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Housing Market - why it's not a bubble

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  • Housing Market - why it's not a bubble

    Yes I know it's a bold statement, but hear me out. Many many people all around the country are saying 'wow so much demand not enough homes' and wondering why. This seems very apparent to me based on the demography of our country with Millennials now being the largest generation . I am on the cusp, depending on definition, youngest Gen-Xer or oldest Millennial. Either way our cohort is now 25 to 40yo and is in prime time for birthing, marrying and buying homes.

    Because homes are more expensive than 30 years ago it's much harder to buy a home outright in ones 20s but mid-late 30s is what's typical. All of my friends/colleagues (including outside medicine) haven't bought until 30s due to prices, working, moving for jobs etc. Now is the beginning of the settling, this is the reason why I don't see this 'bubble' crashing anytime soon. It is the beginning of the Millennial generation finally having enough money for mortgage down-payments there's still another 10-15 years until those 25yr olds are 40. I've been thinking about this a lot because I have friends looking to buy and astonished at prices, multiple offers, etc. But my experience was literally no different in 2016-2017 when I was buying in the same HCOLA, ok homes with many many offers, difficult to buy/outbid, and asking price no longer meaning much except for click-bait. The sold prices of SFH/townhomes typically 50-300K over 'ask'.

    I've encouraged my friends to buy now (as long as it's a >5yr home) because I believe prices will continue to rise. Also, I may be moving within a year and plan on looking to buy nearly immediately if this happens due to this continuing glut of 30-50 qualified buyers for every 1 home (as the article states).

    This market is not the 2005-2006 housing bubble, this is a different generation that has 100K saved for down-payments and looking for first home not necessarily second/third investment properties. Looking forward to hearing some outside thoughts.
    Millennials are now the nation’s largest generation, who are aging into home buying just as already slow rates of home building were further slowed by the pandemic.
    Last edited by eyecandy; 03-26-2021, 11:04 PM.

  • #2
    Interesting, I'd disagree, mostly because I'm old enough to have seen this happen before. The shift in demographics likely contributes somewhat to the demand for homes but other than exceptionally high earners I can't imagine most first time home buyers have 100-200k saved for anything. As demonstrated by past events ie. dot.com, housing bubble, lack of savings for retirement I think a majority of Americans do not make sound financial decisions and also feel entitled to live larger than they can afford. I'd predict a significant number of foreclosures in the near future. Regardless I'm attempting to take advantage of this climate by selling an investment property or two as the pandemic driven foreclosure freeze has me a little squeamish.

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    • #3
      When I hear stories about people buying homes sight unseen, paying way over asking price, waiving inspections, white collar workers hardly being able to afford a home in their VHCOL, etc., I certainly don't think 'this is NOT a bubble'.

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      • #4
        Buying a house because you think prices may go up in the future is a terrible idea. Everyone thinks its a >5 y home, if you didn't you wouldn't be buying a house.

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        • #5
          Something about this market does feel different. In my hometown housing prices have been steadily rising for 10 years but the pandemic has really accelerated things. There seems to be no shortage of buyers with plenty of cash on hand, which makes me think that people aren't necessarily over leveraged. Coupled with low inventory it's making for some crazy prices. Who knows though? If you buy a house that makes sense for you, that's affordable, and you stay in it long enough the market timing tends to be less important.

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          • #6
            Your premise that demographics support rising home prices is correct, but not to this degree. This market is still a bubble.

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            • #7
              No problem, again no one has convinced me yet. Sure things are rising quickly because many people from 2020 March-July of the pandemic were waiting to see what was going to happen with the economy. But we're hitting the point where the people wanting to make offers 1 year ago held off and now you have another year's worth of Millennials prime for buying. The recent meteoric rise will likely start to slow down, but I don't see prices dropping.

              In all honestly I hope I'm wrong and prices go down in MCOL/HCOL since I may be buying again in the next year. However, with the rising savings of Millennials I just don't see that happening anytime in the next 5+ years.
              Last edited by eyecandy; 03-26-2021, 10:58 PM.

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              • #8
                Only time will tell, I can’t believe every house is listed 20-30% above in our market compared to precovid.

                Houses which were showing zestimate of 600-650 are listed at 750-850 and are gone immediately. Looks like a lot of rich people have suddenly appeared in every major city .

                I followed this market , as we were planning to buy , and then finally gave up , I cannot be at peace , paying this price . If the OP is correct , I may regret it in a few years . But I hope the stock market also keeps on going up in the same direction, so the money invested instead would keep up

                I don’t expect either to keep on going up , big question is when ?


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                • #9
                  Originally posted by eyecandy View Post
                  No problem, again no one has convinced me yet. Sure things are rising quickly because many people from 2020 March-July of the pandemic were waiting to see what was going to happen with the economy. But we're hitting the point where the people wanting to make offers 1 year ago held off and now you have another year's worth of Millennials prime for buying. The recent meteoric rise will likely start to slow down, but I don't see prices dropping.

                  In all honestly I hope I'm wrong and prices go down in MCOL/HCOL since I may be buying again in the next year. However, with the rising savings of Millennials I just don't see that happening anytime in the next 5+ years.
                  You think prices can increase for 5 more years ? Maybe if the banks start paying people to take mortgages

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                  • #10
                    Also not really sure it’s smart to be running around telling your friends to buy a house. They should buy a house because they want to, not because their friend introduced a scarcity mentality into their brains

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                    • #11
                      It can still be a bubble as in its somewhat artificial due to supply being so limited. We have less houses than 2005ish per capita, etc...It can still be as prices will adjust downwards if new supply ever hits the market (this is persistent deficit so...).

                      It is not a bubble in that people buying now have never had more income or better credit profiles, so a crash due to inability to pay, no big deal. So theyre underwater a few years, thats a personal crisis not a big systemic issue.

                      US housing is cheap, even in the HCOLA of the country compared to the world...so always room to go up.

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                      • #12
                        Can bubbles really pop if the money supply is trending to the quadrillions?

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                        • #13
                          The more articles I read saying that it is not a bubble, the more I am convinced it is a bubble.

                          And then someone in this thread stated those dreaded four words: “this time, it’s different.”
                          That clinches it.

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                          • #14
                            We can all take a piece of this to fit our narratives. Lots of variables like demographics, supply, inflation, interest rates, job market, stock market, etc. Best guess is from an analysis that tries to put all these things together.

                            This does feel subjectively like a bubble. May be wisest to assume it is but exceptions do exist. There have probably been ppl renting on the sidelines since the 80s/90s waiting for the bay area bubble to pop, while the working class folks who had bought in are now selling to tech folks at a handsome profit.
                            “. . . And the LORD spake, saying “First shalt thou take out the Holy 401k. Then shalt thou save to 20%, no more, no less. 20% shall be the number thou shalt save, and the number of the saving shall be 20%. 25% shalt thou not save, neither save thou 15%, excepting that thou then proceed to 20%. 30% is right out . . .””

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                            • #15
                              Originally posted by blippi View Post
                              We can all take a piece of this to fit our narratives. Lots of variables like demographics, supply, inflation, interest rates, job market, stock market, etc. Best guess is from an analysis that tries to put all these things together.

                              This does feel subjectively like a bubble. May be wisest to assume it is but exceptions do exist. There have probably been ppl renting on the sidelines since the 80s/90s waiting for the bay area bubble to pop, while the working class folks who had bought in are now selling to tech folks at a handsome profit.
                              Yep. Waiting for a housing bubble to pop like in 2010/2011 doesn’t happen often. Shoot next time may be decades from now.

                              As others have mentioned, it’s the same story I keep reading for years now...not enough houses for the demand. When are all these houses going to be built to satisfy the demand? Again, seems like that’ll take many many years.

                              Could be totally wrong, but my theory of when housing will ease up is when the older baby-boomers start selling their homes to move into assisted-living. Oldest baby-boomers are 75, so maybe 10yrs ish.

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