Posted on 05/30/2006 5:51:29 AM PDT by Hydroshock
LOS ANGELES — Back during the '70s recession I was a real estate expert with Morgan Stanley. We helped banks and REITs work out billions of loser portfolios, reorganize, file bankruptcy, even advised the U.S. Dept of Housing & Urban Development on the collapsed Federal New Towns program. I've worked for developers and mortgage bankers, got degrees in architecture and city planning, taught commercial real estate at Cornell University.
But oddly, like the rest of America, most of the time I don't think about the housing bubble that's about to pop. We ignore the coming storm.
(Excerpt) Read more at foxnews.com ...
If you are a renter, it's a bubble.
If you are an owner, it ain't.
ping
I, as well as many in my family disagree. We had a family party yesterday. All agree the chances are high that a recession is a year or less off. Those with debts are paying them off and we are all putting cash back. Example, my wife and I have decided not to go on a vacation this year.
Recessions are self-fulfilling prophecies. This kind of thing--a refusal to spend money on that (US) vacation or the new refrigerator--is exactly what causes a recession. Talking about whether one is coming brings one on.
Me, I'm going to buy a new refrigerator and oven in two weeks, and I'm shopping around for a new horse.
I agree. I will be looking for a house in 2 years. For the long term, 20 to 25 years. But a lot of peopel are flipping and a lot have gotten themselves in to deep to ever see their way out.
Great for you. My wife and I both agree that paying off debts and putting more money in our saving is what we should do now. To each their own.
Talk of a "housing bubble" is just well-disguised disdain for the middle class.
If the owner has refinanced and refinanced and refinanced, he may find his butt between a hard place and a meat grinder.
A lot are in that very situation. And that is what is different now from the past.
Better hope the city doesn't want your land for city use.
"Talk of a "housing bubble" is just well-disguised disdain for the middle class."
What do you mean by that?
This writer is trying hard to create a stampede. Not going to work. Just a little math, if the median annual income in your area is $85K or better (Fairfax Co) then the average house (3 bdrms/2 bath) should cost around $425K. Currently, the average house in Fairfax Co is selling for around $480K or about $55K over the traditional 5x annual income mark for housing. This represents a 13% premium over the base calculation. Given that Fairfax/DC Metro is basically recession proof and incomes on average have been growing in the 3% to 6% annual range the premium is absorbed in a matter of four years. In this area you can buy a big house far out and experience a 3 to 4 hour daily commute, or buy a smaller house further in and spend no more than 40 minutes in daily commuting. It is your choice. I don't see how a 13% premium represents an overbought market. Interest rates are rising, which means if you haven't bought yet you better get on it. There is a hell of a lot of difference in mortgage payments between a 5.5% loan compared to a 7.5% loan. My guess is once interest rates on the long end of the curve begin to lift you will actually see another round of buying in the hot markets. In Fairfax that would translate to another $50k to the base sticker of $480K for the average house.
San Francisco, for example, may decline 10% - but large housing developments two hours away in the Central Valley could well see the 40-50% declines mentioned in the article. Wealthy Chinese businessmen aren't really interested in four-bedroom houses in Modesto. ;)
Also, declines will hit unfashionable areas of the country surprisingly hard. People who think they are immune because their area of Oklahoma or Missouri didn't seem to be participating in the bubble may be in for an unpleasant shock when their home values drop 30% anyway.
I sold my home in Ellicott City, MD last week IN A DAY at my asking price. The realtor didn't even put a sign. So thing can't be too bad yet.
I think my house was price about 15K too low, but the realtor scared me into drop my price. A year ago I probably would have gotten my extra 15k
Still in all, I did walk away with $285K
Paying off debt is always a good thing to do, esp credit cards. Mortgages and car loans are not as debilitating but nice to pay down. And having a cushion in the bank against unexpected events is also very wise. Most people's lives would be greatly improved if they had at least the freedom of no credit card debt, and six months living expenses in the bank. They could make much wiser choices in many instances and save even more money.
I disagree that a recession is coming soon... the boomers simply have too much money to spend. I think 2011 to 2015 is more likely- the demographics shift a bit at that point.
Or, perhaps, universalizing a sober assessment of the housing market in a few cities (like San Francisco) which do show every sign of being in a speculative bubble.
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