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Old 05-25-2018, 05:50 PM
 
126 posts, read 41,432 times
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Originally Posted by luckydogg View Post
In the current market I think home prices are way ahead of what people can reasonably afford in many markets, however I don't think the market is going to crash this time, I think we might be actually be in the midst of a multi decade bull market in real estate like we've never seen before. I think when the economy starts to slow central banks will start cutting rates again and eventually start QE, interest rates will go negative this time, and a new tidal wave of money will come into real estate pushing prices up even higher than they already are. I think the market is going to do a reverse crash (crash up instead of down).

We live in weird times right now, and I think they are going to get even weirder in the future.
But, as you say, they are already unaffordable for many, so if they keep going UP, who is going to buy them?
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Old 05-25-2018, 06:23 PM
 
340 posts, read 163,832 times
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Quote:
Originally Posted by luckydogg View Post
In the current market I think home prices are way ahead of what people can reasonably afford in many markets, however I don't think the market is going to crash this time, I think we might be actually be in the midst of a multi decade bull market in real estate like we've never seen before. I think when the economy starts to slow central banks will start cutting rates again and eventually start QE, interest rates will go negative this time, and a new tidal wave of money will come into real estate pushing prices up even higher than they already are. I think the market is going to do a reverse crash (crash up instead of down).

We live in weird times right now, and I think they are going to get even weirder in the future.
So those that don’t currently own will be stuck renting from foreign investors? Sounds pretty bleak. That was happening in Vancouver and the bubble has just officially burst there. Granted Vancouver was probably more out of whack than any current US market. There’s no way interest rates will retreat - they’re on the rise and will continue to rise - the Fed is raising rates now in an attempt to keep the economy from overheating and try to allow for a “soft landing”.
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Old 05-25-2018, 07:43 PM
 
1,925 posts, read 1,325,569 times
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Quote:
Originally Posted by LifeIsGood01 View Post
Or you might be priced out of the market and be a renter for the rest of your life. Slowly implode does not mean even if your scenario is right that people are going to be foreclosing left and right and selling their homes for peanuts. Just because a few provisions for the big banks changed it does not mean that the small provisions like explaining a $100 deposit is still not in place. When you see dogs getting mortgages let me know.

Buy now or rent for the next 30 years. I have nothing to gain from people heeding bad advice that the sky is falling. I bought a home. Have no intentions of selling or renting the home, i don't work in mortgages or real estate. My best advice is if you can afford to buy a home less than you spend on rent do it.

I'm on track for cutting my 30 year mortgage down to 23 years hopefully sooner. Then I will own a home and only have to pay insurance and homesteaded taxes. People who rent a house are paying their LL full mortgage plus a profit, than after 30 years they have nothing to show for it.

OK, time for my quarterly speech to folks who "know it all." Actually, you make a blanket statement that's not true. In fact, it's been proven time and time and time again that in just looking at which way one would be ahead financially renting and investing the difference has you end up with far more money....

However, people buy homes as a lifestyle decision.
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Old 05-25-2018, 07:51 PM
 
10,274 posts, read 6,515,435 times
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Quote:
Originally Posted by Burkmere View Post
OK, time for my quarterly speech to folks who "know it all." Actually, you make a blanket statement that's not true. In fact, it's been proven time and time and time again that in just looking at which way one would be ahead financially renting and investing the difference has you end up with far more money....

However, people buy homes as a lifestyle decision.
and if your rent is $!000 and your mortgage is $1000 do you really think the renter will make out better, that's silly. In this scenario they can both invest the same amount so renting would be throwing away over $360K, a lot more because rents go up, vs buying and owning the home in 30 years or less.

Plus the renters investing is a fallacy. A made up story in your mind. It may be true in some places like Manhattan or San Francisco where you can't afford to buy so you might as well invest so one day you can buy.
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Old 05-25-2018, 09:41 PM
 
71 posts, read 38,586 times
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Quote:
Originally Posted by Greeniejeans View Post
But, as you say, they are already unaffordable for many, so if they keep going UP, who is going to buy them?
Investors. We now have hedge funds and corporations like Invitation Homes and American Homes 4 Rent which are in the business of competing with regular people for buying single family homes and condos and turning them into rentals. As long as they can outbid regular people that are looking to buy a home to live in, they can turn those home buyers into their renters once they get priced out of the market. They are even buying up blocks of new construction directly from the home builders to prevent regular home buyers from competing. Fannie Mae a year or so ago even loaned Invitation Homes a billion dollars to aid them in buying single family homes and turning them into rentals, guaranteed by us the tax payers. It's the perfect scenario to turn America into a country of renters. Since rents and home prices tend to move together, as long as rental cap rates return higher yields than bonds they make money. So homes can go a lot higher in price as long as the rents go up too, and investors will continue to bid up homes and turn them into rentals. The more people who get outbid and eventually priced out of the market, the more demand there is for rentals, which then further drives up rents, so it's almost like a positive feedback loop. Of course if interest rates go up substantially home price appreciation will slow or might even fall but I don't think that will happen or if it does it will only be temporary.

Last edited by luckydogg; 05-25-2018 at 10:03 PM..
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Old 05-25-2018, 09:51 PM
 
71 posts, read 38,586 times
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Quote:
Originally Posted by Cubicle Dweller View Post
So those that don’t currently own will be stuck renting from foreign investors? Sounds pretty bleak. That was happening in Vancouver and the bubble has just officially burst there. Granted Vancouver was probably more out of whack than any current US market. There’s no way interest rates will retreat - they’re on the rise and will continue to rise - the Fed is raising rates now in an attempt to keep the economy from overheating and try to allow for a “soft landing”.
I agree it does sound bleak.

Yes the Fed is raising rates now, but if you may have noticed the 10 year can't even get above 3%. The Fed only controls short term interest rates, not long term interest rates, which is how bonds and mortgages are priced. At the first hint of a slowing economy the Fed will stop raising and start reducing rates, but they don't have much to reduce before they are back at zero again. The also have to compete with other central banks such as the ECB and BOJ so they can't raise rates too much. Central banks are great at causing bubbles, that's what they do best.
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Old 05-26-2018, 06:27 AM
 
595 posts, read 377,609 times
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Quote:
Originally Posted by Greeniejeans View Post
But, as you say, they are already unaffordable for many, so if they keep going UP, who is going to buy them?
People will keep buying, even as prices go up and up, beyond their actual value. FOMO....

These buyer's will have financially stretched themselves beyond the appropriate DTI, all for a piece of the American dream.

Until one day, when a job loss, medical condition, other inflationary pressures all converge, and, voila!

People have short term memory issue's. There's a run-up in play and most are all in the game.

I was actively looking to buy, now I'm observing and will continue to do so. Something doesn't smell right, and it goes beyond the real estate market. When people show you who they are, believe them. When the markets shown you it's instability and greed, believe it. It's unsustainable, buy in and regret it, wait for the correction and debt reset, enter the game more aware.

Just my .02....
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Old 05-26-2018, 06:43 AM
 
10,274 posts, read 6,515,435 times
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Originally Posted by photogal9 View Post


Until one day, when a job loss, medical condition, other inflationary pressures all converge, and, voila!

.
That's the case with any mortgage, if this was our standard no one would get a mortgage because you can never know if someone will lose a job or get a catastrophic illness and have to choose between living or paying the mortgage. Also saving 2 years of mortgage payments are not going to help you when you need a cancer drug that costs you $10K a month and the money is gone before you get better.
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Old 05-26-2018, 08:26 AM
 
Location: Raleigh NC
7,781 posts, read 6,136,961 times
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Quote:
Originally Posted by Cubicle Dweller View Post
This article link below notes a ratio above 4.1 is starting to enter concern territory. LV has a median income of $64k and this month’s median home price is $280k, so the ratio is almost 4.4 (it’ll probably be up to 4.6 by the summer . If a healthy ratio is 3.5 then that puts Vegas prices about 20% overvalued which is exactly what some recent articles state (guess that’s where they derived the numbers). When the bubble burst the ratio was 4.8, but not sure if that was the case for LV - wouldn’t be surprised if it were higher.
How to Worry About House Prices - Freddie Mac

It’s a little tough to gauge what is healthy for Vegas given how erraric the market has been for the past 15 years. A few examples from our neighborhood:
- House that sold for $268k in 3/03 is listed for $420k - we made an offer for $400k based on comps and the seller won’t budge. $268k in 2018 dollars is $364k.
- House that sold for $213k in 1/03 is listed at $450k. Based on comps it’s probably currently going to fetch $415-$420. $213k in 2018 dollars would put it at $293k.
- House that sold for $303k in 4/03 ($412k in 2018 dollars)has an asking price of $500k.

Good questions and that exercise made me feel better about sitting tight and renting for a little while longer even though we’re sick of our apartment and really want a nice house. We’re very fortunate to have two rental properties that we picked up at good prices and a very modest summer home all on the east coast, so our portfolio does have real estate holdings.
I read it all - can't say I took the time to try and understand some of the arcane analysis. But I wonder if the growth has been exponential since May 2016, or remained a steadier line?

Quote:
In sum, this analysis suggests that, aside from isolated areas, we don’t need to worry about house prices—yet.
My concern would always be market-by-market : are you repeating the same mistakes that caused issues in your market in 2006 - 2008 (because for example, we had no big issues in Raleigh NC until 2008. And then, it was the upper end of the market, and especially those homes further from the center of activity).

May 2016, Raleigh/Wake County - one of the metros noted as being "of concern" by the house price/income metric (which is the classic metric used, and some folks want to use the long-held standard regardless of interest rates which have a huge effect).

Our median sales price - peaked at $215K in 6/08. Bottomed at $200K in 10/09 thru 5/10. Since 2014 has risen: 5%, 4%, 7.7%, 6.5%, 7.4%. Our median income has grown right along, and our economy is expanding. I wouldn't call any of those cause for concern, though based on my 20 years in the business, when we wit 10%/yr appreciation, that RATE is not sustainable.
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Old 05-26-2018, 09:28 AM
 
340 posts, read 163,832 times
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Quote:
Originally Posted by BoBromhal View Post
I read it all - can't say I took the time to try and understand some of the arcane analysis. But I wonder if the growth has been exponential since May 2016, or remained a steadier line?



My concern would always be market-by-market : are you repeating the same mistakes that caused issues in your market in 2006 - 2008 (because for example, we had no big issues in Raleigh NC until 2008. And then, it was the upper end of the market, and especially those homes further from the center of activity).

May 2016, Raleigh/Wake County - one of the metros noted as being "of concern" by the house price/income metric (which is the classic metric used, and some folks want to use the long-held standard regardless of interest rates which have a huge effect).

Our median sales price - peaked at $215K in 6/08. Bottomed at $200K in 10/09 thru 5/10. Since 2014 has risen: 5%, 4%, 7.7%, 6.5%, 7.4%. Our median income has grown right along, and our economy is expanding. I wouldn't call any of those cause for concern, though based on my 20 years in the business, when we wit 10%/yr appreciation, that RATE is not sustainable.
I don’t know much about the Raleigh market, but from what I understand it has the benefit of a diversified economy with tech, biotech, a smattering of financial although that’s moreso Charlotte and a very strong eds and meds sector - kind of like a mini Boston with better weather. Vegas definitely doesn’t have a diversified economy - they’re trying, but it’s still mostly tourism / service-based so its tough to justify an almost 17% price increase from last year. Raleigh is on my radar for cities I’d consider moving to in the future. The drop in price from the peak to the bottom you noted from the last decade in Raleigh isn’t bad at all - that’s just one year of rent that would have otherwise been paid..

The ratio for San Jose is currently the highest in the country at 9 - wow. Will be interesting to see how things shake out there. Granted jobs pay well there, but that doesn’t look unsustainable. Also there’s the changes in the tax laws which are going to impact markets in the northeast and California - that hasn’t really factored in yet. My employer is based out of Boston so I’ve eyed that market in case they offer me a growth opportunity that would require me to relocate there. I haven’t run the numbers but yikes - that market is on fire and has been for a few years. Also the housing stock is old. But the Boston area has had massive job growth and there is little land for new construction - given those factors, even if there’s a correction Boston might not fall too far.

A friend who works for a major chemical company just got a transfer to Raleigh from San Diego and is thrilled. He refused to buy in Cali since he wasn’t there long and said many of his well-paid professional colleagues who lived in the area their whole lives couldn’t afford to buy. He can’t believe the house he just bought in Raleigh and plans to stay there very long-term so he doesn’t care if there’s a bit of a price run-up right now.
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