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Thread: Housing Bubble part 2?

  1. #1
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    Housing Bubble part 2?

    Housing prices have increased by more than 20% in my area in less than a year - and by even more in other places I hear - and people are buying again with adjustable rate loans at record levels. It all seems like 2007ish to me again. Do you think this is a bubble or just a sharp increase before things go on at a more normal pace? Would you sell now or buy now or wait to do either to see how things pan out? I plan to keep my place until Nov of 2014 but wonder that is wise if this IS a short lived bubble.

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    I'm probably not alone in having given up trying to make sense of the housing market after the last bubble.

    Buy a house if you can afford one and if you think it's wise to commit to a given location for a couple of decades (it is my understanding that in a market that's not bubbly where you are buying with a mortgage, only such longer term commitments make sense, because most of your initial payments are much more interest than principle - I forgot where the break even point was - 7 years? it may be less than a couple decades but it's a long term thing). Don't buy a house if you can't easily afford one (if you have no cushion for job loss or emergency funds you are playing it risky) or if you don't think it's wise to commit to a place for the long run.

    But on the housing market: sure there's people that think it's a bubble, and it's distorted as can be, especially in bubble markets: 1/3 of the purchases coming from all cash and the rest coming from FHA low down loans. It's not your mother's housing market. All the shnanigans that always did go on to prop up the market after the crash are as far as I know *still* going on, inventory withheld from market (inventory even withheld in places like Florida where the houses literally rot). All behavior that in most markets would be called price fixing. Hedge funds buying up multi-units noone knows exactly how they'll make a profit on. But the housing market can stay irrational longer than you can stay solvent, especially if it's got a government backstop - and then you can then speculate on how reliable this government backstop is, which is why I said, I've given up trying to reason with this market, just look at your own personal fundementals if all one is looking for is a *place to live*. But deciding whether to buy for the *short* term (especially for cash), isn't that always speculation? And thus you need to try to have a speculators-mind, out-think the Fed and the hedge funds and so on ....
    If you want something to get done, ask a busy person. If you want them to have a nervous breakdown that is.

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    Spartana, just a thought...a lot of people buy in the early summer so that they are prepared to move their children into a new school system. You would eliminate buyers who don't want to transfer their children out of school after being their for a little bit of time.....chris

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    I have read that much of the buying is being done by investors buying for rental property.

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    Denver real estate is supposedly hot right now, with homes in the right price range and neighborhood having multiple offers the day they go on they market and rising prices. It sure feels like 2007 to me and there may be another bubble forming. I think interest rates will stay low as long as the economy in general is slow, which will help the housing market even more. I don't see the bogus loans of the financial crisis since hopefully we've learned our lesson so maybe it will not get out of control. I'm sure a lot of it depends on where you live.

    The concern over slumping home prices has left me scratching my head. As long as a person is selling one place and buying another in a similar price range, it would seem like it all comes out in the wash.

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    Quote Originally Posted by Florence View Post
    I have read that much of the buying is being done by investors buying for rental property.
    That seems to be the case in my hood as well. Buy to flip or, more often, to rent out. Prices are still rising as is speed of sales but as Tussiemussies points out that will probably fall off once school starts. Maybe :-) ! It all seems to much too fast so who knows. I agree with Apathetic that you should sell when you want and buy when you want rather than try to time the market but that can be hard when you have not-so-fond memories of the big crash a few years ago.

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    Quote Originally Posted by Rogar View Post
    The concern over slumping home prices has left me scratching my head. As long as a person is selling one place and buying another in a similar price range, it would seem like it all comes out in the wash.
    It probably doesn't matter unless you are buying the first house - then you probably want to wait until after the potential crash when prices drop a lot. Or if you want to sell and live elsewhere or rent and live off your equity. Then you'd want to sell while prices are high. I'm in the last camp so am tempted to sell sooner rather than wait but.... prices may continue to rise like crazy so maybe waiting is better :-)

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    Senior Member iris lilies's Avatar
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    If this is the time in your life where you can sell this property, then sell it. Property values are unpredictable, but they usually rise in Calif.

    I was just thinking this week: the only piece of real estate I made REAL money on is the vacant lot we bought adjoining our property, bought for $4,000 about 25 years ago.

    Now big half a million dollar houses are going up acorss the street form us and that builder is getting $60,000 for the lots. I know that he would buy our lot although he would not pay that retail price. We could, for sure, get $30,000 for it and likely more.

    I've never made money in real estate but for this little slice of land. And of course I haven't actually "made" the money since I have not, and will not, sell it.

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    Senior Member catherine's Avatar
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    My gut feeling is that this is not a bubble, but a rebound. Things dropped SO low, that this might be just the pendulum seeking the center.

    So, I think you should keep all factors in mind--what would make the value continue to increase over time? Is that value inflated now--or does it seem reasonable given attributes that elevate property value, like access to basic services, quality of life, quality of education and crime rates?

    And, as ANM said, it's your life--so don't let the wacky ups and downs of the marketplace dictate where you live.
    "Do any human beings ever realize life while they live it--every, every minute?" Emily Webb, Our Town
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    Heard on the news this a.m. that prices rose 12% in June in Calif - that on top of the annual rise of over 20% in many areas. Hard to think that is NOT a bubble. I don't plan to sell myself at this time (although it is becoming more tempting since I've been travelling most of this summer and will be gone quit awhile longer and sis, who co-owns the house, has moved closer to work and really isn't going to be there that much either). But I am seeing a lot of the same actions - crazy loans and up-bidding - that was so common before and has me concerned for the overall US economy again if there is another housing market crash.

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