Bubble? What Bubble?

For quite sometime, we have debating the bubble issue and the argument is
that many people talk about the bubble just because it is fashionable and
possibly hip. But, reality is that they lack good understanding of real
estate economics. I have heard for the past five years that a bubble is
about to burst and the world is going off to the deep end and many other
catastrophic scenarios. Again, I do no think that we are going to have this
major national bubble but what we are going to have is many people who will
lose big in real estate just like they did in the past 5 years boom when
they held on to this Sci-Fi scenario.

Re: Bubble? What Bubble?

The basic problem with inflated prices in California is that it
increases the cost of living for young couples, renters etc. It is
happening to the point where some professionals and their jobs are
leaving California for good. Why pay a professional $100,000 when you
can hire one in India or China for a fraction of the cost.

Re: Bubble? What Bubble?

<> wrote in message
news:
> The basic problem with inflated prices in California is that it
> increases the cost of living for young couples, renters etc. It is

Yes, housing affordability is a big problem.

> happening to the point where some professionals and their jobs are
> leaving California for good. Why pay a professional $100,000 when you
> can hire one in India or China for a fraction of the cost.
>

Re: Bubble? What Bubble?

CalNeva wrote:
>
> For quite sometime, we have debating the bubble issue and the argument is
> that many people talk about the bubble just because it is fashionable and
> possibly hip. But, reality is that they lack good understanding of real
> estate economics. I have heard for the past five years that a bubble is
> about to burst and the world is going off to the deep end and many other
> catastrophic scenarios. Again, I do no think that we are going to have this
> major national bubble but what we are going to have is many people who will
> lose big in real estate just like they did in the past 5 years boom when
> they held on to this Sci-Fi scenario.

This is true, the national bubble won't happen. There are some markets
that are overpriced due to very high demand, that will decline if
demand drops, e.g. a factory closes or a disaster happens. Otherwise
the real estate market is healthy. In the southeast, the market is
strong. You can watch land prices on properties in the southeast at
www.ampub.com. Larry Kuka

Re: Bubble? What Bubble?

The bubble we are in is NOT a housing bubble. it is a credit bubble.
The housing market is just a portion of this credit bubble.

A credit bubble will burst with rising interest rates. If you though
the last NASDAQ crash was difficult when fed rates hit 8%, what will
happen if those rates need to hit 12-15% to stave off inflation?

A credit bubble will affect:

1) people with large amounts of credit card debt
2) people with loans which are variable in interest rate (such as
second mortgages, ARMs and HELOCs)
3) people which rely on new cars and pay them off over long periods of
time
4) people with large amounts of student loan debt which is NOT fixed in
interest rate

A credit bubble can be protected against by:
1) paying off debt
2) consolidating debt
3) keeping interest rates fixed on any debt which exists
4) managing debt

When the credit bubble pops, I think the rich will get richer and the
poor will go broke.

Re: Bubble? What Bubble?

CalNeva wrote:
> <> wrote in message
> news:
> > The basic problem with inflated prices in California is that it
> > increases the cost of living for young couples, renters etc. It is
>
> Yes, housing affordability is a big problem.
>

This contradicts your original assertion of no housing bubble. If
affordability is low, then people find housing undesirable and of low
value to them.

Yours In Christ,
John

Re: Bubble? What Bubble?

wrote:
> CalNeva wrote:
> > <> wrote in message
> > news:
> > > The basic problem with inflated prices in California is that it
> > > increases the cost of living for young couples, renters etc. It is
> >
> > Yes, housing affordability is a big problem.
> >
>
> This contradicts your original assertion of no housing bubble. If
> affordability is low, then people find housing undesirable and of low
> value to them.

If somebody thinks this is not a bubble ....

Re: Bubble? What Bubble?

wrote:
> The basic problem with inflated prices in California is that it
> increases the cost of living for young couples, renters etc. It is
> happening to the point where some professionals and their jobs are
> leaving California for good. Why pay a professional $100,000 when you
> can hire one in India or China for a fraction of the cost.

This is true. Salaries are rising for IT professionals, and will
continue to rise, but for a while to come, there will be a drop off in
employment. Why? Because the ones who remain in demand, and thus back
to six figure level, have skills that industry has more difficulty
offshoring (integration, data mining, enterprise know-how). I've never
known one friend or colleague to be offshored because of their ability
to evolve beyond just the technology aspect. My ex's mother was
offshored, but that was because she was complacent (VAX person). There
is also the baby boomers retiring, for which all the Indians, Eastern
Europeans, and Russians will hardly come close to offsetting. Bad
times ahead for the immediately future for the employee, really tough
times for employers to fill spots in the far (10+ yr) future.

Yours In Christ,
John

Re: Bubble? What Bubble?

>
> If somebody thinks this is not a bubble ....

Coincidentally enough, there are only three types of people who
continue to deny a real estate bubble, and will continue to do so until
after it's popped:

1) RE agents
2) Lenders
3) Flippers

Yours In Christ,
John

Re: Bubble? What Bubble?

I am an IT professional. My salary has been increasing. But the total
number of IT jobs will decrease especially in California.

Re: Bubble? What Bubble?

wrote:
> I am an IT professional. My salary has been increasing. But the total
> number of IT jobs will decrease especially in California.

Former IT industry worker -> comp sci teacher. I saw the bleak trend,
or at least I was frustrated by corporate politics, and I was aware of
the offshoring fad and how it was going to be a short term quagmire.
Also, I preferred the ivory tower-esque world of academia. The baby
boomers retiring will not be offset by any real amount of Chinese,
Indians, et al that come our way, or at least there will be no
sustainable way of assimilating them to appropriate work.

Basically, I do agree with your point, however, that California will
have a real problem in the future with housing price affordability. I
do not doubt it is a desirable place to live, but the ability to afford
it will be a great deterrent to any further increases, and will likely
with the rest of the country fall in value. My area, the triangle of
NC, will see slight increases, more than offsetting the national bubble
that will consume all homes (not just regional areas like some would
think), only because it draws in more people than it scares off.

Yours In Christ,
John

Re: Bubble? What Bubble?

If the number of high paying professional jobs decrease it will put a
damper on the increase in housing prices.
Unless wealthy folks from all over the world come to California.

Re: Bubble? What Bubble?

On 4-Feb-2006, wrote:

> Coincidentally enough, there are only three types of people who
> continue to deny a real estate bubble, and will continue to do so until
> after it's popped:
>
> 1) RE agents
> 2) Lenders
> 3) Flippers
>
> Yours In Christ,
> John

Who are the types that admit there IS a real estate bubble?

--
Warmest regards,

Steve Horrillo, Realtor / C.Ht. =^..^=

Re: Bubble? What Bubble?

Steve Horrillo wrote:
> On 4-Feb-2006, wrote:
>
> > Coincidentally enough, there are only three types of people who
> > continue to deny a real estate bubble, and will continue to do so until
> > after it's popped:
> >
> > 1) RE agents
> > 2) Lenders
> > 3) Flippers
> >
> > Yours In Christ,
> > John
>
> Who are the types that admit there IS a real estate bubble?

RE buyers, more and more, nowadays. RE agents I talk to get very
defensive when buyers mention a slowdown. Understandably so, 'cause it
affects their careers.
Financial analysts (Morgan Stanley, et al.)
Former Fed chief Alan Greenspan
Homeowners like myself who aren't blind to the problems ahead just
because we own a home

No surprise that you're a realtor.

Yours In Christ,
John

>
> --
> Warmest regards,
>
> Steve Horrillo, Realtor / C.Ht. =^..^=
>

Re: Bubble? What Bubble?

wrote:
> Steve Horrillo wrote:
>
> > Who are the types that admit there IS a real estate bubble?
>
> RE buyers, more and more, nowadays. RE agents I talk to get very
> defensive when buyers mention a slowdown. Understandably so, 'cause it
> affects their careers.
> Financial analysts (Morgan Stanley, et al.)
> Former Fed chief Alan Greenspan
> Homeowners like myself who aren't blind to the problems ahead just
> because we own a home

Part of it is what the word "bubble" is really supposed to mean.

The real estate market has seen cycles forever. It has shifted back
and forth from buyers markets to sellers markets on decade long
swings as far back as price records and market records have
existed. But a sellers market is NOT a bubble and a switch from a
sellers market to a buyers market is NOT a bubble bursting, not
unless the cycle fits the bubble pattern not the normal historical
pattern.

There have been RE bubbles in history. There have been a lot
more regular old cycles.

Right now in most markets the inventory is going up. The cycle
is beginning to switch from sellers market to buyers market.
(Contrarian investors note, this becomes a good time to buy and
hold for long term gain).

Why is the market switching, what are the fundimentals, what
is driving the switch? For it to count as a bubble the current
market upswing had to have not matched prior normal swings.
It had to match bubble swings of the past.

Compare the RE market to the historical tulip bubble, the 1980s
silver/gold bubble, the late 1990s stock market bubble and to a
few others. Has the price of houses shot so high so fast that
extremely few people could afford to buy? In a couple of areas
maybe and maybe there was a bubble there. I sure have no
interest in returning to Los Angeles county for example. But
across the nation the current gradual shift to a buyers market
doesn't even slightly match the pattern of a bubble.

The credit situation, that's a separate question. The interest rates
have stayed low for too long. I love it for my own rates, but it
worries me about the market as a whole. Should a foreclosure
tsunami happen, it'll look like a bubble bursting. But will it cause
a crash nationwide or just in some areas?

Re: Bubble? What Bubble?

In my metro market, the inventory of existing homes is unusually high,
approaching what I'd term a glut. The newspaper reported that there are
now 7 homes for sale for every buyer, and that number might increase in
the Spring. This could be a precursor to a bursting bubble. The next
few months will be challenging for sellers and their agents.

The real problem could be the timebomb adjustable rate and interest-only
mortgages if interest rates climb much higher. What happens when your
payment increases so high you can't afford it, and real estate prices
have dropped so that you now owe more than your house is worth? If that
happens, you are between that proverbial rock and hard place.

And why have I been seeing and hearing so many HomeVestors ads lately?
You know, the Ug buys ugly houses people. I see their ads on TV,
billboards and newspapers, plus radio. Does this suggest that many
owners are threatened with foreclosure?

Like the Bob Dylan song laments .... the times, they are a changin'. N

Re: Bubble? What Bubble?

wrote:
>
> In my metro market, the inventory of existing homes is unusually high,
> approaching what I'd term a glut. The newspaper reported that there are
> now 7 homes for sale for every buyer, and that number might increase in
> the Spring. This could be a precursor to a bursting bubble. The next
> few months will be challenging for sellers and their agents.

Yet people have to live somewhere. Either the market can't fall
enough to count as a bubble but just a normal swing, or a ton of
folks are going to be renters.

> The real problem could be the timebomb adjustable rate and interest-only
> mortgages if interest rates climb much higher. What happens when your
> payment increases so high you can't afford it, and real estate prices
> have dropped so that you now owe more than your house is worth? If that
> happens, you are between that proverbial rock and hard place.

This is a serious consideration - There may be a credit bubble
without there being a housing bubble, but should a credit bubble
burst it would have a large effect on the housing market. Cause
and effect, but effect nonetheless.

On the other hand I remember the RE market peak in California in
the 1980s and some of my college friends bought just before that
peak. They were *pissed* for several years, but they kept their
houses and eventually the market recovered and they stopped
being pissed. So long as you don't get forclosed, time heals
market timing.

> And why have I been seeing and hearing so many HomeVestors ads lately?
> You know, the Ug buys ugly houses people. I see their ads on TV,
> billboards and newspapers, plus radio. Does this suggest that many
> owners are threatened with foreclosure?

It suggests that investors are expecting a big change.

At a time when folks are handing over the keys, it's best to be on
of the folks the keys are being handed to.

Re: Bubble? What Bubble?

>
> Yet people have to live somewhere. Either the market can't fall
> enough to count as a bubble but just a normal swing, or a ton of
> folks are going to be renters.

Yet they don't have to live in California. It ain't that pretty...

Another thing: fixed land is a fallacy. 97% of America is still
undeveloped.

>
> This is a serious consideration - There may be a credit bubble
> without there being a housing bubble, but should a credit bubble
> burst it would have a large effect on the housing market. Cause
> and effect, but effect nonetheless.
>
> On the other hand I remember the RE market peak in California in
> the 1980s and some of my college friends bought just before that
> peak. They were *pissed* for several years, but they kept their
> houses and eventually the market recovered and they stopped
> being pissed. So long as you don't get forclosed, time heals
> market timing.
>

The forces are far worse this time around. Japan STILL hasn't
recovered from its real estate crash, and it's about 15 years going.
We are next.

>
> It suggests that investors are expecting a big change.

I hope to be one of the vultures.

>
> At a time when folks are handing over the keys, it's best to be on
> of the folks the keys are being handed to.

???

Yours In Christ,
John

Re: Bubble? What Bubble?

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<> wrote in message
news:
>I am an IT professional. My salary has been increasing. But the total
> number of IT jobs will decrease especially in California.
>
>

Re: Bubble? What Bubble?

yawn