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Article "Are we facing another housing bubble?"


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http://finance.yahoo.com/blogs/just-explain-it/signs-of-a-housing-bubble-205544130.html

 

Not sure about a bubble but I wanted to post the article because this tidbit caught my eye:

 

"One are that's heating up is California — the most overvalued market in the nation. Prices there have increased about 17% year-over-year, with Orange County being the hottest metro area."

 

I know when I was looking in 2012 there were less than 200 listings in all of HB.  While I haven't gotten any info from a realtor since then looking at zillow and a few other sites it doesn't look like it's gotten much better. 

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At the peak of the bubble, the house next door sold for $740k.  They sold it a few months ago for $650k.  

 

So if the house was in bubble before, and it's already approaching that amount.  Yeah, very possible for another bubble.  And considering in So Cal, they are saying rents are unaffordable.  It can very well come crashing again, with handouts for all again.  Because nothing teaches people that they did bad, by saying it's ok, we will give you money to cover your stupidity.

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I really wish OC had some sort of rent control. I loved my last apartment. Perfect location for me, clean and safe neighborhood. cool neighbors. etc. Lived there for over 13 years. Unfortunately, the owners were an old married couple and when one of them died, their son took over the management and he proceeded to raise the rent (a month after he took over) by 25%. He said it was because I had been "getting away with paying rent that was too low for too long." I stuck it out out for a few years, but every year (like clockwork) he would raise the rent at least 20%. The rent amount doubled in just over three years. 

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Foreign investors.....namely Japanese.

 

The interesting part is it isn't just the common fixer upper flips. I recently saw a Chinese guy walk into a house and pay full asking of 1.3mm cash with a 30 day close.

 

I'm not as active anymore, but was looking within the past 6-8 months for a buddy and all of his offers were outbid (so they were overpaying) and offering the goods like cash deals and/or quick closings.

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Foreign investors.....namely Japanese.

 

The interesting part is it isn't just the common fixer upper flips. I recently saw a Chinese guy walk into a house and pay full asking of 1.3mm cash with a 30 day close.

 

I'm not as active anymore, but was looking within the past 6-8 months for a buddy and all of his offers were outbid (so they were overpaying) and offering the goods like cash deals and/or quick closings.

It's the Chinese and investment groups. Things are about to change though because the Chinese economy is slowing down immensely. Once they don't have extra money to "safely" park overseas, housing prices will crash again. Like Brandon said, these people pay all cash and they flip them rather quickly.

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We got lucky, our place (bought in 10/12) was a short sale and our offer was essentially "$1000 more than top offer, not to exceed X". It worked. Short sale went smooth and now the house 2 doors down, which is essentially the same floor plan with about 300 more sqf, just sold for $100K more. And I think they're just regular folks, not Chinese investors or anything.

I like my house, but even at what I paid it still seemed like a lot of money. Then again, similar houses were selling for $250K more than what I got it for in 2005-2008.

 

I feel like we got lucky too. Our house (12/13) was owned by a 90 year old italian lady, who died and had a reverse mortgage. She hadn't changed anything since it was built in 1972. We got it for asking, put $30K into renovations and the seller's agent, who came by a couple weeks ago to check in, said he'd list it today for $125K more than what we got it for. 

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we've pretty much given up on trying to buy because we can't come up with enough money for a down payment. plus, prices in glendale are insane. we're okay, though i wish in our younger days we would have tried harder to save enough for a down payment.

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I don't think it's a bubble (at least here in SF). The math doesn't support a bubble.

Places here are always expensive, and definitely rising, but it's not really a bubble because it's not speculative "stupid" money (ie when the non-college educated checker at safeway is giving you RE advice, there is a bubble).

Also here there is some foreign money (there are always Asian investors in SF), but mostly it's just us tech peeps paying a premium and with cash.

 

Like the article says... 

"How could that be when homes are selling for tens of millions in areas like New York City and San Francisco?

Believe it or not, there is enough demand in those markets from people who can afford to pay those sky-high prices. Expensive does not always indicate a bubble."

 

Good to here OC is going well though - didn't know it was kicking so much ass. 

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haha.

 

your post reminds me of when I first got into real estate. when i started it was in the early 2000's and remember so many people whether it was testing prep or even in office prep/classes that were quitting their jobs as bartenders or the chick selling Avon now becoming a real estate agent by 2004ish. i remember some chick did nothing but work at a church and do photography in her free time listing 700k homes. just hilarious.

 

on the flip side, i had to deal with a lot of these people. it's a mutual benefit for both agents to close, so like when i started, i was helping these housewives fill out or get me back paperwork from their buyers/sellers to close on time. just absurd. it's almost free money to be stupid with a license and know you can bs your way through a deal.

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Yeah - that's the stuff you have to watch for when it come to bubbles/mania/etc.

When the stupid people start getting in en masse, the party is usually over (or very close to being over).

Fundamentals and math will always eventually win out.

 

Which is why I think there is a consumer app bubble forming.

Lot's of these apps at ridiculous valuations with zero tech, zero business model and (worse) zero potential business model.

Every idiot is just throwing an app out there hoping to catch lightning.

Edited by mrwicked
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Sure, at worst get paid the advertising dollars.....like that Youtube dude that Disney is buying out that you posted. If people keep coming up with ways of free content that drives in traffic there will be money there. I'm curious about this same bubble as well because I can't see the end due to it not really having a ceiling that is market driven like real estate. You figure if some newb pops up with an app it may not get the buy out he was hoping for, but if the traffic is there he will still get something. I know the bartender at a local watering hole talks about different apps and it reminds me of the real estate bubble.....I notice a lot of Youtube dudes as well.

 

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I've noticed OC beach areas are really going off, specifically in Newport.  Homes that were at $3-4 million during the crash are now going for $5-6 million or more.  That sounds crazy.  On a recent ride along the beach front, there were more than a few homes being constructed and a couple that had just been torn down.  There is a segment of the population with a good sum of cash.

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Looking at HB via zillow and at least as far as the estimated value chart they show most places seem to be anywhere from 10-20% below their peak.  Like other areas mentioned there's been a major jump in the last 12 months.  If we continue to see noticeable increases in the next year or two it would be tempting for me to sell my townhouse and sit on the sidelines to wait for the correction and get into a house.  

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^ don't get hung up on trying time things.

Just buy when/if you are ready, and don't take on more than you can afford.

 

The math/fundamentals will always win out.

For sure but if home prices around here jump another 15-20% I don't think the fundamentals support those type of prices. Right now to get into a house in the city I'm in I'd be looking at a starting price of 550k which is about 8-9x the median household income. I wouldn't sell to take a gain just so I can buy a place that's way more expensive. While it would be tempting to sell and sit on the gain I've got a fixed mortgage at less than 4% and likely wouldn't do it. My plan is to get into a house in about 7-8 years regardless of what the markets do.

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^ don't get hung up on trying time things.

Just buy when/if you are ready, and don't take on more than you can afford.

 

The math/fundamentals will always win out.

 

Not sure if I agree Wicked. Housing doesn't always go up like it used to (except for your neighborhood of course.) I think timing is a huge influence on buying real estate.

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Not sure if I agree Wicked. Housing doesn't always go up like it used to (except for your neighborhood of course.) I think timing is a huge influence on buying real estate.

 

If you can afford it, then when the market dips it will not affect you at all.

Dips only affect those that need to sell.

If you want to speculate, then sure it's risky.

If you buy something you can afford, and hold for long enough, you will be fine.

 

That being said I agree with what you're implying.

You always want to monitor the market - buying at the peak, even if you can afford it, can look less-than-wise when the market corrects.

But, that doesn't mean you would need to sell. Just means you bought at a peak.

RE isn't rocket science but there is some art involved, as with all investment classes.

Edited by mrwicked
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  • 3 weeks later...

Recent data across the US hasn't been good:

 

http://finance.yahoo.com/blogs/daily-ticker/why-the-housing-market-is-suddenly-struggling-201005280.html

 

I'm curious what OC will look like 12 months from now.  As an owner the price jump on paper isn't the worst thing in the world but I just don't think it's sustainable or really supported by much other than low supply around here.  Getting pretty tired of hearing about what the fed will or will not do because they've done more than they should have for years now.    

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http://finance.yahoo.com/blogs/just-explain-it/signs-of-a-housing-bubble-205544130.html

 

Not sure about a bubble but I wanted to post the article because this tidbit caught my eye:

 

"One are that's heating up is California — the most overvalued market in the nation. Prices there have increased about 17% year-over-year, with Orange County being the hottest metro area."

 

I know when I was looking in 2012 there were less than 200 listings in all of HB.  While I haven't gotten any info from a realtor since then looking at zillow and a few other sites it doesn't look like it's gotten much better. 

 

 

 

I agree, OC is a Metro hot bed. They're everywhere.

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