Housing bubble 2.0 bust not if but when (Orange: foreclosures, renters)

[HyperionGap]

Originally Posted by coolbeans2000

I'm not an RE professional and I obviously don't know all the neighborhood specific RE trends in LA. But there is no doubt that the housing market bottomed late 2011/early 2012 (at least where I was shopping for a home in Huntington Beach and Lakewood).

Real Estate Market Trends for Huntington Beach, CA - Trulia

As you can see from this trend line going back to the 80's we're not in a "bubble" like what you see in 2006. We may be at the peak of an upcycle, but it's not wildly over valued "bubble" territory.


For LA metro area:

159.37 - April 2009

159.72 - March 2012


Case Schiller is the industry standard and is significantly more accurate than Trulia or Zillow.

S&P/Case-Shiller U.S. National Home Price Index - S&P Dow Jones Indices

info about the index if you're curious about the methodology.

https://en.wikipedia.org/wiki/Case%E...3Shiller_index

[incognitoe]

Going by the Median Sale Price. Very accurate since my bro and cousin both purchased a house in 2012 when it bottomed out. All around 330k. (GG and Anaheim). Both properties are now valued at over 500k.

[HyperionGap]

zillow. lol.

I have a bridge to sell you too if you're interested.

And you have an anecdote to prove how accurate it is?

Why do you even talk about real estate as if you have any clue? You are basically financially illiterate, I don't get it.

http://www.zillow.com/wikipages/Zill...-Case-Shiller/


Both FHFA and Case-Shiller utilize a weighted repeat sales methodology originally conceived in the 1960s and subsequently elaborated upon by Professors Karl Case (currently at Wellesley) and Robert Shiller (currently at Yale). This methodology was a significant improvement over the more conventional median sale price as it looks at the price change between repeat sales of the same home versus just looking at the median sale price of homes sold in a given period of time. The median sale price is heavily influenced by the type of homes that are selling at a given time, making it a less than ideal measure of home price levels.

[StreetLegal]

Originally Posted by coolbeans2000

I'm not an RE professional and I obviously don't know all the neighborhood specific RE trends in LA. But there is no doubt that the housing market bottomed late 2011/early 2012 (at least where I was shopping for a home in Huntington Beach and Lakewood).

Real Estate Market Trends for Huntington Beach, CA - Trulia

I think you are basically correct that the bottom was at some point in the first half of 2012. The link below shows data based on the Case Shiller index for the Los Angeles metro area adjusted for inflation. The charts shows the bottom was in 2012.

Los Angeles, California - JP's Real Estate Charts

Real estate markets are notoriously sticky as in they can take a long time to unwind on the way down. So even though the bubble starting bursting in 2006 or so, it took several years before the bottom was reached.

Also, below is a couple of articles/links from 2012 with quotes from the likes of Ivy Zelman (Wall Street Housing Analyst) and Christopher Thornberg (former UCLA Economist) signaling the bottom was reached in 2012. They were both very prescient in calling the housing bubble back in the early to mid-2000's.

Housing Ends Slide but Faces a Long Bottom - WSJ

Calculated Risk: Housing Bottom Callers: Zelman, Thornberg

[HyperionGap]

Originally Posted by StreetLegal

I think you are basically correct that the bottom was at some point in the first half of 2012. The link below shows data based on the Case Shiller index for the Los Angeles metro area adjusted for inflation. The charts shows the bottom was in 2012.

Good stuff. Inflation can be a powerful thing indeed. If one includes inflation it also looks like we're in even less bubble territory as well.

[incognitoe]

There are 3 options on Zillow.

1) Zillow Home Value Index
2) Median Listed Price
3) Median Sale Price

I go by the listed or sale price. Which is pretty accurate since Zillow keeps a tab on the listed and sale price of all those homes listed on Zillow. And they probably get all info from the MLS.

It's the home value index that you can laugh at. As no one can get an accurate estimate of the value w/o taking a look at it in person.

[harhar]

Originally Posted by HyperionGap

As you can see from this trend line going back to the 80's we're not in a "bubble" like what you see in 2006. We may be at the peak of an upcycle, but it's not wildly over valued "bubble" territory.


For LA metro area:

159.37 - April 2009

159.72 - March 2012


Case Schiller is the industry standard and is significantly more accurate than Trulia or Zillow.

S&P/Case-Shiller U.S. National Home Price Index - S&P Dow Jones Indices

info about the index if you're curious about the methodology.

https://en.wikipedia.org/wiki/Case%E...3Shiller_index

Granted I'd have to see more graphs, but I think you're right. Its not a bubble but, the first time homebuyer credit, combined with the dumping of foreclosures, combined with low(er) interest rates made an artificially high spike after 2011...and it looks like we're at a peak.

Mortgages/First time homebuyer programs/lenders are much more strict than they were in the past, so the people who own will probably still own because they are much more financially sound.

However ARMS some 0 down programs are coming back and if an when interest rates rise we may see a bit of a correction.


...and I think that's what we'll probably see in the US, especially in the metro areas. Where we'll either be in a 1. more volatile market for the next few years, where we have these smaller peaks and valleys 2. or it will be relatively flat at around these prices. IMO Anything higher (in the metros) is untenable.

Obviously the market dictates what "should" be, but I think when you have to ask "Who's buying these houses?" like I was in 2006, then that's when you start to see something is amiss.

[HyperionGap]

To answer your last question I believe it's: foreign investment, dual income young professionals, and FHA loan buyers with very little down.

I also think home prices in coastal socal could continue increasing at 2-4% annually. Could there be a market correction of 10-20%? Absolutely, but I'm also convinced that will be linked to interest rates. So the "real" cost of home ownership will remain fairly consistent. Bottom line, someone holding their breath for a giant crash like we saw in 2009 is going to be disappointed.

[DriveNotCommute]

OP's article was a general one directed at the national level so it might not even apply to OC. It just triggered questions for me.

At a broad level, hasn't the Fed's purchase of mortgage backed securities also effectively insured home prices to a certain degree? There's also that premise that current prices are largely affected by speculators. harhar's question was similar what came to mind for me too: Who is responsible for the current demand in SF-OC-LA, do cash speculators really make up that large of a proportion of current demand?

I thought a lot of the housing demand in SF-OC-LA is organic, as in from workers attracted to the area by the decent labor market. So unless our strongest industrial sectors are somehow affected first, doesn't it seem unlikely that there would be a bubble to pop as opposed to something less exciting like a plateau or mild decline in home prices at worst?

At the same time, why would cash buyers (investors and otherwise) who already own their properties be affected if all they have to do is sit tight, sip some lemonade and wait for the real estate market and/or inflation to catch up again?

[LuvSouthOC]

Originally Posted by DriveNotCommute

OP's article was a general one directed at the national level so it might not even apply to OC. It just triggered questions for me.

At a broad level, hasn't the Fed's purchase of mortgage backed securities also effectively insured home prices to a certain degree? There's also that premise that current prices are largely affected by speculators. harhar's question was similar what came to mind for me too: Who is responsible for the current demand in SF-OC-LA, do cash speculators really make up that large of a proportion of current demand?

I thought a lot of the housing demand in SF-OC-LA is organic, as in from workers attracted to the area by the decent labor market. So unless our strongest industrial sectors are somehow affected first, doesn't it seem unlikely that there would be a bubble to pop as opposed to something less exciting like a plateau or mild decline in home prices at worst?

At the same time, why would cash buyers (investors and otherwise) who already own their properties be affected if all they have to do is sit tight, sip some lemonade and wait for the real estate market and/or inflation to catch up again?

Agreed. Add to this the strong desirability of the aforementioned locations (LA, OC, and SF), quantitative easing (printing money), investors, a huge increase in rents, and buying now is not nearly as bubbly as it appears. If we see a drop, and I think we will in late 2016 and definitely 2017, it will not be very large barring unforeseen events.