Housing bubble - when will it burst?

[flyinghonu 0]

The hubby and I (after many months of me PUSHING him) finally bought a place in 9/03. It was a townhome on a new construction project in its 2nd phase. The exact same townhome, in the exact same project - now in phase 10, on the same size lot - with less custom features, just sold for over $110,000 more than we paid for ours. WTF!!!

It makes me scared....I almost want to sell it to secure our equity . However, the construction project still has two more phases and just started two more projects adajcent to this one.

We continue to see hoards of people line up each weekend outside (literally pushing each other in line) each time they release a new phase. At one of the new construction sites (they just broke ground on) phase 1-3 are already sold out and the buyers haven't even seen what the homes are going to look like!

So Cal is simply running out of room to build. We continue to have an uncomprable influx of people into the state who, like all of us, want to stay and raise their families here.

Sure, percentage rates will increase...but can you live it out in the home and wait for the recovery (thats if there is even a downfall - which I personally think will be more of a leveling off). Then what about the "housing crisis?" All of these new residents want to buy homes but there are no homes left. Personally, I think supply and demand play a much larger role in this area!

"Excuse me while I kiss the sky..." - Jimi Hendrix

[Bigwallmaster 0]

I have spent many hours pondering this same subject. I live in Orange County, where the housing prices make you wanna puke. . . .if you don't own a home that is.

I believe we will begin to a moderate correction in California over the next 12-16 months and I will explain my reasoning as to why.

My father and I own and operate a steel service center in Los Angeles. We are a decent size company (about 50 million in sales annually), and therefore we buy quite bit of steel. (check us out at www.calstripsteel.com **I know I'm such a salesman ) Over the past year we have seen some dramatic increases in the price of all metals, not limited to steel alone. The catch is that consumption of steel has stayed relatively the same. To put a figure on it, steel has inflated about %40 over the past year, which is huge in our industry. We all know from our college Econ courses that a rise or decrease in the price of "basic metals" is one of the indicators of inflation/deflation. When you combine this with the quickly rising prices of gasoline, and a state that has over 40 billion in debt (ie. a state that will be raising taxes), it strongly points to the possibility of an inflationary economy. Oh and let's not forget the record high fed deficit that we eventually need to deal with. If you ask me all of this stuff points to inflationary economy.

With interest rates being so low right now, people are more willing to spend their $$ and thus feed inflation through what is really false demand. This will certainly not stand in the govt's eyes, and they will most certainly raise the interests to curb this inflation.

That's my 2 cents. I could be totally off base here. Oh and for the record, I don't believe the housing market in California is going to "burst" per say in the sense that it will collapse, but I do think we'll see a correction. Keep in mind that prime land in Orange and L.A. counties is not readily available anymore, which is one of the reasons I believe the prices have gone so high. But you must also keep in mind the question. . . .How many people out there can afford to pay $600,000 or more for a house?


Good topic lawrocket. . . .very stimulating.

cheers,

J.P.

[Michele 1]

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OK my head hurts now...

Sorry.

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Should I buy a house or not?

Do you want to buy a house now? I think YES it's a good time, at least for the next 3 months, possibly through the summer. But....do YOU want to??

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I have the VA behind me.

Excellent.

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House or Townhome?

Depends on what you're looking for. Got time for a yard? Get a home. Don't want to deal with that? Get a townhome.

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I only have about 6 grand saved up for the DP, but I don't need one with the VA...And I think I avoid the PMI as well.

I'd suggest a 103% home loan, where you finance the entire thing based on credit and VA backing. That way, you still have your 6K, for incidentals such as inspections, and moving costs. Those can add up, especially if you make your friends paint and move you, and you give them pizza and beer (they will be skydivers, right?).

PMI - or Private Mortgage Insurance - is one of the lending lessons learned from the late 80's. If you have less than 20% down (the estimated investment that you as a human being won't walk away from [I think it's just an arbitrary number.....]), current lending law requires that you carry PMI.

The usual combined payment is called the PITI - Principle, Interest, Taxes, Insurance (home owner's insurance as well as PMI). The combined total is what your monthly housing costs will be.

Here's something I tell buyers before we start looking.

Determine the approximate home price; talk to a lender! Get a PITI payment based on the amount YOU can comfortably afford. Then talk to your CPA, and find out what part of that is deductible. Take your PITI payment, subtract the deductions, and find your monthly adjusted payment.

Once you have an adjusted payment, then compare that to what you're spending in housing costs RIGHT NOW. It may be more, but often I find that clients come back with a lower NET housing cost than what they are paying in rent.

Next, look at what you're paying for right now. A 1 bedroom, 1 bath apartment, noisy neighbors, and a small kitchenette with no view? Get a realtor to give you automatic listings for your area, and see what's available in your price range...almost guaranteed that you will be getting more home for the money (net) you're spending now. You won't be wasting anyone's time, because you're not going and seeing the homes, you're just getting a feel for what's available in your price range. I have 18 buyers right now on my automatic listing list, and some will buy and some will not. But since it's automatic, it takes about 30 minutes to input from my end, and then you get the listings in your email. I'm not showing you homes, and you're not getting pressured. A win-win, all the way around.

Once you do those things, you can make your decisions from a more solid place. You will know approximately how much home you can afford, what it will buy, and you've made a comparison to what you have now.

And then, ask me for a referral. I'll make a penny at the same time, and I'll be happy as well. (I have a huge network across the US that I can draw from, down into Mexico and up into Canada as well....).

Any other questions?

LOL!

Ciels-
Michele

~Do Angels keep the dreams we seek
While our hearts lie bleeding?~

[lawrocket 3]

A fascinating response. And you are a pretty smart dude!

I lived in OC until July (In Cypress - YAY C-Town!). Of course, housing prices were ridiculous then, and even more so.

I hadn't thought of the false demand aspect. It sounds like a good analysis to me.

My wife is hotter than your wife.

[Ron 10]

My head still hurts....

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Do you want to buy a house now? I think YES it's a good time, at least for the next 3 months, possibly through the summer. But....do YOU want to??

Well I'd rather own a home than pay rent...Of course that means giving up the DZ life......Ok, I can do that.

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Depends on what you're looking for. Got time for a yard? Get a home. Don't want to deal with that? Get a townhome.

What about resale value?
The simple fact is I don't have kids...Don't plan on having kids either. So it's really just me, and I am doing OK living in a trailer on a DZ...So, other than the investment and just owning a house side of it, I don't need much space. I would like a garage or a shop for my radio controled planes.

I might move next year, and that has kept me from doing anything. But if I don't move I will be in place for at least the next three years.

I have been told that I need to stay in a place for 5 years to break even if I have to sell.

So my plan right now is to continue to save around 600 a month for a down payment till I know.

I am looking for a house around 80,000-100,000 Like I said I don't need a castle and any move from a Trailer on a DZ is a move up.

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current lending law requires that you carry PMI.

I was told...And I could be wrong, that with the VA I can skip out of the PMI. Again, I could be wrong.

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Those can add up, especially if you make your friends paint and move you, and you give them pizza and beer (they will be skydivers, right?).

I don't have anything to move...I live in a trailer on a DZ.

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Determine the approximate home price; talk to a lender! Get a PITI payment based on the amount YOU can comfortably afford. Then talk to your CPA, and find out what part of that is deductible. Take your PITI payment, subtract the deductions, and find your monthly adjusted payment.

Well I have more homework to do.

Better to go to a bank or a morgage company?

"No free man shall ever be debarred the use of arms." -- Thomas Jefferson, Thomas Jefferson Papers, 334

[Michele 1]

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Better to go to a bank or a morgage company?

I'd suggest going to a mortgage broker. Banks have a product to sell - a single product (their loan); mortgage brokers are able to be far more flexible because they represent many different sources of funds. For example, I work with a mortgage broker who can loan from more than 100 sources, whereas a bank can only sell their product.

Additionally, banks are known to be very slow in the lending process - approval, appraisal, and so on, because most of the time they are paid via salary (little motivation). A MB is paid when the loan closes (i.e. commission based sales), and therefore has a pressing interest to see this close.

Lastly, the lender of the funds pays the MB, not you.

It looks like you've got a solid plan so far. Try doing as I've suggested, and see what the results are. Coming from a DZ, though, the environment comparison stuff doesn't work so well....

Ciels-
Michele

~Do Angels keep the dreams we seek
While our hearts lie bleeding?~

[misskriss 0]

I'm just wondering whether to sell my house now or not. I'm going through a divorce but the house is mine to sell.. .. houses in my neighborhood aren't lasting two days on the market and two of my neighbors both sold their houses for $100,000 more than what they bought it for. Not an exaggeration.... maybe I should sell now and find something smaller... or just stay here and keep hoping it gets better.. I don't knowwwwwwwwwwwwwwwwwwwwww.

[airtwardo 7]

Been doing some research on the subject as well..

A 'slight' correction may indeed be on the horizon...

But I wouldn't bet the ranch on it!

And anything you buy there now will we worth
as much or more during said 'bubble'

At best the prices may 'flat line' for a bit,
you can't lose money buying there!


We moved to Houston 5 years ago as a convenience,
my better half works for an airline based here...and
was getting tired of commuting.

A home we looked at in the 1000 Oaks area back then
was going for 365,000,
We instead moved here into a MUCH nicer home for about the same
money..4500SQFT, 1 acre of woods..big pool...blah blah blah..

We re-fied last year and this place went up all of 1000.00 in those 5 years,
whereas the same home in 1000 Oaks now lists for 605,000!!!

Problem with NOT buying in So. Cal.
(if that's where you want to STAY)
is once you leave...
it's really hard to get back with the sky rocketing prices!

...As far a the bubble gonna burst...
been hearing THAT for 10 years now...still waiting!

~ If you choke a Smurf, what color does it turn? ~

[speedy 0]

Well I guess you know the answer to your question now

Dave

Fallschirmsport Marl

[timmyfitz 0]

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Well I guess you know the answer to your question now

Since this thread is about 5 years old, it was interesting to read everyone's predictions and opinions about the future of real estate. Especially the real estate agent.

[lawrocket 3]

Yes. How right and wrong we were. The bubble bursting was predicted. The type of burst was not predicted - the causes were hinted at but some factors (interest rates, etc.) were not the compelling factor.

I find this really interesting.

My wife is hotter than your wife.