Are we in a housing bubble?

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Grt2bOutdoors
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Re: Are we in a housing bubble?

Post by Grt2bOutdoors »

Sasquatch1 wrote: Fri May 21, 2021 4:29 pm
brianH wrote: Mon May 10, 2021 2:25 pm
New Providence wrote: Mon May 10, 2021 10:17 am 30 yr mortgages make no sense. Housing prices would collapse if the maximum tenor was, say, 5 yrs.
Why don't 30y mortgages make sense? Houses last, even without much maintenance, at least that long. One could also reasonably expect that 30 years represents an average length of time someone might inhabit a home and still be working to pay the mortgage (age 30-60). The fact that people move more frequently than that is irrelevant.

If anything, I expect the US will start to see 40 or 50 year mortgages soon, like other countries already have.

A shorter term would probably lower prices overall, but it would also price more people out. There's some minimum it costs to build a house, and that minimum is larger than almost anyone could afford paid over 5 years.

I agree with all points and have been expecting 40yr mortgages.

The real issue though is WHY these notes on everything are going with longer terms.

That issue is so people, govt and business can keep kicking the can down the road and charging inflated prices. I believe, big business has learned that they can charge almost anything they want as long as they give us an affordable monthly note. Look at vehicles, it’s easier to give us a longer finance then it is for them to come down to reality with prices. The sad part is, how financially dumb the general population is. They don’t even see the trap.

We are now starting to see notes on literal everything! All the way down to buying a shirt online, you get bombed with 4 easy payment options.

Idk how people can’t see what is taking place.
Do you have an I-phone? You know why people can afford them? Because you can buy it on a zero interest 24 month payment plan. Walk into an Apple store and tell them you want to buy their phone, they will tell you for $X per month, you can have a brand new shiny phone and the payment is conveniently charged to your credit card account so you don't get bombarded with an extra bill.

The FED is also contributing to this mess in the housing market by buying back $20 Billion of mortgage backed securities each month, that buying is driving down the yields in the mortgage finance market and helping the feeding frenzy which is more akin to a school of piranha's surrounding the house or condo or coop going up for sale. It's insane and worse than the 2008 bust. There is a big bubble in housing right now.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Sasquatch1
Posts: 180
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Re: Are we in a housing bubble?

Post by Sasquatch1 »

Grt2bOutdoors wrote: Wed May 26, 2021 9:20 pm
Sasquatch1 wrote: Fri May 21, 2021 4:29 pm
brianH wrote: Mon May 10, 2021 2:25 pm
New Providence wrote: Mon May 10, 2021 10:17 am 30 yr mortgages make no sense. Housing prices would collapse if the maximum tenor was, say, 5 yrs.
Why don't 30y mortgages make sense? Houses last, even without much maintenance, at least that long. One could also reasonably expect that 30 years represents an average length of time someone might inhabit a home and still be working to pay the mortgage (age 30-60). The fact that people move more frequently than that is irrelevant.

If anything, I expect the US will start to see 40 or 50 year mortgages soon, like other countries already have.

A shorter term would probably lower prices overall, but it would also price more people out. There's some minimum it costs to build a house, and that minimum is larger than almost anyone could afford paid over 5 years.

I agree with all points and have been expecting 40yr mortgages.

The real issue though is WHY these notes on everything are going with longer terms.

That issue is so people, govt and business can keep kicking the can down the road and charging inflated prices. I believe, big business has learned that they can charge almost anything they want as long as they give us an affordable monthly note. Look at vehicles, it’s easier to give us a longer finance then it is for them to come down to reality with prices. The sad part is, how financially dumb the general population is. They don’t even see the trap.

We are now starting to see notes on literal everything! All the way down to buying a shirt online, you get bombed with 4 easy payment options.

Idk how people can’t see what is taking place.
Do you have an I-phone? You know why people can afford them? Because you can buy it on a zero interest 24 month payment plan. Walk into an Apple store and tell them you want to buy their phone, they will tell you for $X per month, you can have a brand new shiny phone and the payment is conveniently charged to your credit card account so you don't get bombarded with an extra bill.

The FED is also contributing to this mess in the housing market by buying back $20 Billion of mortgage backed securities each month, that buying is driving down the yields in the mortgage finance market and helping the feeding frenzy which is more akin to a school of piranha's surrounding the house or condo or coop going up for sale. It's insane and worse than the 2008 bust. There is a big bubble in housing right now.

Yep, our education system is failing to do any finance education!! People need to start looking at price and not note cost!

What really bothers me the most is when these “ways” cause a collapse, the people like me who don’t buy up all this crap are the ones to suffer too! Those who borrowed everything just end up with nothing anyway, which was really what they had before.

Those who save and are fiscally responsible lose out for not participating and have to carry the bail out burden
rockstar
Posts: 6308
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Re: Are we in a housing bubble?

Post by rockstar »

Grt2bOutdoors wrote: Wed May 26, 2021 9:20 pm
Sasquatch1 wrote: Fri May 21, 2021 4:29 pm
brianH wrote: Mon May 10, 2021 2:25 pm
New Providence wrote: Mon May 10, 2021 10:17 am 30 yr mortgages make no sense. Housing prices would collapse if the maximum tenor was, say, 5 yrs.
Why don't 30y mortgages make sense? Houses last, even without much maintenance, at least that long. One could also reasonably expect that 30 years represents an average length of time someone might inhabit a home and still be working to pay the mortgage (age 30-60). The fact that people move more frequently than that is irrelevant.

If anything, I expect the US will start to see 40 or 50 year mortgages soon, like other countries already have.

A shorter term would probably lower prices overall, but it would also price more people out. There's some minimum it costs to build a house, and that minimum is larger than almost anyone could afford paid over 5 years.

I agree with all points and have been expecting 40yr mortgages.

The real issue though is WHY these notes on everything are going with longer terms.

That issue is so people, govt and business can keep kicking the can down the road and charging inflated prices. I believe, big business has learned that they can charge almost anything they want as long as they give us an affordable monthly note. Look at vehicles, it’s easier to give us a longer finance then it is for them to come down to reality with prices. The sad part is, how financially dumb the general population is. They don’t even see the trap.

We are now starting to see notes on literal everything! All the way down to buying a shirt online, you get bombed with 4 easy payment options.

Idk how people can’t see what is taking place.
Do you have an I-phone? You know why people can afford them? Because you can buy it on a zero interest 24 month payment plan. Walk into an Apple store and tell them you want to buy their phone, they will tell you for $X per month, you can have a brand new shiny phone and the payment is conveniently charged to your credit card account so you don't get bombarded with an extra bill.

The FED is also contributing to this mess in the housing market by buying back $20 Billion of mortgage backed securities each month, that buying is driving down the yields in the mortgage finance market and helping the feeding frenzy which is more akin to a school of piranha's surrounding the house or condo or coop going up for sale. It's insane and worse than the 2008 bust. There is a big bubble in housing right now.
Low rates definitely contribute to higher prices. It pushes down the monthly payment leaving more room for the price to rise. The big problem is when rates go back up. You reduce your population of buyers. This will either stabilize prices or push them down.

I don't expect a bubble burst like we saw from 2009 through 2012.
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willthrill81
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Re: Are we in a housing bubble?

Post by willthrill81 »

rockstar wrote: Wed May 26, 2021 9:36 pm Low rates definitely contribute to higher prices. It pushes down the monthly payment leaving more room for the price to rise. The big problem is when rates go back up. You reduce your population of buyers. This will either stabilize prices or push them down.
I have serious doubts as to how high the Fed can raise rates. It seems that virtually everyone has grown accustomed to very cheap debt, including the Treasury. But TMK, that's about the only lever that the Fed can pull to squelch inflation, and even then, we've already seen that there can be a significant lag between the two.
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av111
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Re: Are we in a housing bubble?

Post by av111 »

rockstar wrote: Wed May 26, 2021 9:36 pm
Grt2bOutdoors wrote: Wed May 26, 2021 9:20 pm
Sasquatch1 wrote: Fri May 21, 2021 4:29 pm
brianH wrote: Mon May 10, 2021 2:25 pm
New Providence wrote: Mon May 10, 2021 10:17 am 30 yr mortgages make no sense. Housing prices would collapse if the maximum tenor was, say, 5 yrs.
Why don't 30y mortgages make sense? Houses last, even without much maintenance, at least that long. One could also reasonably expect that 30 years represents an average length of time someone might inhabit a home and still be working to pay the mortgage (age 30-60). The fact that people move more frequently than that is irrelevant.

If anything, I expect the US will start to see 40 or 50 year mortgages soon, like other countries already have.

A shorter term would probably lower prices overall, but it would also price more people out. There's some minimum it costs to build a house, and that minimum is larger than almost anyone could afford paid over 5 years.

I agree with all points and have been expecting 40yr mortgages.

The real issue though is WHY these notes on everything are going with longer terms.

That issue is so people, govt and business can keep kicking the can down the road and charging inflated prices. I believe, big business has learned that they can charge almost anything they want as long as they give us an affordable monthly note. Look at vehicles, it’s easier to give us a longer finance then it is for them to come down to reality with prices. The sad part is, how financially dumb the general population is. They don’t even see the trap.

We are now starting to see notes on literal everything! All the way down to buying a shirt online, you get bombed with 4 easy payment options.

Idk how people can’t see what is taking place.
Do you have an I-phone? You know why people can afford them? Because you can buy it on a zero interest 24 month payment plan. Walk into an Apple store and tell them you want to buy their phone, they will tell you for $X per month, you can have a brand new shiny phone and the payment is conveniently charged to your credit card account so you don't get bombarded with an extra bill.

The FED is also contributing to this mess in the housing market by buying back $20 Billion of mortgage backed securities each month, that buying is driving down the yields in the mortgage finance market and helping the feeding frenzy which is more akin to a school of piranha's surrounding the house or condo or coop going up for sale. It's insane and worse than the 2008 bust. There is a big bubble in housing right now.
Low rates definitely contribute to higher prices. It pushes down the monthly payment leaving more room for the price to rise. The big problem is when rates go back up. You reduce your population of buyers. This will either stabilize prices or push them down.

I don't expect a bubble burst like we saw from 2009 through 2012.
If the interest rates rise, lot of other asset values including stocks will decline. This is a hard pill to swallow politically. So asset bubble should grow until it can't

Since no one knows nothing, how do you act on this
AV111
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

willthrill81 wrote: Wed May 26, 2021 9:42 pm
rockstar wrote: Wed May 26, 2021 9:36 pm Low rates definitely contribute to higher prices. It pushes down the monthly payment leaving more room for the price to rise. The big problem is when rates go back up. You reduce your population of buyers. This will either stabilize prices or push them down.
I have serious doubts as to how high the Fed can raise rates. It seems that virtually everyone has grown accustomed to very cheap debt, including the Treasury. But TMK, that's about the only lever that the Fed can pull to squelch inflation, and even then, we've already seen that there can be a significant lag between the two.
I think, their hands are pretty much tied. I realized that they exhausted their tools when stimulus money (basically helicopter) began. But if we experience run away inflation, we can have a repeat of the Greenspan Fed. However, I don't think they will raise them as high as he did.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

av111 wrote: Wed May 26, 2021 9:43 pm
rockstar wrote: Wed May 26, 2021 9:36 pm
Grt2bOutdoors wrote: Wed May 26, 2021 9:20 pm
Sasquatch1 wrote: Fri May 21, 2021 4:29 pm
brianH wrote: Mon May 10, 2021 2:25 pm

Why don't 30y mortgages make sense? Houses last, even without much maintenance, at least that long. One could also reasonably expect that 30 years represents an average length of time someone might inhabit a home and still be working to pay the mortgage (age 30-60). The fact that people move more frequently than that is irrelevant.

If anything, I expect the US will start to see 40 or 50 year mortgages soon, like other countries already have.

A shorter term would probably lower prices overall, but it would also price more people out. There's some minimum it costs to build a house, and that minimum is larger than almost anyone could afford paid over 5 years.

I agree with all points and have been expecting 40yr mortgages.

The real issue though is WHY these notes on everything are going with longer terms.

That issue is so people, govt and business can keep kicking the can down the road and charging inflated prices. I believe, big business has learned that they can charge almost anything they want as long as they give us an affordable monthly note. Look at vehicles, it’s easier to give us a longer finance then it is for them to come down to reality with prices. The sad part is, how financially dumb the general population is. They don’t even see the trap.

We are now starting to see notes on literal everything! All the way down to buying a shirt online, you get bombed with 4 easy payment options.

Idk how people can’t see what is taking place.
Do you have an I-phone? You know why people can afford them? Because you can buy it on a zero interest 24 month payment plan. Walk into an Apple store and tell them you want to buy their phone, they will tell you for $X per month, you can have a brand new shiny phone and the payment is conveniently charged to your credit card account so you don't get bombarded with an extra bill.

The FED is also contributing to this mess in the housing market by buying back $20 Billion of mortgage backed securities each month, that buying is driving down the yields in the mortgage finance market and helping the feeding frenzy which is more akin to a school of piranha's surrounding the house or condo or coop going up for sale. It's insane and worse than the 2008 bust. There is a big bubble in housing right now.
Low rates definitely contribute to higher prices. It pushes down the monthly payment leaving more room for the price to rise. The big problem is when rates go back up. You reduce your population of buyers. This will either stabilize prices or push them down.

I don't expect a bubble burst like we saw from 2009 through 2012.
If the interest rates rise, lot of other asset values including stocks will decline. This is a hard pill to swallow politically. So asset bubble should grow until it can't

Since no one knows nothing, how do you act on this
If rates have two possibilities, flat or up, then I'd look for bond replacements or other ways to cope with large market swings. I feel like we're just using Japan's monetary policy playbook.
Grt2bOutdoors
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Re: Are we in a housing bubble?

Post by Grt2bOutdoors »

rockstar wrote: Wed May 26, 2021 10:00 pm
av111 wrote: Wed May 26, 2021 9:43 pm
rockstar wrote: Wed May 26, 2021 9:36 pm
Grt2bOutdoors wrote: Wed May 26, 2021 9:20 pm
Sasquatch1 wrote: Fri May 21, 2021 4:29 pm


I agree with all points and have been expecting 40yr mortgages.

The real issue though is WHY these notes on everything are going with longer terms.

That issue is so people, govt and business can keep kicking the can down the road and charging inflated prices. I believe, big business has learned that they can charge almost anything they want as long as they give us an affordable monthly note. Look at vehicles, it’s easier to give us a longer finance then it is for them to come down to reality with prices. The sad part is, how financially dumb the general population is. They don’t even see the trap.

We are now starting to see notes on literal everything! All the way down to buying a shirt online, you get bombed with 4 easy payment options.

Idk how people can’t see what is taking place.
Do you have an I-phone? You know why people can afford them? Because you can buy it on a zero interest 24 month payment plan. Walk into an Apple store and tell them you want to buy their phone, they will tell you for $X per month, you can have a brand new shiny phone and the payment is conveniently charged to your credit card account so you don't get bombarded with an extra bill.

The FED is also contributing to this mess in the housing market by buying back $20 Billion of mortgage backed securities each month, that buying is driving down the yields in the mortgage finance market and helping the feeding frenzy which is more akin to a school of piranha's surrounding the house or condo or coop going up for sale. It's insane and worse than the 2008 bust. There is a big bubble in housing right now.
Low rates definitely contribute to higher prices. It pushes down the monthly payment leaving more room for the price to rise. The big problem is when rates go back up. You reduce your population of buyers. This will either stabilize prices or push them down.

I don't expect a bubble burst like we saw from 2009 through 2012.
If the interest rates rise, lot of other asset values including stocks will decline. This is a hard pill to swallow politically. So asset bubble should grow until it can't

Since no one knows nothing, how do you act on this
If rates have two possibilities, flat or up, then I'd look for bond replacements or other ways to cope with large market swings. I feel like we're just using Japan's monetary policy playbook.
You'd better hope not, otherwise we are going to have 30 years of stagnation, ZIRP and worse. I don't think we are there yet, there is definite inflation whereas Japan had deflation. I think the inflation is going to cool off as the stimulus money sitting in bank accounts runs out.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
goblue100
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Re: Are we in a housing bubble?

Post by goblue100 »

willthrill81 wrote: Wed May 26, 2021 10:34 am
Again, there are very good, 'non-bubbly' reasons why the real estate market is so hot right now: a housing shortage that started years before COVID, construction costs being substantially higher now, construction lead times being substantially longer, and record low interest rates.

The points raised by the CEO above are effects of a strong sellers' market and have nothing to do with whether the market is in a bubble or not.
I'm not sure how you draw the line between a hot market and a bubble. I can relate my daughters story. Her and her husband bought a 3 bedroom, 1650sq starter home in 2018. They put it on the market last Friday with an asking price 25% greater than they paid in 2018. They had an offer on Saturday afternoon that was 3% over the asking price. Monday they got an offer at 10% over asking price. Apparently the lady making the bid had been outbid on 3 or 4 houses so she decided to be aggressive. They accepted her offer.
Luckily they were having a new home built and that price is locked in. The same model home in their new subdivision has gone up over 25% since they locked in their price. Their timing has been really good. She is east of Dallas.
"Confusion has its cost" - Crosby, Stills and Nash
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willthrill81
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Re: Are we in a housing bubble?

Post by willthrill81 »

goblue100 wrote: Wed May 26, 2021 11:30 pm
willthrill81 wrote: Wed May 26, 2021 10:34 am
Again, there are very good, 'non-bubbly' reasons why the real estate market is so hot right now: a housing shortage that started years before COVID, construction costs being substantially higher now, construction lead times being substantially longer, and record low interest rates.

The points raised by the CEO above are effects of a strong sellers' market and have nothing to do with whether the market is in a bubble or not.
I'm not sure how you draw the line between a hot market and a bubble.
It's impossible to know with certainty which is which in advance. But in general, a hot market could be argued to exist when prices are rising for objective reasons, whereas a bubble is present when prices are rising primarily from a 'herd' mentality (i.e., FOMO).

Quickly rising prices alone of an asset class have never been reliable signals of a bubble, but many automatically assume that a rapid increase in the price of almost anything must be a bubble.

Prices might eventually come down from where they are now, but they might not. It's safe to say that the growth of the last few years will not last indefinitely, but prices may just stabilize. If prices never fall significantly below their current levels, then what we're currently seeing is a hot market and not a bubble. By comparison, the real estate market leading up to the GFC was definitely in a bubble, fueled by easy debt. The current market is at least partly fueled by cheap debt.

Our 1,200 sq. ft. 3/2 around Spokane has doubled in value in the 6.5 years since we bought it. We have seen steady increases in the value for years, consistently 8-10% until around the beginning of 2020 when the growth rate increased substantially. We could sell and walk away with a huge pile of cash, but we have to live somewhere, and there's nowhere around here where we could buy an equivalent property at significantly less expense. And just yesterday, I overheard some of our neighbors in a nearby park saying the exact same thing: 'we could sell, but where would we go'?
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smitcat
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Re: Are we in a housing bubble?

Post by smitcat »

FWIW - in one area we live in a large fairly recent runup in prices has now turned completely quiet. Bidding up homes with a rush to buy has been replaced with very little activity and where there is activity the listed price is now being negotiated. Lets see if this spreads and how it plays out.
smitcat
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Re: Are we in a housing bubble?

Post by smitcat »

willthrill81 wrote: Wed May 26, 2021 11:58 pm
goblue100 wrote: Wed May 26, 2021 11:30 pm
willthrill81 wrote: Wed May 26, 2021 10:34 am
Again, there are very good, 'non-bubbly' reasons why the real estate market is so hot right now: a housing shortage that started years before COVID, construction costs being substantially higher now, construction lead times being substantially longer, and record low interest rates.

The points raised by the CEO above are effects of a strong sellers' market and have nothing to do with whether the market is in a bubble or not.
I'm not sure how you draw the line between a hot market and a bubble.
It's impossible to know with certainty which is which in advance. But in general, a hot market could be argued to exist when prices are rising for objective reasons, whereas a bubble is present when prices are rising primarily from a 'herd' mentality (i.e., FOMO).

Quickly rising prices alone of an asset class have never been reliable signals of a bubble, but many automatically assume that a rapid increase in the price of almost anything must be a bubble.

Prices might eventually come down from where they are now, but they might not. It's safe to say that the growth of the last few years will not last indefinitely, but prices may just stabilize. If prices never fall significantly below their current levels, then what we're currently seeing is a hot market and not a bubble. By comparison, the real estate market leading up to the GFC was definitely in a bubble, fueled by easy debt. The current market is at least partly fueled by cheap debt.

Our 1,200 sq. ft. 3/2 around Spokane has doubled in value in the 6.5 years since we bought it. We have seen steady increases in the value for years, consistently 8-10% until around the beginning of 2020 when the growth rate increased substantially. We could sell and walk away with a huge pile of cash, but we have to live somewhere, and there's nowhere around here where we could buy an equivalent property at significantly less expense. And just yesterday, I overheard some of our neighbors in a nearby park saying the exact same thing: 'we could sell, but where would we go'?
Could you rent for the time being?
stoptothink
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Re: Are we in a housing bubble?

Post by stoptothink »

smitcat wrote: Thu May 27, 2021 7:06 am
willthrill81 wrote: Wed May 26, 2021 11:58 pm
goblue100 wrote: Wed May 26, 2021 11:30 pm
willthrill81 wrote: Wed May 26, 2021 10:34 am
Again, there are very good, 'non-bubbly' reasons why the real estate market is so hot right now: a housing shortage that started years before COVID, construction costs being substantially higher now, construction lead times being substantially longer, and record low interest rates.

The points raised by the CEO above are effects of a strong sellers' market and have nothing to do with whether the market is in a bubble or not.
I'm not sure how you draw the line between a hot market and a bubble.
It's impossible to know with certainty which is which in advance. But in general, a hot market could be argued to exist when prices are rising for objective reasons, whereas a bubble is present when prices are rising primarily from a 'herd' mentality (i.e., FOMO).

Quickly rising prices alone of an asset class have never been reliable signals of a bubble, but many automatically assume that a rapid increase in the price of almost anything must be a bubble.

Prices might eventually come down from where they are now, but they might not. It's safe to say that the growth of the last few years will not last indefinitely, but prices may just stabilize. If prices never fall significantly below their current levels, then what we're currently seeing is a hot market and not a bubble. By comparison, the real estate market leading up to the GFC was definitely in a bubble, fueled by easy debt. The current market is at least partly fueled by cheap debt.

Our 1,200 sq. ft. 3/2 around Spokane has doubled in value in the 6.5 years since we bought it. We have seen steady increases in the value for years, consistently 8-10% until around the beginning of 2020 when the growth rate increased substantially. We could sell and walk away with a huge pile of cash, but we have to live somewhere, and there's nowhere around here where we could buy an equivalent property at significantly less expense. And just yesterday, I overheard some of our neighbors in a nearby park saying the exact same thing: 'we could sell, but where would we go'?
Could you rent for the time being?
We're in a similar situation, in 5.5yrs the value of our home is up >85% and we were discussing buying a larger home in 2-5yrs. We make 3x median income for our area and feel like we are getting priced out. My mom has a large home with a completely unused finished basement (nearly the size of our current home), and they could really use our help. We're over there at least every other weekend to do the yardwork and help with random things because my mom just had back surgery and my step-father is blind. It's only ~15 minutes away. It has definitely crossed our mind a few times to sell and just move in with them for a while, but it would totally change the lifestyle (almost non-existent commutes, our kids' sports, etc.) that we enjoy.
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willthrill81
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Re: Are we in a housing bubble?

Post by willthrill81 »

smitcat wrote: Thu May 27, 2021 7:06 am
willthrill81 wrote: Wed May 26, 2021 11:58 pm Our 1,200 sq. ft. 3/2 around Spokane has doubled in value in the 6.5 years since we bought it. We have seen steady increases in the value for years, consistently 8-10% until around the beginning of 2020 when the growth rate increased substantially. We could sell and walk away with a huge pile of cash, but we have to live somewhere, and there's nowhere around here where we could buy an equivalent property at significantly less expense. And just yesterday, I overheard some of our neighbors in a nearby park saying the exact same thing: 'we could sell, but where would we go'?
Could you rent for the time being?
Not likely. There is a serious dearth of rental properties, especially SFHs, in the area, and rents are beginning to significantly increase. Some folks we know had to stay in an extended stay hotel for around six months until they could get into an apartment. A new apartment complex that's still several months from being finished is already 100% rented. The housing shortage is so significant that a very nice RV park near us which charges at least $2k/month for sites has remained nearly full for a long while now, even throughout the winter, and I suspect that the reason is because many are living there while waiting for a home to become available.
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smitcat
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Re: Are we in a housing bubble?

Post by smitcat »

willthrill81 wrote: Thu May 27, 2021 8:37 am
smitcat wrote: Thu May 27, 2021 7:06 am
willthrill81 wrote: Wed May 26, 2021 11:58 pm Our 1,200 sq. ft. 3/2 around Spokane has doubled in value in the 6.5 years since we bought it. We have seen steady increases in the value for years, consistently 8-10% until around the beginning of 2020 when the growth rate increased substantially. We could sell and walk away with a huge pile of cash, but we have to live somewhere, and there's nowhere around here where we could buy an equivalent property at significantly less expense. And just yesterday, I overheard some of our neighbors in a nearby park saying the exact same thing: 'we could sell, but where would we go'?
Could you rent for the time being?
Not likely. There is a serious dearth of rental properties, especially SFHs, in the area, and rents are beginning to significantly increase. Some folks we know had to stay in an extended stay hotel for around six months until they could get into an apartment. A new apartment complex that's still several months from being finished is already 100% rented. The housing shortage is so significant that a very nice RV park near us which charges at least $2k/month for sites has remained nearly full for a long while now, even throughout the winter, and I suspect that the reason is because many are living there while waiting for a home to become available.
"Not likely. There is a serious dearth of rental properties, especially SFHs, in the area, and rents are beginning to significantly increase."
Sounds like it would have been a good move to purchase one or more rental units a few years back.
smitcat
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Re: Are we in a housing bubble?

Post by smitcat »

stoptothink wrote: Thu May 27, 2021 8:26 am
smitcat wrote: Thu May 27, 2021 7:06 am
willthrill81 wrote: Wed May 26, 2021 11:58 pm
goblue100 wrote: Wed May 26, 2021 11:30 pm
willthrill81 wrote: Wed May 26, 2021 10:34 am
Again, there are very good, 'non-bubbly' reasons why the real estate market is so hot right now: a housing shortage that started years before COVID, construction costs being substantially higher now, construction lead times being substantially longer, and record low interest rates.

The points raised by the CEO above are effects of a strong sellers' market and have nothing to do with whether the market is in a bubble or not.
I'm not sure how you draw the line between a hot market and a bubble.
It's impossible to know with certainty which is which in advance. But in general, a hot market could be argued to exist when prices are rising for objective reasons, whereas a bubble is present when prices are rising primarily from a 'herd' mentality (i.e., FOMO).

Quickly rising prices alone of an asset class have never been reliable signals of a bubble, but many automatically assume that a rapid increase in the price of almost anything must be a bubble.

Prices might eventually come down from where they are now, but they might not. It's safe to say that the growth of the last few years will not last indefinitely, but prices may just stabilize. If prices never fall significantly below their current levels, then what we're currently seeing is a hot market and not a bubble. By comparison, the real estate market leading up to the GFC was definitely in a bubble, fueled by easy debt. The current market is at least partly fueled by cheap debt.

Our 1,200 sq. ft. 3/2 around Spokane has doubled in value in the 6.5 years since we bought it. We have seen steady increases in the value for years, consistently 8-10% until around the beginning of 2020 when the growth rate increased substantially. We could sell and walk away with a huge pile of cash, but we have to live somewhere, and there's nowhere around here where we could buy an equivalent property at significantly less expense. And just yesterday, I overheard some of our neighbors in a nearby park saying the exact same thing: 'we could sell, but where would we go'?
Could you rent for the time being?
We're in a similar situation, in 5.5yrs the value of our home is up >85% and we were discussing buying a larger home in 2-5yrs. We make 3x median income for our area and feel like we are getting priced out. My mom has a large home with a completely unused finished basement (nearly the size of our current home), and they could really use our help. We're over there at least every other weekend to do the yardwork and help with random things because my mom just had back surgery and my step-father is blind. It's only ~15 minutes away. It has definitely crossed our mind a few times to sell and just move in with them for a while, but it would totally change the lifestyle (almost non-existent commutes, our kids' sports, etc.) that we enjoy.
We bought a home suitable for 2 familes to live comfortably in a past situation.
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Re: Are we in a housing bubble?

Post by willthrill81 »

smitcat wrote: Thu May 27, 2021 8:47 am
willthrill81 wrote: Thu May 27, 2021 8:37 am
smitcat wrote: Thu May 27, 2021 7:06 am
willthrill81 wrote: Wed May 26, 2021 11:58 pm Our 1,200 sq. ft. 3/2 around Spokane has doubled in value in the 6.5 years since we bought it. We have seen steady increases in the value for years, consistently 8-10% until around the beginning of 2020 when the growth rate increased substantially. We could sell and walk away with a huge pile of cash, but we have to live somewhere, and there's nowhere around here where we could buy an equivalent property at significantly less expense. And just yesterday, I overheard some of our neighbors in a nearby park saying the exact same thing: 'we could sell, but where would we go'?
Could you rent for the time being?
Not likely. There is a serious dearth of rental properties, especially SFHs, in the area, and rents are beginning to significantly increase. Some folks we know had to stay in an extended stay hotel for around six months until they could get into an apartment. A new apartment complex that's still several months from being finished is already 100% rented. The housing shortage is so significant that a very nice RV park near us which charges at least $2k/month for sites has remained nearly full for a long while now, even throughout the winter, and I suspect that the reason is because many are living there while waiting for a home to become available.
"Not likely. There is a serious dearth of rental properties, especially SFHs, in the area, and rents are beginning to significantly increase."
Sounds like it would have been a good move to purchase one or more rental units a few years back.
Tell me about it! When we bought our home, there were many condos nearby selling for $80k-$100k. Those have now doubled in value and rent for $1,500-$2,000/month. :oops:

But my DW is vehemently opposed to owning rentals, so we won't go down that path. And to be honest, all of the restrictions we've seen levied against landlords over the last year would make me very skittish about it as well.
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Re: Are we in a housing bubble?

Post by smitcat »

willthrill81 wrote: Thu May 27, 2021 8:50 am
smitcat wrote: Thu May 27, 2021 8:47 am
willthrill81 wrote: Thu May 27, 2021 8:37 am
smitcat wrote: Thu May 27, 2021 7:06 am
willthrill81 wrote: Wed May 26, 2021 11:58 pm Our 1,200 sq. ft. 3/2 around Spokane has doubled in value in the 6.5 years since we bought it. We have seen steady increases in the value for years, consistently 8-10% until around the beginning of 2020 when the growth rate increased substantially. We could sell and walk away with a huge pile of cash, but we have to live somewhere, and there's nowhere around here where we could buy an equivalent property at significantly less expense. And just yesterday, I overheard some of our neighbors in a nearby park saying the exact same thing: 'we could sell, but where would we go'?
Could you rent for the time being?
Not likely. There is a serious dearth of rental properties, especially SFHs, in the area, and rents are beginning to significantly increase. Some folks we know had to stay in an extended stay hotel for around six months until they could get into an apartment. A new apartment complex that's still several months from being finished is already 100% rented. The housing shortage is so significant that a very nice RV park near us which charges at least $2k/month for sites has remained nearly full for a long while now, even throughout the winter, and I suspect that the reason is because many are living there while waiting for a home to become available.
"Not likely. There is a serious dearth of rental properties, especially SFHs, in the area, and rents are beginning to significantly increase."
Sounds like it would have been a good move to purchase one or more rental units a few years back.
Tell me about it! When we bought our home, there were many condos nearby selling for $80k-$100k. Those have now doubled in value and rent for $1,500-$2,000/month. :oops:

But my DW is vehemently opposed to owning rentals, so we won't go down that path. And to be honest, all of the restrictions we've seen levied against landlords over the last year would make me very skittish about it as well.
"But my DW is vehemently opposed to owning rentals, so we won't go down that path"
That is too bad, just one more tool that can be utilized.
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Re: Are we in a housing bubble?

Post by bigtex »

You'd better hope not, otherwise we are going to have 30 years of stagnation, ZIRP and worse. I don't think we are there yet, there is definite inflation whereas Japan had deflation. I think the inflation is going to cool off as the stimulus money sitting in bank accounts runs out.
[/quote]

The stimulus money is just getting started. I’m waiting for my $900 a month to start in July.
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Re: Are we in a housing bubble?

Post by TheLaughingCow »

bigtex wrote: Thu May 27, 2021 8:55 am
The stimulus money is just getting started. I’m waiting for my $900 a month to start in July.
I'm sorry, what is this $900/month? I haven't heard of any such thing.
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Re: Are we in a housing bubble?

Post by willthrill81 »

TheLaughingCow wrote: Thu May 27, 2021 9:05 am
bigtex wrote: Thu May 27, 2021 8:55 am
The stimulus money is just getting started. I’m waiting for my $900 a month to start in July.
I'm sorry, what is this $900/month? I haven't heard of any such thing.
It's probably the advance child tax credit.
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Re: Are we in a housing bubble?

Post by Wanderingwheelz »

willthrill81 wrote: Thu May 27, 2021 8:37 am
smitcat wrote: Thu May 27, 2021 7:06 am
willthrill81 wrote: Wed May 26, 2021 11:58 pm Our 1,200 sq. ft. 3/2 around Spokane has doubled in value in the 6.5 years since we bought it. We have seen steady increases in the value for years, consistently 8-10% until around the beginning of 2020 when the growth rate increased substantially. We could sell and walk away with a huge pile of cash, but we have to live somewhere, and there's nowhere around here where we could buy an equivalent property at significantly less expense. And just yesterday, I overheard some of our neighbors in a nearby park saying the exact same thing: 'we could sell, but where would we go'?
Could you rent for the time being?
Not likely. There is a serious dearth of rental properties, especially SFHs, in the area, and rents are beginning to significantly increase. Some folks we know had to stay in an extended stay hotel for around six months until they could get into an apartment. A new apartment complex that's still several months from being finished is already 100% rented. The housing shortage is so significant that a very nice RV park near us which charges at least $2k/month for sites has remained nearly full for a long while now, even throughout the winter, and I suspect that the reason is because many are living there while waiting for a home to become available.
It’s anecdotal, and probably means nothing, but exactly two years ago my wife and I bought a Class B (motor)home and we used it quite a bit, driving it nearly 25,000 miles and spending roughly 120 nights in it. We sold it a couple of days ago (listed for only a day) to a couple for 28% more than we bought it for two years ago. That’s nearly a $30,000 gain on a (motor)home! That is the very definition of insane.

As an aside: RV parks, national parks, state parks, and everything that draws recreational travelers are full to the brim (and then some) mainly because demand for RVs went parabolic due to something called Covid 19. We sold largely because of what you just described. We were just in the Smokies and parking at trail heads to take a hike was practically impossible, mid-week. The bath houses at the campground were under construction and porta-potties were up. When we got back home we sold the van.
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Re: Are we in a housing bubble?

Post by willthrill81 »

Wanderingwheelz wrote: Thu May 27, 2021 9:12 am It’s anecdotal, and probably means nothing, but exactly two years ago my wife and I bought a Class B (motor)home and we used it quite a bit, driving it nearly 25,000 miles and spending roughly 120 nights in it. We sold it a couple of days ago (listed for only a day) to a couple for 28% more than we bought it for two years ago. That’s nearly a $30,000 gain on a (motor)home! That is the very definition of insane.

As an aside: RV parks, national parks, state parks, and everything that draws recreational travelers are full to the brim (and then some) mainly because demand for RVs went parabolic due to something called Covid 19. We sold largely because of what you just described. We were just in the Smokies and parking at trail heads to take a hike was practically impossible, mid-week. The bath houses at the campground were under construction and porta-potties were up. When we got back home we sold the van.
Nice work getting paid $30k to travel for 4 months! :beer

Many suspect that the RV craze will largely dissipate in a year or two, but I'm not entirely sure. That's a topic for another thread though.
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Re: Are we in a housing bubble?

Post by vv19 »

Wanderingwheelz wrote: Thu May 27, 2021 9:12 am
willthrill81 wrote: Thu May 27, 2021 8:37 am
smitcat wrote: Thu May 27, 2021 7:06 am
willthrill81 wrote: Wed May 26, 2021 11:58 pm Our 1,200 sq. ft. 3/2 around Spokane has doubled in value in the 6.5 years since we bought it. We have seen steady increases in the value for years, consistently 8-10% until around the beginning of 2020 when the growth rate increased substantially. We could sell and walk away with a huge pile of cash, but we have to live somewhere, and there's nowhere around here where we could buy an equivalent property at significantly less expense. And just yesterday, I overheard some of our neighbors in a nearby park saying the exact same thing: 'we could sell, but where would we go'?
Could you rent for the time being?
Not likely. There is a serious dearth of rental properties, especially SFHs, in the area, and rents are beginning to significantly increase. Some folks we know had to stay in an extended stay hotel for around six months until they could get into an apartment. A new apartment complex that's still several months from being finished is already 100% rented. The housing shortage is so significant that a very nice RV park near us which charges at least $2k/month for sites has remained nearly full for a long while now, even throughout the winter, and I suspect that the reason is because many are living there while waiting for a home to become available.
It’s anecdotal, and probably means nothing, but exactly two years ago my wife and I bought a Class B (motor)home and we used it quite a bit, driving it nearly 25,000 miles and spending roughly 120 nights in it. We sold it a couple of days ago (listed for only a day) to a couple for 28% more than we bought it for two years ago. That’s nearly a $30,000 gain on a (motor)home! That is the very definition of insane.

As an aside: RV parks, national parks, state parks, and everything that draws recreational travelers are full to the brim (and then some) mainly because demand for RVs went parabolic due to something called Covid 19. We sold largely because of what you just described. We were just in the Smokies and parking at trail heads to take a hike was practically impossible, mid-week. The bath houses at the campground were under construction and porta-potties were up. When we got back home we sold the van.
That is a completely insane data point. 30K over? Wow.
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Re: Are we in a housing bubble?

Post by Wanderingwheelz »

willthrill81 wrote: Thu May 27, 2021 9:16 am
Wanderingwheelz wrote: Thu May 27, 2021 9:12 am It’s anecdotal, and probably means nothing, but exactly two years ago my wife and I bought a Class B (motor)home and we used it quite a bit, driving it nearly 25,000 miles and spending roughly 120 nights in it. We sold it a couple of days ago (listed for only a day) to a couple for 28% more than we bought it for two years ago. That’s nearly a $30,000 gain on a (motor)home! That is the very definition of insane.

As an aside: RV parks, national parks, state parks, and everything that draws recreational travelers are full to the brim (and then some) mainly because demand for RVs went parabolic due to something called Covid 19. We sold largely because of what you just described. We were just in the Smokies and parking at trail heads to take a hike was practically impossible, mid-week. The bath houses at the campground were under construction and porta-potties were up. When we got back home we sold the van.
Nice work getting paid $30k to travel for 4 months! :beer

Many suspect that the RV craze will largely dissipate in a year or two, but I'm not entirely sure. That's a topic for another thread though.
We traveled for 2 years. We both work full time (I don’t now, though). So the 120 nights were spread out pretty evenly over two full calendar years.

Who knows what will happen to the RVs. I don’t, but I have an idea. It’s not like they’ll all end up in a junkyard somewhere- they’re all new. What I suspect will happen is what anyone with credits in Econ 101 would expect, and that’s for prices to begin to go down, down, down, DOWN as demand drops. It’s very basic economics post demand spike. Most of them are financed with extremely unfavorable terms so it’s not like people can just sell them, at least so long as they’re unable to bring cash to the table. The RVIA used to publish monthly sales numbers pre-Covid but they stopped because sales were tanking when we bought ours.
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Re: Are we in a housing bubble?

Post by ballons »

brianH wrote: Wed May 26, 2021 6:19 pm
ballons wrote: Wed May 26, 2021 12:30 pm Before offshoring will come the race to the bottom inside the United States. WFH jobs will flow to the cheapest place. $200+K/year CA job -> $85K rural Alabama. When all work from jobs do the same, you are free the "call their own shots" all the way to rural Alabama or wherever rural state their job shifted to.
I can't speak for low-level (low-skill) office jobs, but I'm not seeing any signs of this in technology. Employers are starved for talent, and they're more than happy to scoop up resources, wherever they live, at rapidly increasing salaries. If anything, more liberal WFH policies with big tech employers may bump up salaries for any talent that was formally underpaid in remote areas of the US.

Employees with in-demand skills have options, same as they always did.
That is my point. You make $250K. Bob in rural Kansas will take $50K and is just as talented. Why keep paying you $250K along with expensive healthcare and benefits? True, Bob's salary could hit $100K and he is still cheaper than $250K. WFH is great for slashing labor costs.

Eventually one firm will do it and the others will be forced to follow. People jumping jobs every 3-4 years for pay raises will have to be jumping houses at the same time.
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Re: Are we in a housing bubble?

Post by jackbeagle »

Bungo wrote: Sat May 22, 2021 10:17 pm
anoop wrote: Sat May 22, 2021 5:04 pm This behavior of buying houses without inspection, crazy bidding, and all cash offers last happened at the market BOTTOM! There’s that data point to consider when you think this is a top.
That's not how I remember it. In the Bay Area, waiving of inspections and other contingencies was the norm during the bubble inflation phase (say 2000-2007) but by the time the market hit bottom in 2011 and 2012 it was a buyer's market. When I bought my house in early 2012, I waived no contingencies, negotiated the price down, forced the seller to pay all closing costs, and also made them pay for some repairs to be performed by contractors of my choice, all as a condition of the sale. There was no bidding war or competition from cash buyers; in fact mine was the only offer on the house I bought. I don't think my situation was particularly unusual.
I think this member may have been describing INVESTOR behavior when rapidly buying properties at bottom, but for the average buyer, it would seem crazy that they would be making any concessions for the seller.
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Re: Are we in a housing bubble?

Post by mikejuss »

ballons wrote: Thu May 27, 2021 2:31 pmThat is my point. You make $250K. Bob in rural Kansas will take $50K and is just as talented. Why keep paying you $250K along with expensive healthcare and benefits? True, Bob's salary could hit $100K and he is still cheaper than $250K. WFH is great for slashing labor costs.

Eventually one firm will do it and the others will be forced to follow. People jumping jobs every 3-4 years for pay raises will have to be jumping houses at the same time.
It's a striking thought, and perhaps it will mean that the price of living in a city will decrease as wages are more uniformly spread across the country. But I'm not sure that, at present, there are many Bobs in Kansas who are as qualified and experienced as, say, someone who has worked at various start-ups in San Francisco. That said, I do believe that widespread work-from-home arrangements are going to put a strain on big-city salaries as companies realize they can spend less on employees who live elsewhere.
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Re: Are we in a housing bubble?

Post by brianH »

ballons wrote: Thu May 27, 2021 2:31 pm That is my point. You make $250K. Bob in rural Kansas will take $50K and is just as talented. Why keep paying you $250K along with expensive healthcare and benefits? True, Bob's salary could hit $100K and he is still cheaper than $250K. WFH is great for slashing labor costs.
There aren't enough 'Bobs' out there in rural Kansas to meaningfully move the needle. Tech has plenty of remote workers (and offshore for that matter), even before COVID, and yet many companies still pay handsomely.

For the record, I'd be delighted to see rural areas get infusions of cash from high-paid tech workers relocating there. There's too much concentration of wealth in a few big cities, when we've had the technology to work anywhere for years.
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Re: Are we in a housing bubble?

Post by mikejuss »

brianH wrote: Thu May 27, 2021 3:05 pm
ballons wrote: Thu May 27, 2021 2:31 pm That is my point. You make $250K. Bob in rural Kansas will take $50K and is just as talented. Why keep paying you $250K along with expensive healthcare and benefits? True, Bob's salary could hit $100K and he is still cheaper than $250K. WFH is great for slashing labor costs.
There aren't enough 'Bobs' out there in rural Kansas to meaningfully move the needle. Tech has plenty of remote workers (and offshore for that matter), even before COVID, and yet many companies still pay handsomely.

For the record, I'd be delighted to see rural areas get infusions of cash from high-paid tech workers relocating there. There's too much concentration of wealth in a few big cities, when we've had the technology to work anywhere for years.
I agree with you--but what if there's an intermediary step? Let's say there's a Joe who lives in the suburbs around a big city and is willing to work for 25% less? I do not see how the cost of city living is sustained in the long term.
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Re: Are we in a housing bubble?

Post by ballons »

mikejuss wrote: Thu May 27, 2021 2:51 pm
ballons wrote: Thu May 27, 2021 2:31 pm
brianH wrote: Wed May 26, 2021 6:19 pm
ballons wrote: Wed May 26, 2021 12:30 pm Before offshoring will come the race to the bottom inside the United States. WFH jobs will flow to the cheapest place. $200+K/year CA job -> $85K rural Alabama. When all work from jobs do the same, you are free the "call their own shots" all the way to rural Alabama or wherever rural state their job shifted to.
I can't speak for low-level (low-skill) office jobs, but I'm not seeing any signs of this in technology. Employers are starved for talent, and they're more than happy to scoop up resources, wherever they live, at rapidly increasing salaries. If anything, more liberal WFH policies with big tech employers may bump up salaries for any talent that was formally underpaid in remote areas of the US.

Employees with in-demand skills have options, same as they always did.
That is my point. You make $250K. Bob in rural Kansas will take $50K and is just as talented. Why keep paying you $250K along with expensive healthcare and benefits? True, Bob's salary could hit $100K and he is still cheaper than $250K. WFH is great for slashing labor costs.

Eventually one firm will do it and the others will be forced to follow. People jumping jobs every 3-4 years for pay raises will have to be jumping houses at the same time.
It's a striking thought, and perhaps it will mean that the price of living in a city will decrease as wages are more uniformly spread across the country. But I'm not sure that, at present, there are many Bobs in Kansas who are as qualified and experienced as, say, someone who has worked at various start-ups in San Francisco. That said, I do believe that widespread work-from-home arrangements are going to put a strain on big-city salaries as companies realize they can spend less on employees who live elsewhere.
Those people in San Francisco came from somewhere else. WFH can stop the brain drain to the cities. Tech companies can open rural satellite locations to attract Bob from rural Kansas and that entire region. "Is rural Kansas the new SV?" will be the headlines. All I do know is that wages can be slashed thanks to WFH and these companies are going to do it. The person getting a $250K CA salary that moved to a VLCOL area are deluding themselves if they believe that salary isn't getting adjusted downward.
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Re: Are we in a housing bubble?

Post by drk »

mikejuss wrote: Thu May 27, 2021 3:09 pm I agree with you--but what if there's an intermediary step? Let's say there's a Joe who lives in the suburbs around a big city and is willing to work for 25% less? I do not see how the cost of city living is sustained in the long term.
There aren't enough Bobs, Joes, or Marys to fill our open reqs. That's why all the top-tier companies have started training programs to teach non-tech employees how to code, do ML, etc. And I've interviewed Bob from rural Kansas enough times to know that he doesn't want to stay in Kansas: he's looking forward to relocating to Seattle/SFBA/NYC/LA.
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Re: Are we in a housing bubble?

Post by mikejuss »

ballons wrote: Thu May 27, 2021 3:23 pm
mikejuss wrote: Thu May 27, 2021 2:51 pmIt's a striking thought, and perhaps it will mean that the price of living in a city will decrease as wages are more uniformly spread across the country. But I'm not sure that, at present, there are many Bobs in Kansas who are as qualified and experienced as, say, someone who has worked at various start-ups in San Francisco. That said, I do believe that widespread work-from-home arrangements are going to put a strain on big-city salaries as companies realize they can spend less on employees who live elsewhere.
Those people in San Francisco came from somewhere else. WFH can stop the brain drain to the cities. Tech companies can open rural satellite locations to attract Bob from rural Kansas and that entire region. "Is rural Kansas the new SV?" will be the headlines. All I do know is that wages can be slashed thanks to WFH and these companies are going to do it. The person getting a $250K CA salary that moved to a VLCOL area are deluding themselves if they believe that salary isn't getting adjusted downward.
I'm not fully convinced that city salaries are going to be slashed dramatically anytime soon, but I do believe that they will be under pressure from talent in lower-cost-of-living locales.
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Re: Are we in a housing bubble?

Post by ballons »

brianH wrote: Thu May 27, 2021 3:05 pm
ballons wrote: Thu May 27, 2021 2:31 pm That is my point. You make $250K. Bob in rural Kansas will take $50K and is just as talented. Why keep paying you $250K along with expensive healthcare and benefits? True, Bob's salary could hit $100K and he is still cheaper than $250K. WFH is great for slashing labor costs.
There aren't enough 'Bobs' out there in rural Kansas to meaningfully move the needle. Tech has plenty of remote workers (and offshore for that matter), even before COVID, and yet many companies still pay handsomely.

For the record, I'd be delighted to see rural areas get infusions of cash from high-paid tech workers relocating there. There's too much concentration of wealth in a few big cities, when we've had the technology to work anywhere for years.
If the brain drain to cities stop, sure there are. Post-covid demonstrated that WFH works to companies that never even considered it. The bean-counters are licking their lips at slashing labor costs with $50K/year Bob.

What you call "high-paid" the companies consider overpaid.
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Re: Are we in a housing bubble?

Post by mikejuss »

drk wrote: Thu May 27, 2021 3:29 pm
mikejuss wrote: Thu May 27, 2021 3:09 pm I agree with you--but what if there's an intermediary step? Let's say there's a Joe who lives in the suburbs around a big city and is willing to work for 25% less? I do not see how the cost of city living is sustained in the long term.
There aren't enough Bobs, Joes, or Marys to fill our open reqs. That's why all the top-tier companies have started training programs to teach non-tech employees how to code, do ML, etc. And I've interviewed Bob from rural Kansas enough times to know that he doesn't want to stay in Kansas: he's looking forward to relocating to Seattle/SFBA/NYC/LA.
Hmm--why does Bob want to relocate to a big city when he can save far more, and perhaps have a higher quality of life, by living in a rural area?
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Re: Are we in a housing bubble?

Post by drk »

mikejuss wrote: Thu May 27, 2021 3:32 pm Hmm--why does Bob want to relocate to a big city when he can save far more, and perhaps have a higher quality of life, by living in a rural area?
Because Bob is smart, and he knows that living in a tech hub makes it easier to network and build relationships that will help him get promoted, find the next job, and maybe join a start-up. Long-term, Bob will earn and save more by relocating.
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Re: Are we in a housing bubble?

Post by mikejuss »

drk wrote: Thu May 27, 2021 3:43 pm
mikejuss wrote: Thu May 27, 2021 3:32 pm Hmm--why does Bob want to relocate to a big city when he can save far more, and perhaps have a higher quality of life, by living in a rural area?
Because Bob is smart, and he knows that living in a tech hub makes it easier to network and build relationships that will help him get promoted, find the next job, and maybe join a start-up. Long-term, Bob will earn and save more by relocating.
Then, in fact, there will never be a brain drain from cities, and city salaries really won't be affected by work-from-home arrangements. That's certainly one possibility. Time will tell. :mrgreen:
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ballons
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Re: Are we in a housing bubble?

Post by ballons »

drk wrote: Thu May 27, 2021 3:29 pm
mikejuss wrote: Thu May 27, 2021 3:09 pm I agree with you--but what if there's an intermediary step? Let's say there's a Joe who lives in the suburbs around a big city and is willing to work for 25% less? I do not see how the cost of city living is sustained in the long term.
There aren't enough Bobs, Joes, or Marys to fill our open reqs. That's why all the top-tier companies have started training programs to teach non-tech employees how to code, do ML, etc. And I've interviewed Bob from rural Kansas enough times to know that he doesn't want to stay in Kansas: he's looking forward to relocating to Seattle/SFBA/NYC/LA.
Bob wants that $250K/year salary and the best place to do that is job hopping every 3-4 years in a four areas. As mentioned by mikejuss, it doesn't have to be instantly to rural Kansas. The race to the bottom will be incremental.
Arpek
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Re: Are we in a housing bubble?

Post by Arpek »

smitcat wrote: Thu May 27, 2021 7:05 am FWIW - in one area we live in a large fairly recent runup in prices has now turned completely quiet. Bidding up homes with a rush to buy has been replaced with very little activity and where there is activity the listed price is now being negotiated. Lets see if this spreads and how it plays out.
Thats interesting. Where about in the country are you seeing this?
drk
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Re: Are we in a housing bubble?

Post by drk »

mikejuss wrote: Thu May 27, 2021 3:45 pm Then, in fact, there will never be a brain drain from cities, and city salaries really won't be affected by work-from-home arrangements. That's certainly one possibility. Time will tell. :mrgreen:
Never is a long time, but I'm definitely skeptical that WFH is going to be the thing that does it. Maybe some wildcatter will find an untapped reservoir of 500k high-performing software developers who have no interest in leaving the Midwest and prove me wrong.
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
mikejuss
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Re: Are we in a housing bubble?

Post by mikejuss »

drk wrote: Thu May 27, 2021 8:34 pm
mikejuss wrote: Thu May 27, 2021 3:45 pm Then, in fact, there will never be a brain drain from cities, and city salaries really won't be affected by work-from-home arrangements. That's certainly one possibility. Time will tell. :mrgreen:
Never is a long time, but I'm definitely skeptical that WFH is going to be the thing that does it. Maybe some wildcatter will find an untapped reservoir of 500k high-performing software developers who have no interest in leaving the Midwest and prove me wrong.
Or the high performers leave the city and take pay cuts to be closer to family and nature. It'll be interesting to see how this all shakes out.
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Blue456
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Re: Are we in a housing bubble?

Post by Blue456 »

mikejuss wrote: Thu May 27, 2021 3:32 pm perhaps have a higher quality of life, by living in a rural area?
Every single weekend off, no evenings and not a single phone call at 3 am. I love my rural area ;)
Last edited by Blue456 on Fri May 28, 2021 5:17 am, edited 1 time in total.
fortunefavored
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Re: Are we in a housing bubble?

Post by fortunefavored »

mikejuss wrote: Thu May 27, 2021 8:44 pm
drk wrote: Thu May 27, 2021 8:34 pm
mikejuss wrote: Thu May 27, 2021 3:45 pm Then, in fact, there will never be a brain drain from cities, and city salaries really won't be affected by work-from-home arrangements. That's certainly one possibility. Time will tell. :mrgreen:
Never is a long time, but I'm definitely skeptical that WFH is going to be the thing that does it. Maybe some wildcatter will find an untapped reservoir of 500k high-performing software developers who have no interest in leaving the Midwest and prove me wrong.
Or the high performers leave the city and take pay cuts to be closer to family and nature. It'll be interesting to see how this all shakes out.
Having some connections at megacorps, it's a real interesting tug-of-war right now. Megacorps are consolidating around the idea of 2-3 days of in office/work from home per week. While 2nd tier (but still large and profitable) companies are offering full time remote. The top 5% super performers are all demanding full time remote or they will quit. Will the megacorps blink? Will the top talent just go to the 2nd tier companies and megacorps will stick to their guns?
mikejuss
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Re: Are we in a housing bubble?

Post by mikejuss »

fortunefavored wrote: Thu May 27, 2021 9:32 pm
mikejuss wrote: Thu May 27, 2021 8:44 pm
drk wrote: Thu May 27, 2021 8:34 pm
mikejuss wrote: Thu May 27, 2021 3:45 pm Then, in fact, there will never be a brain drain from cities, and city salaries really won't be affected by work-from-home arrangements. That's certainly one possibility. Time will tell. :mrgreen:
Never is a long time, but I'm definitely skeptical that WFH is going to be the thing that does it. Maybe some wildcatter will find an untapped reservoir of 500k high-performing software developers who have no interest in leaving the Midwest and prove me wrong.
Or the high performers leave the city and take pay cuts to be closer to family and nature. It'll be interesting to see how this all shakes out.
Having some connections at megacorps, it's a real interesting tug-of-war right now. Megacorps are consolidating around the idea of 2-3 days of in office/work from home per week. While 2nd tier (but still large and profitable) companies are offering full time remote. The top 5% super performers are all demanding full time remote or they will quit. Will the megacorps blink? Will the top talent just go to the 2nd tier companies and megacorps will stick to their guns?
Fascinating. Stay tuned... :sharebeer
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helloeveryone
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Re: Are we in a housing bubble?

Post by helloeveryone »

SuperTrooper87 wrote: Fri Mar 12, 2021 4:21 am Currently, in rural New England, homes are and have been selling far above their appraised value. Homes that are “worth” 200k are getting same day as listing offers of 240-270k cash, no inspection, sight unseen.

I know other areas are seeing similar situations as there is a mass exodus out of the urban areas (NY, CA, etc).

In the midst of this influx of urban money to the rural area, locals are trying to compete with homeownership. I lately heard a story from a coworker who has been trying to desperately buy a home before their rental lease ends. (Not being renewed as they plan to sell). Several times they offered on homes, 15%+ over asking, just to lose. He mentioned just offering more next time and using his ability as a first time homebuyer to put 3% down. This is when alarms went off in my head.

This seems eerily reminiscent of 2008. People taking loans to the max, no equity in homes, no EF, etc. What’s this kids chance of refinancing in 5 years because he has to buy a new roof or furnace because he overpaid on the house and has no cash? Well now home prices potentially sunk and his 250k home is really only worth 160k. He and others are screwed.

Are we in another bubble? Is this a national trend due to covid or is this in isolated pockets?
I know the OP posted in March but 2.5 months later big bank ceo’s even don’t share the same opinions. One says yes other says “it looks frothy”, third says not yet

https://www.google.com/amp/s/amp.cnn.co ... index.html
smitcat
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Re: Are we in a housing bubble?

Post by smitcat »

Arpek wrote: Thu May 27, 2021 4:41 pm
smitcat wrote: Thu May 27, 2021 7:05 am FWIW - in one area we live in a large fairly recent runup in prices has now turned completely quiet. Bidding up homes with a rush to buy has been replaced with very little activity and where there is activity the listed price is now being negotiated. Lets see if this spreads and how it plays out.
Thats interesting. Where about in the country are you seeing this?
If you know any realtors in the Long Island downstate area (NY) ask them about the past years pattern in the area. It is quite interesting to watch it change over the past year or so.
Valuethinker
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Re: Are we in a housing bubble?

Post by Valuethinker »

Blue456 wrote: Thu May 27, 2021 8:50 pm
mikejuss wrote: Thu May 27, 2021 3:32 pm perhaps have a higher quality of life, by living in a rural area?
Every single weekend off, no evenings and not a single phone call at 3 am. I love my rural area ;)
That's your job? Not where you live?
il0kin
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Re: Are we in a housing bubble?

Post by il0kin »

drk wrote: Thu May 27, 2021 8:34 pm
mikejuss wrote: Thu May 27, 2021 3:45 pm Then, in fact, there will never be a brain drain from cities, and city salaries really won't be affected by work-from-home arrangements. That's certainly one possibility. Time will tell. :mrgreen:
Never is a long time, but I'm definitely skeptical that WFH is going to be the thing that does it. Maybe some wildcatter will find an untapped reservoir of 500k high-performing software developers who have no interest in leaving the Midwest and prove me wrong.
My .02 being a tech worker in the Midwest who just accepted a fully remote position for a company many states away:

There will be both downward and upward pressure on wages and I think they'll equalize. I am, of course, speaking in broad generalizations, there are exceptions to every rule. IMO, there are plenty of talented, knowledgeable people in Midwest cities >200k population, but not truly rural areas. Honestly, smart people don't stay in rural areas unless they're running large farms or production plants - but that isn't tech work. Everyone I know who grew up in small towns and graduated top 25% of their classes was gone, never to return, the second they stepped foot in their college dorm. Everyone.

For those of us in the mid-major 2nd tier cities, some will take remote positions from tech companies, with higher salaries than we can earn locally, but lower salaries than the SF workers, which will include things like bonuses and RSUs, and blow out the comp our local employers can offer by 50%. Yet, the COL stays reasonable, the communities/schools for kids are great, etc.

I imagine there will be a slow but steady downward pressure on SF wages as voluntary attrition happens. Why hire a SWE at 300k total comp when someone equally qualified in a MCOL city will do it for 150-200k and feel like they hit the lottery?

My thoughts are mine only and by no means represent macro trends... but I am seeing this trend play out in front of me and am actively participating in it. Covid changed everything when it comes to remote work. It accelerated a slow burning 15 year change into a 12 month period.

I am not so naive to think in ten more years, I may be on the losing end of whatever cultural shift happens, so... Boglehead principles apply. Save early, save often!
Bungo
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Re: Are we in a housing bubble?

Post by Bungo »

Valuethinker wrote: Fri May 28, 2021 7:46 am
Blue456 wrote: Thu May 27, 2021 8:50 pm
mikejuss wrote: Thu May 27, 2021 3:32 pm perhaps have a higher quality of life, by living in a rural area?
Every single weekend off, no evenings and not a single phone call at 3 am. I love my rural area ;)
That's your job? Not where you live?
"Bob from Kansas's" lifestyle certainly won't resemble this if he lands a FAANG job, regardless of whether he works at home or in an office.
av111
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Re: Are we in a housing bubble?

Post by av111 »

il0kin wrote: Fri May 28, 2021 8:33 am
drk wrote: Thu May 27, 2021 8:34 pm
mikejuss wrote: Thu May 27, 2021 3:45 pm Then, in fact, there will never be a brain drain from cities, and city salaries really won't be affected by work-from-home arrangements. That's certainly one possibility. Time will tell. :mrgreen:
Never is a long time, but I'm definitely skeptical that WFH is going to be the thing that does it. Maybe some wildcatter will find an untapped reservoir of 500k high-performing software developers who have no interest in leaving the Midwest and prove me wrong.

Why hire a SWE at 300k total comp when someone equally qualified in a MCOL city will do it for 150-200k and feel like they hit the lottery?
Not having local resources is generally a drag in complex projects unless remote people are super smart and motivated (one in hundreds).

If it were just a question of location and not quality of output , how about paying 10th of that in China?

I think most of the companies are looking at bringing people back to work. We are being asked to check with our teams and I have heard other managers in large companies say the same. There are no timelines but as soon as schools open, it is only a matter of short time that covidesque wfh would be gone
AV111
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