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Old 05-25-2013, 07:42 AM
 
Location: Everywhere and Nowhere
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Quote:
Originally Posted by flo2900 View Post
Too much demand for this sunny crowded place called So Cal....supply and demand is basic economics! We may never see the bottom of 2009 prices ever again. Bottom is gone people!
Southern California's not the only place experiencing home price escalation. It's happening in most major metros. I think it has more to do with low interest rates and a recovering economy than sunshine. However, lagging new construction is also a factor.

I'm not sure why people think this should end with a bursting bubble. I don't think prices there or in other hot markets are out of line with the incomes and wealth of homebuyers. People aren't buying homes they can't afford. Unlike before, they seem to have the cash or are well qualified.

Last edited by CAVA1990; 05-25-2013 at 07:59 AM..
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Old 05-25-2013, 08:42 AM
 
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Quote:
Originally Posted by CAVA1990 View Post
Southern California's not the only place experiencing home price escalation. It's happening in most major metros. I think it has more to do with low interest rates and a recovering economy than sunshine. However, lagging new construction is also a factor.

I'm not sure why people think this should end with a bursting bubble. I don't think prices there or in other hot markets are out of line with the incomes and wealth of homebuyers. People aren't buying homes they can't afford. Unlike before, they seem to have the cash or are well qualified.
Yes and no, super low interest rates have created the illusion that prices are affordable because most families buy a monthly payment, not the home price.

However, nearly 40% of purchases have been by investors chasing yield. Couple that with low interest rates and low inventory, you have the underpinnings of a bubble. In fact, people can not afford these prices and investors are only investing because can't generate yield elsewhere. Already, the yield is drying up with the rapid run up in prices. It is likely that prices will moderate and even stop (a good thing) The best outcome would be a slow decline, reducing prices by 30% overall over the next 5 years. Will it happen, unlikely, because people are foolish, believe that high RE prices are a good thing, get greedy and blow up the bubble till it pops.
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Old 05-25-2013, 11:10 AM
 
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According to Redfin, what's happening in CA this year happened in AZ last year. Things have quieted down substantially.
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Old 05-25-2013, 02:00 PM
 
Location: Everywhere and Nowhere
14,129 posts, read 31,130,987 times
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Quote:
Originally Posted by Calix View Post
In fact, people can not afford these prices and investors are only investing because can't generate yield elsewhere.
Homes are selling to qualified buyers so they must be affordable to the market. Perhaps those investors are taking a buy and hold long view and realize that yields in real estate go up and down like the stock market. Just because yields may be tightening now doesn't mean they always will.
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Old 05-25-2013, 02:39 PM
 
Location: Murrieta California
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There was an article in "Money magazine" last month about the housing situation in the US. They broke it into several different markets. Basically each market with increasing prices was defined as either being economy driven or a rebound market. The San Jose CA market is economy driven becuase of the high tech boom with a lot of new buyers with high incomes and a very limited supply. On the other hand Riverside County is a rebound market where the economy is not good but prices have risen because of investors. The rebound markets are ones where the prices increased rapidly from 2002-2006 and then crashed. The rebound markets are not sustainable unless their local economies improve because the investors will quit buying as prices have increased. We bought our home new in 2002 for $280,000 plus $120,000 in upgrades and improvements. It peaked in 2006 at $650,000 and then dropped to $250,000 in 2010. It is now worth about $350,000 with the increase coming in the past year. Homes are selling like hotcakes here with multiple offers at prices above the listing price. However this will not keep up and will level off very soon.

The good thing is my property tax dropped about 30% but it will go back up.
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Old 05-25-2013, 02:41 PM
 
246 posts, read 420,320 times
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Quote:
Originally Posted by CAVA1990 View Post
Homes are selling to qualified buyers so they must be affordable to the market. Perhaps those investors are taking a buy and hold long view and realize that yields in real estate go up and down like the stock market. Just because yields may be tightening now doesn't mean they always will.
3% down with 45-50% DTI may "qualify" but is hardly sustainable. Most of these buyers are on the ragged edge of bankruptcy. That is what we have now. Also, they are only "affordable" due to the massive Fed subsidy in the mortgage market. When that stops, ask yourself if homes are "affordable" with a 35% payment increase simply due to rates at 5-6%, which would be historically low. Mind that interest rates have dropped by 25% in the last year alone, which has fueled much of the so called "price appreciation".

Rock bottom mortgage rates, stagnant incomes, price inflation in food, fuel and other necessities, sounds like a recipe to allow "qualified buyers" absorb another 50% gain in prices.

Last edited by Calix; 05-25-2013 at 02:51 PM..
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Old 05-25-2013, 05:23 PM
 
Location: Everywhere and Nowhere
14,129 posts, read 31,130,987 times
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Quote:
Originally Posted by Calix View Post
3% down with 45-50% DTI may "qualify" but is hardly sustainable. Most of these buyers are on the ragged edge of bankruptcy. That is what we have now. Also, they are only "affordable" due to the massive Fed subsidy in the mortgage market. When that stops, ask yourself if homes are "affordable" with a 35% payment increase simply due to rates at 5-6%, which would be historically low. Mind that interest rates have dropped by 25% in the last year alone, which has fueled much of the so called "price appreciation".

Rock bottom mortgage rates, stagnant incomes, price inflation in food, fuel and other necessities, sounds like a recipe to allow "qualified buyers" absorb another 50% gain in prices.
I'll wager that anyone buying right now with cash or a mortgage and selling 10 years from now will make out just fine.
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Old 05-25-2013, 10:41 PM
 
619 posts, read 2,160,639 times
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Quote:
Originally Posted by CAVA1990 View Post
I'll wager that anyone buying right now with cash or a mortgage and selling 10 years from now will make out just fine.
In no more than 3 years we will have 2007 level prices! That will complete the 10 year turn around cycle for prices to come back as forecasted by most.
After that they will stabilize plus the 3% annual appreciation to adjust for inflation.
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Old 05-25-2013, 10:55 PM
 
Location: Everywhere and Nowhere
14,129 posts, read 31,130,987 times
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Another sign of a bubble would be rents significantly lower than mortgage payments on recent purchases. That spread still seems pretty small.
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Old 05-27-2013, 07:19 PM
 
Location: Murrieta California
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Quote:
Originally Posted by CAVA1990 View Post
Another sign of a bubble would be rents significantly lower than mortgage payments on recent purchases. That spread still seems pretty small.
We are a long way from that. Monthly rents are much higher than the mortgage payment would be including taxes and insurance.
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