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Drudge linked, Economist on housing bubble: We never left the bubble, its bubble inception
Posted on 1/22/18 at 9:58 am
Posted on 1/22/18 at 9:58 am
He didn't short the bubble in 2008, so take his 'prediction' for what it's worth
Just going to say before quoting any more: The enormous, extreme growth in real estate cost over the last 20 years has been driven in large part because the fed has decided to see what would happen if they just eliminated interest for 20 years. (my opinion).
People buy houses based off of what payment they can afford, not what the sticker price is. When interest rates are effectively 0 for decades, the sticker price goes up to reflect the lower interest rate. If interest rates ever go up significantly, as they are soon to do, current sticker prices become out of reach of most people, because what they could afford at 4% interest, they could never afford at 8%. So current homeowners take a bath and can't sell their homes at the current inflated prices, because no one can pay.
quote:
U.S. home prices are surging to new records. Homebuilder stocks last year outperformed all other groups. And bears? They’re now an endangered species.
Stack, 66, who manages $1.3 billion for people with a high net worth, predicted the housing crash in 2005, just before prices reached their peak. Now, from his perch in Whitefish, Montana, he says his “Housing Bubble Bellwether Barometer” of homebuilder and mortgage company stocks, which jumped 80 percent in the past year, once again is flashing red.
Just going to say before quoting any more: The enormous, extreme growth in real estate cost over the last 20 years has been driven in large part because the fed has decided to see what would happen if they just eliminated interest for 20 years. (my opinion).
People buy houses based off of what payment they can afford, not what the sticker price is. When interest rates are effectively 0 for decades, the sticker price goes up to reflect the lower interest rate. If interest rates ever go up significantly, as they are soon to do, current sticker prices become out of reach of most people, because what they could afford at 4% interest, they could never afford at 8%. So current homeowners take a bath and can't sell their homes at the current inflated prices, because no one can pay.
quote:
“It is 2005 all over again in terms of the valuation extreme, the psychological excess and the denial,” said Stack, whose fireproof files of newspaper articles on bear markets date back to 1929. “People don’t believe housing is in a bubble and don’t want to hear talk about prices being a little bit bubblish.”
quote:
Homebuilders, which have focused on pricier homes since the market bottomed in 2012, are now getting ready for a wave of first-time buyers left with little to choose from on the existing-home market. Investors are rushing to builders of starter homes, because lower-priced homes in the U.S. are in the shortest supply. Shares of LGI Homes Inc., which targets renters with ads that trumpet monthly payments instead of prices, rose 161 percent last year. D.R. Horton Inc., the biggest builder, powered by its fast-selling Express entry-level brand, gained 87 percent.
Overall, the S&P 500’s index of homebuilders increased 75 percent last year, about four times as much as the stock market as a whole. A subset that includes just the three largest builders was the best performer of the 158 S&P groups.
Posted on 1/22/18 at 10:00 am to cokebottleag
Housing market falling out again would suck. Many are still recovering from the last one.
Posted on 1/22/18 at 10:00 am to cokebottleag
quote:
because what they could afford at 4% interest, they could never afford at 8%. So current homeowners take a bath and can't sell their homes at the current inflated prices, because no one can pay.
Common Sense
Posted on 1/22/18 at 10:01 am to cokebottleag
Well that sucks. I think the interest rate on our mortgage is 3.25 or 3.75. Bought our house 5 years ago, and were looking to upgrade due to our growing family, in a couple years.
Posted on 1/22/18 at 10:03 am to Redleg Guy
People are overvaluing and overpaying for homes. I look at a lot of these prices and wonder how so many can afford such high prices.
In short, they can't. Something has to give.
In short, they can't. Something has to give.
Posted on 1/22/18 at 10:05 am to cokebottleag
Not planning on selling or moving anytime soon, so the secondary fallout will be the worst for me.
Posted on 1/22/18 at 10:06 am to cokebottleag
I 100% believe this, because damn near every house being built in DFW is 2500 sqft + McMansion, 500k+ .
There's like zero inventory for first-time homeowners that/s not in the fricking ghetto.
There's like zero inventory for first-time homeowners that/s not in the fricking ghetto.
Posted on 1/22/18 at 10:08 am to boogiewoogie1978
quote:
People are overvaluing and overpaying for homes. I look at a lot of these prices and wonder how so many can afford such high prices. In short, they can't. Something has to give.
Me and the wife bought our 1st new home in 1991 for $67k, that house today would be over 120k for a resale, over 130 new.
Posted on 1/22/18 at 10:10 am to boogiewoogie1978
Interest rates are part of the problem.
The other problem is that the bailout of banks kept the market from correcting properly, as people shite themselves over the idea of so many foreclosure houses hitting the market in a short period because it would depress home values across the board.
The other problem is that the bailout of banks kept the market from correcting properly, as people shite themselves over the idea of so many foreclosure houses hitting the market in a short period because it would depress home values across the board.
Posted on 1/22/18 at 10:11 am to Bass Tiger
quote:
Me and the wife bought our 1st new home in 1991 for $67k, that house today would be over 120k for a resale, over 130 new.
Relatively speaking, that would be a reasonable price increase when considering inflation.
Posted on 1/22/18 at 10:13 am to AUsteriskPride
quote:
quote:
Me and the wife bought our 1st new home in 1991 for $67k, that house today would be over 120k for a resale, over 130 new.
Relatively speaking, that would be a reasonable price increase when considering inflation.
Yeah, I'm not sure what he was getting at in relation to the thread. That doesn't strike me as some sort of "bubble" indicative increase.
Posted on 1/22/18 at 10:13 am to cokebottleag
quote:Only in enclaves, Seattle, Manhattan, etc. In many locations housing is flat X years.
housing bubble
Posted on 1/22/18 at 10:16 am to cokebottleag
Home prices skyrocketing have been a real surprise with some of the demographic trends. Millennials weren't supposed to care about owning a home.
In Cali and Florida, at least, a lot of the demand and price is driven by foreigners seeking refuge in hard U.S. assets.
In Cali and Florida, at least, a lot of the demand and price is driven by foreigners seeking refuge in hard U.S. assets.
Posted on 1/22/18 at 10:16 am to NC_Tigah
Housing will bubble for various reasons.
My neck of the woods is building like crazy and the bubble inflates during any moritorium on building for a period of time.
My neck of the woods is building like crazy and the bubble inflates during any moritorium on building for a period of time.
Posted on 1/22/18 at 10:19 am to boogiewoogie1978
quote:
In short, they can't. Something has to give.
Stop putting people on ARM's that can't afford to be on ARM's That and buying POS houses that are barely worth half of what they paid for them.
Posted on 1/22/18 at 10:23 am to cokebottleag
There will be some differences regionally, though. The new tax code will absolutely push anyone close enough to retirement out of NY/NJ/MA down to Florida sooner rather than later because of the lack of state taxes and lower property taxes. However, these are popping up as condos, over 55 communities (how is that shite legal?) and zero lot line gated communities. In 10-20 years there is going to be a glut of housing because of the boomers dying off at a massive rate.
Posted on 1/22/18 at 10:24 am to 50_Tiger
quote:
There's like zero inventory for first-time homeowners that/s not in the fricking ghetto.
Which is why I wonder who are buying all of these homes?
Investors having been sitting on homes for years to create low inventory and drive up the prices. They are beginning to release them into the market at very high prices. Inventory is short so people are overpaying. Eventually it will come crashing down when they can't pay.
Posted on 1/22/18 at 10:27 am to teke184
quote:
Interest rates are part of the problem.
Hopefully if they notch up, they do so slowly and give home builders time to react.
Posted on 1/22/18 at 10:29 am to cokebottleag
I'm looking at you DFW property values. I just don't understand people who invest in properties with artificially high valuations due to rates. Isn't the play here to be patient until the fed is done raising the benchmark? I'm approaching thirty and can't understand why people are buying at my age right now. And it's happening quite a bit.
Posted on 1/22/18 at 10:30 am to 50_Tiger
quote:
2500 sqft
Is a McMansion now?
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