Real Estate Bubble Forming?

[hightower]

I often think to myself that it would be super nice to get out of the mid-west and live somewhere that's warm year round with access to the ocean, mountains, etc.  But, then I read articles like this and I think its just not worth it.  I can't imagine having a mortgage this big!  And I doubt all these people are wealthy enough to pay cash.  So, its clear that a lot of people are signing up for massive amounts of house debt.  The realtors are getting nervous that the market isn't sustainable and I tend to think they're right.  But, who knows how long prices will keep going up like this.  Maybe if I'm serious about moving in the future I'll get lucky and be able to buy during a down swing just like 2008/2009.

 

http://www.latimes.com/business/la-fi-spring-market-20170425-htmlstory.html

[DMFA]

Just build your house out of gold; that way, it'll never lose value...right?

I definitely feel you about over-valuation. Real estate is just another part of the puzzle. Imo the next correction, crash, bear, whatever is going to be brought about by over-valuation. This pace is simply not sustainable...

I thought this was going to be a Crixus thread, so I put my gold-foil hat on before I clicked it.

[ENT Doc]

Hey, if Chester Lampick can do it...

https://deadhomersociety.files.wordpress.com/2011/10/thedaytheviolencedied5_thumb.png?w=512&h=384

[hightower]

Overvaluation is something I worry about now only because our home value has risen so quickly in the last couple of years.  We have a lot of equity in this place and its making feel like I need to cash out now.  My wife and I don't really want to move right now is the problem.  But, we think we might want to move in the next few years.  So it makes me nervous thinking about the "what if" scenarios.  But, just like the stock market, no one really knows what's going to happen in the future, so I shouldn't worry about it.  Good news is that even if home values drop by 50% like they did in 2008, we'll still be able to easily get out of our current mortgage thanks to the healthy amount of equity we have.  It will just sting a little (or a lot) knowing how much cash we could have received at closing. I'll keep my fingers crossed that it doesn't happen that way though

[RJ]

I live in a very HCOL area. Bought a condo in 2013. It appreciated >$500k in just 4 years. Makes my head spin. I keep thinking we need to sell, but my wife doesn't want to move out of the area (we have family in the area) and you can imagine how much houses cost around here...

[hightower]

That's incredible. That's a bit more complicated because, as you pointed out, if you sell now you either have to rent or try to buy something more expensive. Its not quite like that in the midwest. We have lots of cheap housing still. We just happen to live in a neighborhood downtown that is undergoing a renaissance, so our prices are rising a lot fasted than surrounding neighborhoods.

[Craigy]

Just in the past 3 or 4 years it feels like prices have doubled, with most of that appreciation being in the last year.  We're looking to move but prices are just so absurd in the areas we want compared to just 12-24 mos ago.  A teardown that used to be $199k is now $350k.  A nice home that used to be $650k is now $1.25M.  Reasonable houses that were in the high $300s and low $400s are all over $500k to $800k now. Etc. etc.

I don't know if I'd call it a bubble, but I just don't see how the prices are going to keep moving upward from here.  Already high-dollar homes are starting to sit and discount to move, but they are still overpriced.  It seems like listings either sell within ~72 hours or sit for months, with not much in-between happening.

In theory if we keep the house for 10 years+ we don't have to worry about the market taking a downturn, but I'm in no rush to buy.

 

[RJ]

$350k for a teardown? Ha! Teardowns around here are $1.2M and up. I wish I had your problems

[Complete_newbie]

Crixus wrote:

There’s a lot of capital flight inflating RE markets around the world. BoJ and ECB are still displacing $200B/mo worth of money that would have gone into bonds. Despite cap controls money is still leaving China. The Chinese money knows it’s overpaying but doesn’t care. It just wants to hide the sweatshop booty/ponzi WMP funds from the Chinese government.

Click to expand...

This is actually an excellent point. I agree.

[lurch]

hightower wrote:

I often think to myself that it would be super nice to get out of the mid-west and live somewhere that’s warm year round with access to the ocean, mountains, etc.  But, then I read articles like this and I think its just not worth it.  I can’t imagine having a mortgage this big!  And I doubt all these people are wealthy enough to pay cash.  So, its clear that a lot of people are signing up for massive amounts of house debt.  The realtors are getting nervous that the market isn’t sustainable and I tend to think they’re right.  But, who knows how long prices will keep going up like this.  Maybe if I’m serious about moving in the future I’ll get lucky and be able to buy during a down swing just like 2008/2009.

 

http://www.latimes.com/business/la-fi-spring-market-20170425-htmlstory.html

Click to expand...

How would you even time this i.e. moving from the midwest to a HCOL area? It would be much easier to do the reverse.

Home prices in coastal CA are much more insulated from a bear market/recession/housing crisis than midwest homes. If you wait for a crash, you will lose a lot of money in your current home and the CA home will not fall nearly as far. You will lose money in that deal. If you sell now to try to lock in your gains before ha potential housing crisis, you might be buying at the peak of the CA market. If you feel you can get a good price for your current home, why not sell now and rent? Then buy your CA dream home when the housing market tanks. Certainly some elements of market timing here but what else can you do?

[Craigy]

RJ wrote:

$350k for a teardown? Ha! Teardowns around here are $1.2M and up. I wish I had your problems

Click to expand...

We have $1M teardowns as well, they're just out of my price range  :cry:  :lol:

[CM]

Crack Shack or Mansion? This is a very entertaining look at ridiculous real estate prices (Vancouver): http://www.crackshackormansion.com/

[Zaphod]

Crixus wrote:

There’s a lot of capital flight inflating RE markets around the world. BoJ and ECB are still displacing $200B/mo worth of money that would have gone into bonds. Despite cap controls money is still leaving China. The Chinese money knows it’s overpaying but doesn’t care. It just wants to hide the sweatshop booty/ponzi WMP funds from the Chinese government.

Click to expand...

If you want to see a bubble check what the above has done to Vancouver and Toronto, etc...insane. Starting to have issues lately.

[SwanSong]

There was a time where the mortgage interest deduction and the state income tax deduction were rumored to be on the chopping block. That alone could cause the house of cards that is the California housing market to flop. Man, I would not want to be stretching like some of these people are stretching.

[Doc_science]

That's why we have decided to rent for the foreseeable future and pay off student loans aggressively