Housing Bubble?

[foraker]

Hey Fairweather, is this what you had in mind?

[Off_White]

Wilkeson/Carbonado is a pretty cool area. Don't forget, Fairweather is in Pierce County, not King, and it's a different market than what most of ya'll are thinking about. On the other hand, Tacoma is pushing hard on downtown revitalization, and it's a different place than 10 years ago. I think a clever investor could make some long haul money buying up some downtown T-town periphery property now, though it may not be a place you'd want to move your family to for another 5 or 10 years.

 

Me, I'm happy to be a seller in this market rather than a buyer, just don't let that bubble burst for another 3 weeks.

[marylou]

T-town downtown periphery property has been gone a long time. All those south Downtown Victorian with the Mt. Rainier views got bought up by the Tacoma lawyers ages ago.

[willstrickland]

Don't wanna get into a long write-up here, but Jay_B drop me a line if you want some more data resources. I've got stacks of info accumulated in the last 6 mos on everything from bankruptcy and default trends to median home price charts over the years, to cost as % of income, % of interest only and "investment" home mortgages, etc.

 

The short version: Negative real rates and the ensuing credit bubble flowed largely into real estate in the last few years. The asset inflation trend is out of line with fundamentals, unsustainable. Housing tends to be "sticky downward" meaning that prices rarely fall much but tend to stagnate for long periods of time (notable exceptions in the "hottest" markets...Texas circa the S&L scandals is one, soCal mid 90s is another where prices dropped 10% or more).

[AlpineK]

I can see housing prices stagnate, but there would have to be an economic disaster, or some other kind of disaster before prices would really drop.

 

The way they keep increasing density around Seattle I don't see how prices would even stagnate that much here.

[Dru]

You mean an economic disaster like Europe and Asia calling in the 700 trillion dollar US debt and leaving you bankrupt? How are your guns going to protect your freedom after they've been repoed to pay your debts?

[Stonehead]

Didn't Greenspan or one of the other Federal Reserve yokels characterize the situation as 'froth'? In other words, they didn't want to send any alarmist signals, just precautionary, because locally there are overinflated markets that which if deflated wouldn't necessarily induce a general collapse?

[AlpineK]

You mean an economic disaster like Europe and Asia calling in the 700 trillion dollar US debt and leaving you bankrupt? How are your guns going to protect your freedom after they've been repoed to pay your debts?

 

That's never going to happen Dru. As the world stands right now it's in no country's interest to drive the US into economic problems because it would fuck up a lot more than just the US.

 

What I was driving at was some act of terrorism like a dirty bomb set off in a major city, or something like Boeing, Microsoft, and a few other big employers leaving Seattle all at once.

[Dru]

You mean an economic disaster like Europe and Asia calling in the 700 trillion dollar US debt and leaving you bankrupt? How are your guns going to protect your freedom after they've been repoed to pay your debts?

 

That's never going to happen Dru. As the world stands right now it's in no country's interest to drive the US into economic problems because it would fuck up a lot more than just the US.

 

What I was driving at was some act of terrorism like a dirty bomb set off in a major city, or something like Boeing, Microsoft, and a few other big employers leaving Seattle all at once.

 

There are always those who will benefit from a global depression, even if it isn't the working man.

[willstrickland]

[willstrickland]

[willstrickland]

[willstrickland]

[willstrickland]

Any questions? LOL.

[Stefan]

As long as people keep having sex, housing prices will rise. More sex means population growth.

 

Housing prices will slow at their growth rate in the Puget Sound area in probably around 10-15 years when the baby boomers start moving to Arizona and New Mexico to get away from this rain. In the real estate short term--no growth rate stoppage whatsoever.

[Stonehead]

Wasn't the dot.com bubble burst by a credit squeeze caused by rising interest rates?

 

I'm not sure if I have that right, didn't look it up. 'Cause I seem to recall also that Greenspan eased rates just prior to the turn of the millenium. Do you have a chart of interest rates too?

[willstrickland]

Yeah, I have rates might take min to find them (on home computer, I'll have to source it elsewhere).

 

Stefan, you are way off the mark bro. The housing sales/starts etc are WAY WAY above pop. growth levels in the "hot" markets.

[willstrickland]

Here ya go, Fed Funds rate (this is what the Greenspan is actually manipulating when they raise/cut rates).

 

[Stefan]

Yeah, I have rates might take min to find them (on home computer, I'll have to source it elsewhere).

 

Stefan, you are way off the mark bro. The housing sales/starts etc are WAY WAY above pop. growth levels in the "hot" markets.

 

DUh.......Take away net immigration AND population growth in an area and see what that does to housing prices.

 

I meant sex as in "north america" and how that affects housing prices for all of north america. Not just sex in Puget Sound.

 

Also, houses are much larger than they used to be in the US, with more restrictive codes. Therefore, driving up the cost of newer housing as percentage of peoples incomes.

[Alex]

Great thread. as a person who just sold first house and bought second in seattle area, all I have to say is that if I had not bought the first one 5 years ago, I would never have been able to buy one now.

 

Lots of great advice in this thead. Fairweather has some really good rules of thumb, though I am going on an 15-year fixed paying off in 11. Whatever works for you.

 

As far as bubble, I doubt it! Consider this area of the country the economy is lagging a little worse than most other areas, but housing prices are climbing at a steady 15% a year (thats better return than any other investment you can make!) and we are in chronic housing shortage in this area. Buying a primary residence is a good investment. Buying rental property is also really good, if you have extra cash laying around: rental income is not taxed!

[Dru]

The housing market is really strong! Since you can't make much money from other investments, easy money looks for the highest rate of return - property.

Buy a home as an investment! As long as everyone keeps doing it, house prices will continue to rise!

Maybe you can wallpaper it with your tech stock certificates from the dot com bubble.

[Stonehead]

Wasn't something similar brought up here perhaps a year ago? The so-called 'creation of wealth'. Just seems the grand illusion is produced by low interest rates and artificially elevated demand through people pushing money around--investors. What's the term for it? ---"flipping"?

 

As far as population and land space, I read somewhere that one should look at the situation in Japan where real estate prices have been stagnant or depressed for a long period. That's the opposite situation that you would expect given the number of people per unit land.

[Ratboy]

all I have to say is that if I had not bought the first one 5 years ago, I would never have been able to buy one now.

 

This seems to be a common theme from the people I talk to about houses these days, which really sucks for someone like me who wants to buy their first house in the near future.

[Peter_Puget]

rental income is not taxed!

 

[Stonehead]

Housing tends to be "sticky downward" meaning that prices rarely fall much but tend to stagnate for long periods of time (notable exceptions in the "hottest" markets...).

 

I guessing due to a psychological phenomenon called 'loss aversion'?