Bidding wars break out in Sacramento! (West Sacramento: sales, real estate, 2013)

[caligirlz]

There were fewer than 1,100 active home listings in Sacramento County and West Sacramento in February, according to the Sacramento Association of Realtors. "It's the ultimate seller's market," said Chris Little, president of the local Realtors' association. The lack of homes on the market is leading to multiple offers, fast sales and offers above the asking price in some of the region's more desirable neighborhoods.

Real estate tracker Zillow estimated this week that area prices rose by more than 15 percent in February compared with the same month a year ago.

In some ways, the escalating prices and bidding wars look like a rerun of last decade's housing bubble – the kind of unhealthy phenomenon that will only lead to another bust.


Read more here: Bidding wars breaking out in Sacramento's housing market - Real Estate - The Sacramento Bee

It's kinda interesting because in financial circles people are talking about another economic crash....selling to get their equity out, and renting until the next storm blows over.

I never want to rent again, hated it.

[Curmudgeon]

Originally Posted by caligirlz

I never want to rent again, hated it.

With you on that one. We rented in downtown Sacramento for 11 years. It was easily affordable, comfortable and convenient. Then we retired, moved, bought a modest lakeshore home on a quarter acre lot and our mortgage payment for the principal is a few dollars less than our rent was. Decidedly more satisfying - room to move, grow our own vegetables, good distance between houses - all custom - and best of all, no privacy fences so we have wide-open areas full of wildlife.

[NickB1967]

Originally Posted by caligirlz

It's kinda interesting because in financial circles people are talking about another economic crash....selling to get their equity out, and renting until the next storm blows over.

As much as I am betting on an Obamunist Owe-conomic crash, I am betting it will be a stagflationary one rather than a deflationary one. Real estate is still a hard asset.

Obviously, pay off your home as best and as soon as you possibly can and don't make crazy borrowings against it again.

I would be more likely to get out of stocks and bonds. Near record highs on the Dow? Well, in "quantitatively eased" dollars, a 14,000 Dow today doesn't mean anywhere near what it meant in 2006.

[ryuns]

Originally Posted by NickB1967

As much as I am betting on an Obamunist Owe-conomic crash, I am betting it will be a stagflationary one rather than a deflationary one. Real estate is still a hard asset.

Obviously, pay off your home as best and as soon as you possibly can and don't make crazy borrowings against it again.

I would be more likely to get out of stocks and bonds. Near record highs on the Dow? Well, in "quantitatively eased" dollars, a 14,000 Dow today doesn't mean anywhere near what it meant in 2006.

I generally stop reading as someone uses some ridiculous half word, though I do admire the creativity, with terms demoncrap and repugnantcan earning high marks. Owe-conomic--not quite as high.

Anyway, your advice is not bad: very few people regret paying down, and staying out of, debt. That said, there's no reason to pay off your home unless you think you won't earn, in the mid- to long-term a nominal return higher than the tax-adjusted mortgage rate you're paying. Stocks and bonds are risky and you may be betting on a crash, but if you're betting on stagflation, the -flation part of that benefit the borrower. And if inflation is greater than your mortgage rate, you'll essentially automatically win money, since most low risk assets return something close to inflation, or are pegged to inflation, like TIPs and savings bond.

Now, people have made a pretty good case for a deflationary environment, and, indeed, the market's long-term expectations for inflation (as defined by the nominal return of treasury notes minus the real return of TIPs) is pretty low. My advice is to stay the course for your retirement portfolio and rebalance regularly (which will keep you gradually banking gains from a rising stock market, if that happens). Staying with fairly short term, and high quality bonds will shield you from losses in a rising interest rate environment (which is not what the general market is expecting). Pay down your house quickly if that helps you refi. If you're long-term at a low mortgage rate, then I think it's kind of a wash. I'd personally be make sure I had 12 months of living expenses saved in an FDIC-insured account, and was maxing out my tax-advantaged retirement accounts (particularly your Roth IRA, if you're worried about an owe-pcoming owe-conomic owe-pocalyse) before I tried too hard to pay down my house.

[NickB1967]

Originally Posted by ryuns

I generally stop reading as someone uses some ridiculous half word, though I do admire the creativity, with terms demoncrap and repugnantcan earning high marks. Owe-conomic--not quite as high.

Anyway, your advice is not bad: very few people regret paying down, and staying out of, debt. That said, there's no reason to pay off your home unless you think you won't earn, in the mid- to long-term a nominal return higher than the tax-adjusted mortgage rate you're paying. Stocks and bonds are risky and you may be betting on a crash, but if you're betting on stagflation, the -flation part of that benefit the borrower. And if inflation is greater than your mortgage rate, you'll essentially automatically win money, since most low risk assets return something close to inflation, or are pegged to inflation, like TIPs and savings bond.

Now, people have made a pretty good case for a deflationary environment, and, indeed, the market's long-term expectations for inflation (as defined by the nominal return of treasury notes minus the real return of TIPs) is pretty low. My advice is to stay the course for your retirement portfolio and rebalance regularly (which will keep you gradually banking gains from a rising stock market, if that happens). Staying with fairly short term, and high quality bonds will shield you from losses in a rising interest rate environment (which is not what the general market is expecting). Pay down your house quickly if that helps you refi. If you're long-term at a low mortgage rate, then I think it's kind of a wash. I'd personally be make sure I had 12 months of living expenses saved in an FDIC-insured account, and was maxing out my tax-advantaged retirement accounts (particularly your Roth IRA, if you're worried about an owe-pcoming owe-conomic owe-pocalyse) before I tried too hard to pay down my house.

OK, fair enough. While stagflation does benefit the borrower, the economic dislocations caused by said stagflation may cause the borrower to be unable to make the payments. Yes, leverage can make you a fortune, but make sure you can make the payments on the properties leveraged.

[ryuns]

Originally Posted by NickB1967

OK, fair enough. While stagflation does benefit the borrower, the economic dislocations caused by said stagflation may cause the borrower to be unable to make the payments. Yes, leverage can make you a fortune, but make sure you can make the payments on the properties leveraged.

I'm pretty risk averse myself, so I wouldn't want it to sound like I'd advocate people to take undue risk. And it's interesting to note that most risk-averse people would categorically advise against leverage, while holding a mortgage while investing for retirement, which is clearly a form of leverage in itself.