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Unread 05-23-2013, 10:29 PM
 
615 posts, read 1,262,786 times
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Default Bubble bursting in 2014? or not?

Fed announced since a year ago that interest rates will go up in 2014.
Would that be enough to burst the bubble? Are we in a bubble?

I believe that with rising interest rates in 2014 market will slow down and prices will stay at the same level for a while.
Real estate still a better spot to park money that stock market that's why I just do not see prices falling again soon. People buying are cash buyers or strong buyers.

OC is at 2005 levels at $545k on average. peak was 675k in 2007. IMHO prices will continue to climb a little more this summer.

Your opinions please.
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Unread 05-24-2013, 09:30 AM
 
Location: LA/OC
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I'm pretty much agree with everything you just said. I believe once interest rates go back up, prices will begin to level off. I don't think there will be a sudden crash due to interest rates going up a point. Prices will likely keep trending upwards until that happens.
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Unread 05-24-2013, 12:21 PM
 
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I'm sure once the investors wave passes, something we can't even imagine now will happen to keep 50 year old tract houses out of reach for anyone making under $150k. Such is life in OC.
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Unread 05-24-2013, 01:10 PM
 
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We are not in a bubble.
Prices seem fair. I would not expect much movement up or down other than 1-2% per year. Of course, variability can be caused by other factors such as fed/fiscal policy, growth in wages, international competitiveness, local issues etc. but there is no underlying issue that is creating a bubble as there was in 2004-2007.
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Unread 05-24-2013, 01:20 PM
 
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Quote:
Originally Posted by tiredofoc View Post
We are not in a bubble.
Prices seem fair. I would not expect much movement up or down other than 1-2% per year. Of course, variability can be caused by other factors such as fed/fiscal policy, growth in wages, international competitiveness, local issues etc. but there is no underlying issue that is creating a bubble as there was in 2004-2007.
Non-existent supply and investors chasing returns are combining to sell houses in hours for thousands over asking. Prices are increasing far faster than either inflation or incomes. If you think $600k for a 40 year old 3 bedroom tract house in mediocre condition is fair, you've been in the OC real estate distortion field too long.
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Unread 05-24-2013, 01:29 PM
 
11 posts, read 33,572 times
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Quote:
Originally Posted by EscapeCalifornia View Post
Non-existent supply and investors chasing returns are combining to sell houses in hours for thousands over asking. Prices are increasing far faster than either inflation or incomes. If you think $600k for a 40 year old 3 bedroom tract house in mediocre condition is fair, you've been in the OC real estate distortion field too long.
You are explaining the conditions that lead to price increase but those have nothing to do with valuation.

Applying an income approach - houses are fairly valued in relation to rental rates in most areas.
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Unread 05-24-2013, 02:45 PM
 
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Back during the housing boom, my husband and I held off for the collapse. Houses will go into short sale, foreclosure, etc., so the market should be flooded with homeowners who can't keep up with payments. At that time, there should be so many homes for sale that prices will drop. Then we'll buy. That was the plan.

Ha. The bubble did burst, home values dropped, but the banks played us. Supply is low, demand is still high and prices went high and now higher--not what we planned at all!

I just bought a house--yes, escrow closed (yeah), but I wonder in the back of my mind what will happen when rates go up. Should I have waited? No, I simply couldn't have considering my personal situation.

I have no idea what's going to happen in the coming years. I had it all wrong!
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Unread 05-24-2013, 07:24 PM
 
881 posts, read 418,644 times
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Quote:
Originally Posted by russlancea View Post
Back during the housing boom, my husband and I held off for the collapse. Houses will go into short sale, foreclosure, etc., so the market should be flooded with homeowners who can't keep up with payments. At that time, there should be so many homes for sale that prices will drop. Then we'll buy. That was the plan.

Ha. The bubble did burst, home values dropped, but the banks played us. Supply is low, demand is still high and prices went high and now higher--not what we planned at all!

I just bought a house--yes, escrow closed (yeah), but I wonder in the back of my mind what will happen when rates go up. Should I have waited? No, I simply couldn't have considering my personal situation.

I have no idea what's going to happen in the coming years. I had it all wrong!
Since so many of the sales are cash buyers interest rates will not impact them. They get a better return on their money than current investment rates and have solid equity.

The bubble is not being inflated by stupid buyers, but by cash investors. That may drop off if interest rates cause a better return in other areas, but I doubt any "crash" like a few years ago will occur.

It may very well be like major areas of Europe where rentals are what people look for as housing has gotten too expensive. The Southern coast of CA may ultimately be out of reach of most buyers and just be a rental market in the future. Obviously many homes will be held by buyers and some sold to buyers, who are not investors, but prices will stay high as long as there are enough people or investors to pay what is asked.
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Unread 05-24-2013, 08:16 PM
 
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Quote:
Originally Posted by Leonard64 View Post
Since so many of the sales are cash buyers interest rates will not impact them. They get a better return on their money than current investment rates and have solid equity.

The bubble is not being inflated by stupid buyers, but by cash investors. That may drop off if interest rates cause a better return in other areas, but I doubt any "crash" like a few years ago will occur.

It may very well be like major areas of Europe where rentals are what people look for as housing has gotten too expensive. The Southern coast of CA may ultimately be out of reach of most buyers and just be a rental market in the future. Obviously many homes will be held by buyers and some sold to buyers, who are not investors, but prices will stay high as long as there are enough people or investors to pay what is asked.
Of course, a permanently high plateau in real estate. Hmm I've heard that before. Paging Dr. Fisher

"There may be a recession in stock prices, but not anything in the nature of a crash."
- Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929
"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."
- Irving Fisher, Ph.D. in economics, Oct. 17, 1929

The stock market crashed less than two weeks later.
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Unread 05-25-2013, 03:52 AM
 
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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!
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