Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Goodlife, you say that "homes are not selling for anywhere close to what people paid back in 2008."
However, according to the US Federal Reserve, their compilation of "Average Sales Price for New Houses Sold" shows that the AVERAGE sales prices for NEW HOUSES SOLD (not houses "for sale," but rather houses "sold") across the entire US is at a new bubble high. It's true that prices in Las Vegas, S. Florida, and Stockton CA are not at the 2008 bubble highs ... but that's because the mechanism which caused those areas to skyrocket in 2008 (i.e., the subprime liar loans) is a different mechanism than what is causing the 2013 housing bubble (i.e., ultra-loose monetary policy).
I'm not sure what more objective evidence one can provide than the Fed's own data. I'm not trying to be cute ... but I just do not honestly see where the evidentiary flaw lies in this data presentation.
Yes, and this helps explain why the current prices are so high ... it's because the yield-starved hedge funds with deep pockets are desperate to buy real estate.
Real estate is location specific. The most desirable areas will always command a higher price because of the location and amenities it offers. I've been actively monitoring the real estate market where I live for over 10 years. The prices of homes sold today are much lower than the height of the market. Many of these people are paying lower than they would had they rented. There are lots of deals to be had.
I doubt people will be crying foreclosure in 5 years. Subprime loans are not being offered anymore. Rates will eventually go up thus reducing the number of homes being sold. That is normal. There is always a high and low period. There is always a recession too. I think those who got a home with a 30 year fixed rate of 2-3 % hit the jackpot. No one can come back to these people and amend the loan. That is awesome.
Just taking a quick look at that graph, yes the new home prices have risen very quickly recently but seeing as they dropped so quickly 5-6 years ago aren't we just getting back to point A where people don't owe more than their homes are worth? And the problem with the "recession" was all the bad loans the banks were handing out to people who they knew couldn't afford them. This time around banks are less likely to award loans and people are more aware of what could happen with an investment of this magnitude so they are putting more cash down
Real estate is local. I bought my house in 2008 and sold it in 2013 for $50k more (about 15% appreciation).
Take any of the the repairs you made the cost of the move and the interest and commission you paid and I bet you didn't walk away with that 15% appreciation.
Anyone comparing the bs housing price of the mid 2k bubble prices to today's prices is a fool. Why? Because the prices were grossly overinflated. It's like comparing apples to watermelons. I was a contractor back in those days in California. I COULDNT hire people fast enough they were slapping up houses. I saw literally hundreds of people line up to get on a list so they can get the chance for a lottery to place a bid on a house that wasn't gonna be built for a year. F'ing idiotic. I saw people that had no business buying a 250k house get keys to 550k houses. I saw people HELOC'ing like crazy to fund that new truck boat vacation. Sometimes all three.
House prices here in SoCal are in some cases surpassing or within 10% of bubble prices. Last year houses were going pending within a day. Especially if you were in a desirable area. House for sake on my street is within 13% of bubble price.
You really think the banks or the fed give a crap? All they care about us getting the prices back up to satisfy the of loans or minimize their loss. The only difference is they are looking now for people that can actually pay where before all was required was a heartbeat and a warm body.
A guy I knew was a handyman. He maybe maybe pulled 40k a year. Bought a house for 275k in California city. For those who don't know California city is in the middle of nowhere. It's currently worth about 90k. Which is about 20k more than what it should be worth.
The only difference is they are looking now for people that can actually pay where before all was required was a heartbeat and a warm body.
And where are they going to find such people who can now take fixed rate 30yr loans at interest rates that are rising by the month at prices that are on the verge of matching the last bubble's peak?
The majority of demand so far has been by investors for the low lying fruit. That has disappeared now as all the deals are gone and the overpriced inventory that is now available is of interest to no one. Sales volume is falling off a cliff.
The new 2013-14 housing bubble is even bigger and better than the 2008 housing bubble ... and we all know how well the 2008 housing bubble ended.
First, the "real" cost of purchasing a home has NEVER BEEN HIGHER:
Second, the average new home sales price in the month of November reached a new all time high, such that new home prices in the US have never been higher.
Why is this happening? Well, the Fed has deliberately lowered its federal funds interest rate to 0.0% for five consecutive years in order to reflate the 2008 Housing Bubble. Plus the Fed has undertaken 5 years of "quantitative easing" to lower mortgage interest rates to the lowest in history ... Plus the US government has implemented a host of programs designed to reflate the housing bubble.
Just as the 2008 housing bubble ended in a cataclysmic disaster when it popped, so too will the new and improved 2013-14 Housing Bubble end in a total catastrophe.
Be prepared.
Your observations and conclusions are flawed on several counts.
In the first place, bubbles have little or nothing to do with average sale prices; they have everything to do with speculation and debt.
In the housing bubble which ended in 2008, banks were loaning to people based on little more that a heartbeat. The bubble was clearly unsustainable because the underwriting criteria of loans were based on lies and dependent on best case scenarios.
That is clearly not the case today. Loans are very difficult to get, and the quality of borrowers is substantially higher that it was previously.
Much of the demand for housing now is being pushed by financially strong investors who have few options to secure double digit returns on investment. Lack of any kind of reasonable returns in the bond markets has forced investors out of bonds and into real estate seeking returns and diversification.
Another flaw in your assessment is that it fails to take the true inflation rate into consideration. I am not talking about the fantasyland 2% rate the government keeps force feeding your psyche; I am talking about the real inflation rate which has seen steady increases in food, energy, rents, and taxes.
Finally, your statistics are flawed in that the "average cost" does not take into account changing demographics. Much of the higher priced properties for example in California have been purchased by foreign and corporate investors, while lower priced properties in states not particularly hard hit by the previous housing crash have become more attractive spots for relocation by people starting over or retiring.
In the first place, bubbles have little or nothing to do with average sale prices; they have everything to do with speculation and debt.
...
That is clearly not the case today.
Today's boom has been fueled 100% by investor speculation... so do you think speculative cycles last forever? Of course not, when attractiveness wanes in this asset class investors typically pull money out and invest it elsewhere. That may take a while but when that happens that particular asset class, in this case Real estate, crashes quite spectacularly.
The trigger to entice investors to cash in and lock in gains will probably be when homes appreciate sufficiently and interest rates rise so the yield/risk equation is better elsewhere.
First off new build and investors don't go together. There was some speculation in 2004 to 2006 but since then new build is almost entirely an owner occupied sector. Investors are not going to pay a 25% premium to enable a 15% initial outfitting cost.
Case Shiller shows that prices are still way off their peak.
And the regular buyers are quite active with little trouble getting mortgages. No funny paper but the regular paper works fine.
Parts of the previous market was driven by investors...but they were not speculators. They were attracted by the fact we had real 8 and 10% yields on rentals. I expect some of these guys will begin to cash out as the value of the property lowers the yield. But on cash they still have good yields.
Today's boom has been fueled 100% by investor speculation... so do you think speculative cycles last forever? Of course not, when attractiveness wanes in this asset class investors typically pull money out and invest it elsewhere. That may take a while but when that happens that particular asset class, in this case Real estate, crashes quite spectacularly.
The trigger to entice investors to cash in and lock in gains will probably be when homes appreciate sufficiently and interest rates rise so the yield/risk equation is better elsewhere.
100%; non-sense the stats show that not to be true. But even investors see the investment after near 5 years .Numbers I have heard is 40% on cash sales.This is just from loan going thru on purchases and some many be cash sales for purchase by many richer people or retirees selling out in higher area then paying cash;so I suspect its much lower on investment buyers based on cash sales.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
