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Florida is just now getting back to pre bubble level pricing but cali is stratosphere pricing. In many markets $750k buys you a 3/2 1500 sqft turn of the century junker with a highway in the back. Property taxes are 3x Fl and likely you're paying an extra 10% in state/city income tax where Florida has none.
Because California is awesome, desirable, has no humidity, and is 10X more entertaining than Florida. Florida is humid, rainy, hurricanes, and from what I hear has serious bug/pest problems. Sure some wealthy people have 2nd homes down in the Miami area, but all the top dogs in just about all areas of life have a primary home in Southern California. Fortune 500 CEO's, top aerospace engineers, musicians, actors, athletes, etc. If Florida was that great, it would have the population, demand, and pricing.
SoCal is the way it is because it is one, if not one of the most desirable places to live in the world. It practically has it all from 150+IQ tech talent, insanely beautiful women everywhere, perfect weather, and world class stars of entertainment.
The Fed and other centrals banks are going to deleverage their balance sheets, causing bonds to go down and yields to go even higher in addition to raising interest rates.
Plus all that demand, you know the $300B of asset purchases, gone.
The west coast, particularly California, has always been higher. I'm curious about our local Seattle market remaining this high or is it in a bubble. I think as long as the Seattle economy continues to offer high paying jobs, this will be the new normal here.
I don't think Portland is overpriced yet so I think their pricing is probably a new norm there.
The highest prices areas of Cali like the Bay area and Orange County I think are contingent on low interest rate so those areas I believe will pop if mortgage rates escalate rapidly.
One good shaker will take care of Seattle's high housing prices.
Lots of money from Asia coming into CA and WA as well.
That is because of the crackdown going on in Vancouver. Taxes galore for those not Canadian citizens. Chinese leaving and coming to US. US should consider doing the same thing or we'll find ourselves where Vancouver is and forced to do the same.
Have a US friend selling a home there now. For 15 days they show the house, then there is one day where offers are accepted. So everyone has to offer their 'best price' or could lose out. No second chances. Great for sellers, bad for buyers.
Is there still job growth? Is there still high demand and low supply of housing? Are the people buying homes qualified to buy homes (i.e have good supporting incomes and assets)? If the answer to these is "Yes" then it's not a bubble. That's true of most of the western metros.
Denver, Seattle, Portland, and to a lesser degree Phoenix, Salt Lake City, and Boise are seeing steep increases in appreciation and housing starts because they have high job growth. In the case of Phoenix it's still not recovered fully to pre-bubble pricing in the market, which job growth is strong and supply is low. No bubble there. Boise, SLC, Denver, and the rest have been driven by high job growth and low supply, as well. I think those markets are a little closer to hitting the ceiling (especially Portland and Denver) but an influx of foreign money (China, etc.) is really pouring into the major coastal cities in California as well as Seattle because they are looking for a safe place to invest capital and they know those markets best. Foreign cash buyers are all over SoCal and the Bay Area and are snapping up homes left and right. Eventually some of that will spill into the other western markets.
So no, I don't think there is a bubble and price growth isn't going to end for another two years at least unless there is some sort of major economic (policy) shifts or cataclysmic event.
in cities like San Diego, LA, Sacramento, Phoenix, Las Vegas and etc. Housing is overvalued by 50% and more. In some areas like
Sacramento, Phoenix and Vegas is more like 70%. In those areas real estate is the number 1 scam. No one buys a house there to live in it, but to trade or buy/sell and flip. You have some homes that are 5 years old and have been bought or sold 5 times already. Total insanity thanks to low interest rates and speculators.
The Fed, during Obama, did everything in it's power to surge all asset prices - stocks, bonds, real estate with no regard for its own guidance, as to when it would take its lead-foot off the accelerator. Now, under Trump, they are doing the exact opposite in an effort to raise rates as quickly as possible. If, the past 8-years of a Fed in Armageddon-mode created the “everything bubble” what will shifting monetary policy into reverse do to said asset price levels??????
While speculators were pushing house prices beyond the reach of most end-user shelter-buyers in any given region, volume remained relatively weak. Sales volume has never been a feature of Housing Bubble 2.0. In fact, after 7-years of ZIRP, $10 Trillion in new .Gov debt, and $5 Trillion in Fed money printing, builder new home sales are sitting at around 60% of the volume of the past Bubble. Resales are about 20% lower (resales rose more because that’s where the unorthodox demand lives…it doesn’t go to Pulte developments for flips and rentals). Most blame a “lack of supply”. As if house supply doubled, so would sales. But, the problem has always been about true fundamental demand, which is a key feature missing from this latest housing “faux-covery”.
Remember, a “house-price recovery” and “housing market recovery” are two vastly different things. If this was a REAL housing market recovery then homeownership rate in America wouldn't be at multi decade low. Just because there are no NINJA loans that turned every ma and pa into a millionaire for the purposes of qualifying for a mortgage to buy a house, which pushed prices through the roof, doesn’t mean the housing market hasn’t been similarly, artificially goosed over the past five-years beginning when millions of legacy mortgage were “modified”. House prices have been goosed for years by unorthodox demand using unorthodox credit and liquidity (i.e., investors, speculators, flippers, floppers, foreigners, money launderers, options, etc etc)
One thing is for sure…house prices are as diverged, or more, from end-user, shelter-buyer employment and income fundamentals as they were back in 2006.
This housing Bubble always needs constantly lower mortgage rates; stable to increased flows of unorthodox demand, easy credit and liquidity to keep house prices detached from end-user, shelter-buyer fundamentals. All three of these engines of house price inflation have been running at max RPM’s for years now.
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