, a basketball court, a large backyard grass area and a view of Las Vegas' Strip from the Mandalay Bay to the Stratosphere Tower ( I was south of the Strip), five bed./3 bath./3 car garage house. It was all stucco with architectural details, tile roof, the whole works. .......in 2000 I paid $205,000. The bubble in Las Vegas began to really take hold in about 2003 and then it just shot up mirrored by soaring prices in California, Florida, Washington D.C. many parts of the Eastern Seaboard, etc. It moved from regional increases to a national phrenzy.
I sold my house in Vegas at exactly the very top of the bubble...June 2005. From then on the value of the house I sold has declined.
My parents' home in northern California had appreciated to almost $1,000,000, yet it now would appraise for $200,000 less. My sister tried to sell her home in Pasadena, CA. for $700,000 - the going rate for homes in her neighborhood and didn't have even a lookie-lou in four months and pulled it off the market.
The bubble has burst.
I believe it started in CA. It was a byproduct of the tech boom and just being a 'cool' place to live. Lot's of demand. Then the mortgage companies fueled the fire by loaning way too much money to average folks. It worked out OK for a while. As long as homes were appreciating like crazy, it was fine.
I've been studying Las Vegas for a few years now. I agree it was very affordable in 2000. For a while in 2004/5, I was priced out of the SFR market. Now, I can afford it again!
What good is that if I can't sell the darn home I have now? Sigh!
Nixon took us off the gold standard because the oil producing countries and some others had begun asking for payment in gold. There actually was an incident where one country (I forgot which one, France maybe) had ingots delivered from Ft Knox.
I saw the housing bubble develop first hand. In most of the 1970's you could buy a house anywhere in the country for about 5% differential. I had just built a 3 BR ranch house in upstate NY (where the avg price is still $75 what we pd for the ranch) and we had a chance to buy a similar one of two stories on the gold coast of LI near the water for approx $3,000 more. These houses in LI are now over a million.
Toward the end of the decade, say 1977, we moved to San Jose, Ca and bought a slightly smaller ranch house for the same price as the one we had built in upstate, NY. Three entirely different markets with prices in the same range, same time period.
What happened is that hi-tech was just beginning to take off in Silicon Valley, lots of companies, and lots of high paying jobs. This was when Apple was still being developed in his garage. People were buying houses right and left and adding second stories onto them increasing their value. Rents were already high there because of a housing crunch. Prices were still affordable but just starting to climb. It then moved on to LA (where I'd also had a house for $40 in the Hollywood Hills) which is now over a million.
It later moved on to DC, NYC, and Boston. DC because there is always a turnover due to political entities moving in and out frequently, and because hi-tech has moved there the last several years. NYC is always strong because of the finance industry though at the time it was crime ridden. I could have bought my entire apt house in NYC for $40,000 in 1969, and the owner was begging me to do it. I shudder to think how much each of the 25 apts are worth now.
From there it caught on especially spreading from the CA to places where they moved to, east coast, up the west coast, and on. I don't think it hit Fla till the last 5-6 yrs in an excessive way. You could still buy a brand new 3BR ranch there for $40 in the 1980's, and a decent home for $150- 175 there up till the last few years.
The whole thing has expanded like a nuclear bomb with people spreading inflation all over the place. It especially freaks me out when I see people on tv buying half million dollar fixer-uppers that you'd be able to get here for $30,000. And it makes me sick to my stomach when I think I could have realized as much profit from merely living in any one of the homes I had as I did busting my ass for 30 years in a business. The really unfortunate part is that regular folks, while the economy is becoming tenuous for many, can't even dream of affording a decent home due to unsustainable sky high prices.
It wasn't the gold standard, it was speculation (especially after the stock market tech bust). To some degree the dynamic of the baby boomers played a role just as we had blown out everything we passed through from the school system on.
very low interest rates has to be in this equation,(a few years ago) money was cheap...mortgage payments were affordable to buy a house beyond ones' normal means. also, with very low interest rates, it was advantageous, to buy a house, rather than rent.
also with very low residential interest rates, were low commercial interest rates,,,,this created a real estate investment frenzy.
also part of the equation is median incomes (per household) increased!
also, i believe capital gains tax rates were lowered, so more invested without being tax-raped
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