As every real estate "expert" will tell you....there are only three important features to determine home value:
Location, location, location........
And finding a qualified buyer, to pay the price required to get the home....
There seems to be no shortage of folks with the desire, income and loan worthiness to buy the homes at the asking price!
I have no idea of how they do it!
I've been hearing from the "gloom and doom" crowd about the coming real estate crash, since 1977...
The closest we come to a "crash", here in Northern California was more that a decade ago -- when prices stopped increasing for a couple of years...
Homes in our neighborhood - purchased for what I thought was outrageous at $86K in 1977, are now selling for close to $1M today...
I'm sure that the market here is somewhat unique --- and I'm sure that some area are grossly overbuilt or overpriced ----- and perhaps overdue for a "correction"..
I doubt the the South Bay area is one of them.....
Semper Fi
There have been some bubbles in isolated areas and there were about 5 years in the 80's were housing was flat. BUt the bubble talk is old
Exactly. I'm not too worried about my home (about 500 yards from the beach in Jupiter) plummeting in value too much.
While I'm happy that it's quadrupled in value since I bought it in 1991, I'm not borrowing on the equity. Just quietly paying my mortgage. My local taxes HAVE skyrocketed, but that's to be expected.
Gosh, has everyone in California forgotten the mid-90's???
We bought our nice, fairly new tract home in Southern Cal (Ventura) in 1988, in good times, for $240K. Prices on identical homes in our neighborhood climbed steadily through 1991 to $330K. We were amazed but pleased.
And then the bottom fell out. The market reduced almost immediately by $50 to $60K. Over the next 3 years, prices continued to drop, but not as drastically.
I divorced in 1996. We put our home on the market for $200M in late 1996. Not a nibble. In mid-1997, we gave it away for $184K, which was the going rate for the homes in our tract--not an isolated incident, please be sure.
That same home sold last month for $700K. Same home we couldn't give away 8 years ago--now it's 8 years older and in quite lousy condition compared to when we gave it away. (Yes, I do kick myself on a fairly regular basis!)
No bubble? Pfffffffffffffffffffftttttt....
Well, I bought an ocean front lot in NC in November 03 for 180K. Identical lots on either side of me are currently listed for 1.2 MIL. that sure seems like a bubble to me, great location or not. And man do I wish I had bought that second lot for an investment as I had planned. Stupid, stupid stupid....
I waited for the "housing bubble" in the Boston area to crash. And I waited. And waited.
They shot up, stopped increasing at double digits per year to single digits, then stabilized for a little while, then went crazy again, and so on, and so on.
God isn't making any more land right now. What you see is what you get. Here in New Jersey, land that was farmer's fields 10 years ago is now homes, office parks, and shopping centers.
People who want to wait this "bubble" out may get a break in a year or two if prices do go down, but I guarantee you they will rise again. It happens almost everytime (unless you live in a very economically depressed area). Try timing that "buy low and sell high" gamble also. It isn't that easy.
A home bought for cash 28 years ago for $86K that sold for $1M on Friday would have returned an annualized 9.16%.
An identical amount invested in 1977 (6/17/77 at 99.97) in the S&P 500 index and sold on Friday (6/17/05 at 1216.96) would have returned an annualized 9.34%.
This doesn't take into account the impact of interest paid (or tax deduction thereof) on a loan or the massive impact of dividends paid and reinvested in the stock holding. Realtors cut isn't in there either.
9.16% is nothing to scoff at but isn't an astronomical number. Real estate returns often look more impressive because we start with and end with a large absolute dollar amount.
That being said, a situation like that doesn't look much like a bubble to me.
Well, right now, there is one more factor besides "location" that determines the sale price of a house...........the ability to borrow very large sums of money with extremely risky mortgage gimmicks.
Today, 47% of all new California buyers have the income and "loan worthiness" to afford such prices only because they are resorting to the "Interest Only" mortgage gimmick.
These people aren't "buying" a home. They are leasing a home for ten years from the true owner with is the mortgage holder. On a 30 year loan, the "interest only" period expires after 10 years. Then the buyers are obligated to pay off the full amount of the principal, with interest of course, during the remaining 20 years.
Since they are stretching their budgets to pay "interest only" as it is, they are sitting on financial time bombs.
The last time "Interest Only" loans were popular was during the Roaring Twenties when people were also leveraged up to their eyeball just prior to The Crash.