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We are in a bubble, and no, it’s not as bad as 07-08.
There are a lot of investors and foreign buyers involved. They will be the ones that will effect what the future will be, along with interest rates. Though interest rates do need to go up. All this debt we’re under, and what we’re going to do with it, is the question for all time.
Housing prices, in some areas more than others, have been on a tear. We're talking 20% YOY for 2, going on 3, years. What surprises me is that many people believe it is realistic that it will continue this way indefinitely, when basic math says it cannot.
Traditional laws of house buying go like
* Down payment of 20%
* Pay off over 30 years (preferably 15 or 10)
* Monthly payment no more than 1/3 or 1/4 take-home pay
* House appreciates at 2-4% per year (nominal terms)
but this whole math is rewritten if you change the last bullet point so that house appreciation is on the order of 20% per year. In that scenario, you can put 0% down and be done paying in 5 years, which means you no longer care how much of your take-home pay goes to your house (heck, put it on a credit card). This creates a vicious cycle where house prices going up influences people to pay even more for houses which pushes them up further which ... (you get the picture).
I am presently investigating ways to short the housing market and welcome any advice you have on ETFs where one can 2-3x the inverse of a REIT if holding money in the inverse ETF for a period of several years. I'm aware of the mathematical consequences of the fact that inverse ETFs only track the inverted asset for 1 day before resetting.
Oh yes, we are in the market to hopefully buy soon but what we can afford for a payment every month we are better off going with a mobile home/land home package. On another note EVERY DAY I see a new house up for sale in my town, no particular reason to be selling and all are in past month or 2 because right now it's a sellers market, prices are up so they figure why not!
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(set 24 days ago)
Location: Pine Grove,AL
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Quote:
Originally Posted by thinkingandwondering
The "housing bubble" is just a conglomerate of everything that is affecting the market. The basic laws of Capitalism (supply and demand) still apply.
No they dont.
Supply and Demand is simplistic and doesnt actually discuss the government element of building new homes
As I said earlier, my area put in place moratoriums on new subdivisions. New permits are only being permitted on single family residences , and its hard to find land to build a home when land developers swooped in and bought everything. They have the same in place for new apartment buildings, none are permitted.
Supply and Demand still exist, the "market" still exists, but outside forces cause a rise that none of us " marketeers " have any control of.
Supply and Demand is simplistic and doesnt actually discuss the government element of building new homes
As I said earlier, my area put in place moratoriums on new subdivisions. New permits are only being permitted on single family residences , and its hard to find land to build a home when land developers swooped in and bought everything. They have the same in place for new apartment buildings, none are permitted.
Supply and Demand still exist, the "market" still exists, but outside forces cause a rise that none of us " marketeers " have any control of.
It depends a lot on where you are. Some areas have bigger price increases than others and some are less immune to a potential crash.
Here in Southern Nevada the federal government owns most of the land and only releases so many parcels at a time. The bidding for these parcels is fierce among builders and that drives the price up. There is a relatively small inventory of existing homes and high demand from those coming from out of state.
Our house has gone up about 65% over the 4 1/2 years we've been here. Problem is, to get another place (if we wanted one) it would also cost that much more, so we're staying put.
At first I could not understand your response, but then I realized that you may think I am in favor of cashing out an IRA or borrowing from a 401k to help children buy a home. I would not recommend that, but I do think it's fine for parents to assist children in purchasing a home as long as they are not putting their own future at risk.
At first I could not understand your response, but then I realized that you may think I am in favor of cashing out an IRA or borrowing from a 401k to help children buy a home. I would not recommend that, but I do think it's fine for parents to assist children in purchasing a home as long as they are not putting their own future at risk.
I understand you more clearly, too! Thank you!
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