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re: Drudge linked, Economist on housing bubble: We never left the bubble, its bubble inception
Posted on 1/22/18 at 10:30 am to cokebottleag
Posted on 1/22/18 at 10:30 am to cokebottleag
Here in BR, the prices have gone insane post-flood. You ain’t getting into a decent house/area in BR for under 200k
0
Posted on 1/22/18 at 10:35 am to boogiewoogie1978
quote:
Which is why I wonder who are buying all of these homes?
As was said earlier, a LOT of it is pressure from massive foreign buying of assets in the US/Canada. Mostly Chinese. Vancouver is an extreme example of this right now and is absolutely out of control. The city is considering (or has already) putting severe restrictions on foreign purchases of property because of the extreme inflation of prices. Homes in VC that were worth $200k 15 years ago were going for $1.5M last year and $1.7M this year. It's that kind of an increase.
The same is happening in a lot of cities, especially ones that restrict development (or have geographical restrictions) such as San Fran, LA, Miami, Austin, etc. Even in Houston it's gotten ridiculous recently. These homes are simply not worth even close to what they are being sold at, and there are too many luxury homes and not enough entry level.
If we hit any kind of bump in the market, it's going to get ugly, AGAIN.
Posted on 1/22/18 at 10:36 am to cokebottleag
Cant wait. Looking to pick up something on the cheap in the mountains.
Posted on 1/22/18 at 10:38 am to wutangfinancial
quote:
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.
Rents are going up in Houston too for apartments. The economics of it just don't make sense.
In 2014, the oil market crashed. Houston, probably the center of the oilfield and services in the US, had major layoffs and bankruptcies.
And housing prices... went UP.
Posted on 1/22/18 at 10:52 am to cokebottleag
This isn’t close to the same as the previous housing bubble.
That bubble was created because:
A. Mortgage Lenders were told to relax lending requirements for the purpose of allowing less fortunate people to “live the American dream of owning a home!”, and as a result, anyone with a 450+ credit score could get a mortgage.
B. Lenders created new types of loans to accommodate this. You could do 100% financing, and even add in your closing costs to the loan. You could even do an 80% mortgage, and then a separate 20% second mortgage, and this would allow you to bypass PMI.
C. On top of this, you could get astronomically low premiums for 7-10 years (ARM - adjustable rate mortgage), while the vast majority of your premiums went towards interest rather than principle, but then be prepared for a balloon payment after your deferred term. However, don’t fret, you can simply refinance and do it all again.
D. Banks/mortgage lenders were selling these mortgages to Fannie and Freddie. Except this was a full blown Ponzi scheme in the works. The tranch rating companies were being paid off/bribed to grossly overrate the quality of the mortgage tranches (groups of loans packaged together). Fannie and Freddie were hiding super shitty loans that were already either in default or in arrears in tranches with higher quality loans to mask and hide their embezzling of federal dollars to their crony banking friends.
E. Eventually, too many Fannie and Freddie tranches went upside down. More money was going out than interest payments coming in. This triggered an audit and federal oversight found the Ponzi scheme and blew it up. Stocks plummeted and banks, lenders, and market wire houses lost their arse.
Needless to say, NONE of that is happening right now. The current housing market is not being driven by anything of the sort.
You can’t buy a home with shitty credit anymore.
You can’t do an 80/20 loan anymore.
Banks and lenders are refusing to do 7-10 year ARM’s with balloon payment mortgages.
Ratings companies are heavily regulated and audited.
Fannie and Freddie aren’t running a Ponzi scheme anymore and also under extremely heavy oversight with all new sets of rules and regulations.
The housing market took 8 years to fully recover. And it’s doing really well right now because the average homeowner lives in a home for 9-10 years. And all those people who bought homes during the 05-07 home buying boom are jumping into new homes.
In addition, a lot of lumbering regulations have been relaxed and lumber is cheap and home building materials are in large supply. And the economy is kicking arse and building companies have extra cash on hand to invest in building new neighborhoods and development communities.
Plus the average home buyer who has been penny pinching for a decade is feeling good about the direction of the economy and they are deciding to spend some of their savings and equity from the home they built 10 years ago.
That bubble was created because:
A. Mortgage Lenders were told to relax lending requirements for the purpose of allowing less fortunate people to “live the American dream of owning a home!”, and as a result, anyone with a 450+ credit score could get a mortgage.
B. Lenders created new types of loans to accommodate this. You could do 100% financing, and even add in your closing costs to the loan. You could even do an 80% mortgage, and then a separate 20% second mortgage, and this would allow you to bypass PMI.
C. On top of this, you could get astronomically low premiums for 7-10 years (ARM - adjustable rate mortgage), while the vast majority of your premiums went towards interest rather than principle, but then be prepared for a balloon payment after your deferred term. However, don’t fret, you can simply refinance and do it all again.
D. Banks/mortgage lenders were selling these mortgages to Fannie and Freddie. Except this was a full blown Ponzi scheme in the works. The tranch rating companies were being paid off/bribed to grossly overrate the quality of the mortgage tranches (groups of loans packaged together). Fannie and Freddie were hiding super shitty loans that were already either in default or in arrears in tranches with higher quality loans to mask and hide their embezzling of federal dollars to their crony banking friends.
E. Eventually, too many Fannie and Freddie tranches went upside down. More money was going out than interest payments coming in. This triggered an audit and federal oversight found the Ponzi scheme and blew it up. Stocks plummeted and banks, lenders, and market wire houses lost their arse.
Needless to say, NONE of that is happening right now. The current housing market is not being driven by anything of the sort.
You can’t buy a home with shitty credit anymore.
You can’t do an 80/20 loan anymore.
Banks and lenders are refusing to do 7-10 year ARM’s with balloon payment mortgages.
Ratings companies are heavily regulated and audited.
Fannie and Freddie aren’t running a Ponzi scheme anymore and also under extremely heavy oversight with all new sets of rules and regulations.
The housing market took 8 years to fully recover. And it’s doing really well right now because the average homeowner lives in a home for 9-10 years. And all those people who bought homes during the 05-07 home buying boom are jumping into new homes.
In addition, a lot of lumbering regulations have been relaxed and lumber is cheap and home building materials are in large supply. And the economy is kicking arse and building companies have extra cash on hand to invest in building new neighborhoods and development communities.
Plus the average home buyer who has been penny pinching for a decade is feeling good about the direction of the economy and they are deciding to spend some of their savings and equity from the home they built 10 years ago.
This post was edited on 1/22/18 at 10:54 am
Posted on 1/22/18 at 11:11 am to BeefDawg
Well aware of all of that. Yes, the same metrics which caused the financial meltdown of 2008 are not present.
That's not what I'm talking about.
We're in an enormous fixed asset bubble that has been created by 20 years of fed experimentation and extreme levels of foreign capital parking. That wasn't fixed by 2008's drop. 2008 was a bubble in mortgage backed securities caused by all the things you listed. None of that was the main driving factor in the extreme housing price increases seen in large swaths of the country.
That's not what I'm talking about.
We're in an enormous fixed asset bubble that has been created by 20 years of fed experimentation and extreme levels of foreign capital parking. That wasn't fixed by 2008's drop. 2008 was a bubble in mortgage backed securities caused by all the things you listed. None of that was the main driving factor in the extreme housing price increases seen in large swaths of the country.
Posted on 1/22/18 at 11:15 am to Tesla
quote:
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.
Related to this, but broader in scope.
The baby boomers have been working through America on their life cycle like a carcass of some sort passing through a python since '45.
They are hanging around the workplace longer than any previous generation for a number of reasons, but they are not going to defy time forever.
No matter what, I personally have been expecting at least a decade long negative pressure on housing prices as baby boomers are compelled to sell for a number of reasons (they just want to, moving to Florida or Arizona, having to go to assisted living).
We haven't seen it yet, but I really can't imagine how it can't happen.
Some people pointed out that immigration and foreign buyers push things in the opposite direction, at least in some areas.
But there were a crapload of baby boomers.
Anyway some things take on the order of years and decades to play out. But from where I sit, I'm kind of puzzled we haven't seen it yet.
Posted on 1/22/18 at 11:25 am to Sunbeam
Land, they aren't making anymore of it, and commutes already really suck.
Posted on 1/22/18 at 12:14 pm to cokebottleag
I'm at 5%. Bought at $185($177k plus closing etc) in 10/2008, and the market puts me about $270k now.
I was looking at a cash out refinance to get some extra cash for paint and some improvements. Is now(within the next 6 months) a bad time to do that, or is it better to keep the low balance? I plan on being here a while. I'm in AZ
I was looking at a cash out refinance to get some extra cash for paint and some improvements. Is now(within the next 6 months) a bad time to do that, or is it better to keep the low balance? I plan on being here a while. I'm in AZ
This post was edited on 1/22/18 at 12:15 pm
Posted on 1/22/18 at 12:18 pm to cokebottleag
quote:
We're in an enormous fixed asset bubble that has been created by 20 years of fed experimentation and extreme levels of foreign capital parking.
Something is being conflated here.
There is only a "fixed asset bubble" in the fact that we are in an inflation/interest rate/currency value bubble.
The reason for my above reply is because your OP clearly mentions another "housing bubble". Which is very odd because there is no correlation. So I don't get how this guy's "barometer" is throwing up red flags if he's using the previous housing bubble as his means of comparison.
Believe me, I've been trying for years to explain to Obama sycophants why his economy was actually shite, and his stock markets were propped up on monopoly money printed out of thin air (QE), and that he's dangerously pushing us into another massive bubble.
You can't turn a $6 trillion M2 money supply into $12 trillion and only raise inflation 14.8% over two terms and not expect some kind of wide spread asset devaluation or a fall into hyper-inflation sometime down the road.
Fortunately for us, however, Trump won and appears to be staving off disaster.
The Fed has already released interest rates .75 points (.25 per quarter) over 3 quarters in 2017, and are about to raise it some more. Very likely .50 points in just the first quarter of 2018.
If we continue at 4%+ GDP growth, they will continue to do this at a steady pace, probably .25 to.50 a quarter until we get in the 7% range.
With 4% GDP growth and rising interest rates, the bubble will dissipate and eventually vanish.
And we haven't even really begun to feel the effects of Trump's economy agenda changes yet. So far, this has all pretty much happened on consumer and business sentiment and confidence.
Real change is happening, and more is coming. Repatriation of a couple trillion. Corporate inversion into the US. Massive job growth. Wages will rise. labor participation will rise. Corporate investment will spur R&D and create an innovation boom. $1 trillion in infrastructure spending will increase efficiencies. Relaxing of domestic energy drilling and exploration will reduce our foreign dependence and move us towards energy independence, creating even more jobs and wealth.
Stock markets under this agenda have no real reason to lose confidence and reverse trajectory. There is no real reason for a bubble to expand and burst in this environment. All the money is moving INTO the economy, not out. The value of the dollar should at the very least stay stable and stave off harmful excessive inflation.
Posted on 1/22/18 at 12:26 pm to Ace Midnight
quote:
Is a McMansion now?
No, but the average 2500 sqft home is right around 350k+
Anything over 3000 sqft in a desirable part of DFW is over 400k.The one home that is not is usually on contract within a day.
Posted on 1/22/18 at 12:28 pm to cokebottleag
NOLA is the biggest housing bubble in the country. There is no way in hell to sustain the housing prices.
Posted on 1/22/18 at 12:34 pm to 50_Tiger
quote:
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.
It’s pretty much the same for Houston except you are buying stucco townhouses built by the cheapest bidder. Come time to sell, the seller thinks of it as an investment and tries to sell it for a profit but the same house down the road cost less.
I am living in a duplex built in the 30s that is in better shape than many new built condos.
Posted on 1/22/18 at 12:35 pm to 50_Tiger
quote:
Anything over 3000 sqft in a desirable part of DFW is over 400k.
It only takes $134/sq. ft to get it over $400k. You priced "nice" homes out in the hinterlands? You'll play hell finding newer, nicer homes in good neighborhoods with good schools for less than $115, $120 a foot.
This post was edited on 1/22/18 at 12:36 pm
Posted on 1/22/18 at 12:40 pm to Ace Midnight
quote:
It only takes $134/sq. ft to get it over $400k. You priced "nice" homes out in the hinterlands? You'll play hell finding newer, nicer homes in good neighborhoods with good schools for less than $115, $120 a foot.
Totally understand, however, looking back at their sell history, most of these homes that are less than 10 years old were sold originally for the most part under $100. Which is why it's crazy. People would be buying even more at $100. shite i'd jump right now at $100.
Here is a perfect example: Zillow Home The Colony, TX
This post was edited on 1/22/18 at 12:42 pm
Posted on 1/22/18 at 12:42 pm to 50_Tiger
quote:
shite i'd jump right now at $100.
I'm considering a huge house at $100. I'd like them to get it down to conforming, but we'll see. I'm more worried about the property taxes than anything else.
(ETA: And it is a McMansion -
)This post was edited on 1/22/18 at 12:43 pm
Posted on 1/22/18 at 12:43 pm to Ace Midnight
Check out the house I just linked.
08 - $77 sqft
18 - $117!!!!!
08 - $77 sqft
18 - $117!!!!!
Posted on 1/22/18 at 12:46 pm to 50_Tiger
quote:
Check out the house I just linked. 08 - $77 sqft 18 - $117!!!!!
Does that market support better than a 5% appreciation rate?
Where I'm looking is flat. At the upper end of my budget, there aren't many buyers (
) - why? Because most people with that kind of money already live in the house of their dreams. So, I'm holding all the cards - I just can't buy a house, hate it then have to sell it. I'm getting too old for that.
Posted on 1/22/18 at 12:49 pm to AUsteriskPride
quote:
Relatively speaking, that would be a reasonable price increase when considering inflation.
Yeah I agree, I guess the bubble depends on where you live. In the KC area prices didn’t drop as much as most areas of the country during the 2007-2009 meltdown, maybe 10% compared to 30-40 % or more in LA, San Francisco, Phoenix etc. Right now the hot real estate in KC is multi unit rentals and single occupancy homes in the 400-500k range. Not too many starter homes being built under 175k in the 1300-1500 sq ft range.
Posted on 1/22/18 at 12:49 pm to Ace Midnight
quote:
Does that market support better than a 5% appreciation rate?
This is the million dollar question. Right now the answer might be yes, but for how much longer?
quote:
Where I'm looking is flat. At the upper end of my budget, there aren't many buyers ( ) - why? Because most people with that kind of money already live in the house of their dreams.
So, I'm holding all the cards - I just can't buy a house, hate it then have to sell it. I'm getting too old for that.
I am only 31 lol.
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