Are we in a housing bubble?

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Bogle_Bro
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Re: Are we in a housing bubble?

Post by Bogle_Bro »

physixfan wrote: Thu Mar 25, 2021 8:02 pm
retireIn2020 wrote: Thu Mar 25, 2021 7:53 pm NO we are not in a housing bubble!

Here's my data.

https://realestatedecoded.com/real-mont ... ice-index/
Thanks! These data are very informative.
Yes very compelling info I especially liked this post

https://realestatedecoded.com/80-of-hom ... est-rates/
LINY
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Re: Are we in a housing bubble?

Post by LINY »

retireIn2020 wrote: Thu Mar 25, 2021 7:53 pm NO we are not in a housing bubble!

Here's my data.

https://realestatedecoded.com/real-mont ... ice-index/
Great post!

So if this is the case, wouldn’t rising interest rates reduce home values?
Jess Saying
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Re: Are we in a housing bubble?

Post by Jess Saying »

LINY wrote: Sat Mar 27, 2021 6:54 am
retireIn2020 wrote: Thu Mar 25, 2021 7:53 pm NO we are not in a housing bubble!

Here's my data.

https://realestatedecoded.com/real-mont ... ice-index/
Great post!

So if this is the case, wouldn’t rising interest rates reduce home values?
This is true of asset prices in general.
whereskyle
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Re: Are we in a housing bubble?

Post by whereskyle »

After reading Irrational Exuberance last week, I am firmly of the belief that we are permanently in a bubble that will deflate and reinflate. As such, it simply doesn't matter if we are in a bubble. Prices will continue their overall upward trend because people think they should.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
LINY
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Re: Are we in a housing bubble?

Post by LINY »

Jess Saying wrote: Sat Mar 27, 2021 8:14 am
LINY wrote: Sat Mar 27, 2021 6:54 am
retireIn2020 wrote: Thu Mar 25, 2021 7:53 pm NO we are not in a housing bubble!

Here's my data.

https://realestatedecoded.com/real-mont ... ice-index/
Great post!

So if this is the case, wouldn’t rising interest rates reduce home values?
This is true of asset prices in general.
So with that being said. It is possible we are experiencing a bubble.

In 2006-2008 a reduction in underwriting requirements lead to an increase in buyers into the market thus driving up demand.

The reduction in interest rates, in conjunction with other factors, has increased the pool of buyers in the current market. So in theory, if home prices keep rising along with mortgage rates. Many of these new potential buyers will be priced out of the market and reduce demand/values.
MoonGlow
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Re: Are we in a housing bubble?

Post by MoonGlow »

Submitted two offers this morning on homes on the north shore of MA 65k over on both. looks like both homes will go UAG later today. One home will be going under at 103K over asking. The other will be 111K over asking. If this is not a bubble then I don't know what is.
LINY
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Re: Are we in a housing bubble?

Post by LINY »

MoonGlow wrote: Mon Mar 29, 2021 11:04 am Submitted two offers this morning on homes on the north shore of MA 65k over on both. looks like both homes will go UAG later today. One home will be going under at 103K over asking. The other will be 111K over asking. If this is not a bubble then I don't know what is.
This is my thoughts on it also. It appears now most homes are being “bid up” by flippers and speculators in conjunction with urban money.

It’s not like salaries have doubled since last year. So these homes are being priced off of recent or pre-pandemic sales.

https://www.cnn.com/2021/03/29/success/ ... index.html
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ray.james
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Re: Are we in a housing bubble?

Post by ray.james »

Calculated Risk had a post today on the house prices and price to rent ratio's. Charts are quite helpful. With current vaccination rates, I have hard time seeing the low inventory continuing into later summer.
https://www.calculatedriskblog.com/2021 ... -rent.html
In real terms, prices are back to 2005 levels, and the price-to-rent ratio is back to 2004.
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GP813
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Re: Are we in a housing bubble?

Post by GP813 »

Housing has been crazy in the Tampa Bay area. Houses are selling quickly, multiple and cash offers, way above listing in many cases. We've been bombarded with agents inquiring about selling and the online companies like OpenDoor sending us spam about how much they'll buy our house for. I think low inventory, high materials costs for new homes, and people moving to this region and trying to lock in low rates is responsible for current situation. If that creates a bubble, I'm not sure yet.
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unclescrooge
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Re: Are we in a housing bubble?

Post by unclescrooge »

LINY wrote: Tue Mar 30, 2021 5:57 am
MoonGlow wrote: Mon Mar 29, 2021 11:04 am Submitted two offers this morning on homes on the north shore of MA 65k over on both. looks like both homes will go UAG later today. One home will be going under at 103K over asking. The other will be 111K over asking. If this is not a bubble then I don't know what is.
This is my thoughts on it also. It appears now most homes are being “bid up” by flippers and speculators in conjunction with urban money.

It’s not like salaries have doubled since last year. So these homes are being priced off of recent or pre-pandemic sales.

https://www.cnn.com/2021/03/29/success/ ... index.html
Flippers are unlikely to get into bidding wars.

They calculate the After Repair Value, subtract the rehab costs, and then offer 70% of that.

I got this text message today:

Hello I am searching for a fixer upper property in Greenwood. Do you have one you want to sell? I could buy it for cash. Please reply if interested, thanks.

I literally have gotten a similar text or phone call each week for 3 months. Before that, it was one every 1-2 months for all of last year.
dachshunddad
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Re: Are we in a housing bubble?

Post by dachshunddad »

I hope it keeps up. I’m selling my rental property soon and hoping it gets caught up in the bubble :D :moneybag
KlangFool
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Re: Are we in a housing bubble?

Post by KlangFool »

WhiteMaxima wrote: Thu Mar 25, 2021 8:22 pm Building material and labor cost are all up. Covid limit supply. Low interest rate. 5 TB money into the American pocket. No we are not in bubble.
WhiteMaxima,

That could only be true if you believe that we can continue printing 5 Trillion of money into existence forever. Do you believe that?

A) If yes, this is not a bubble.

B) If not, this is a bubble.

I believe this is asset rotation. Folks that make too much in the stock market is putting some of their money into the Real Estate.

Gold is getting cheap now. This is great!

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JAZZISCOOL
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Re: Are we in a housing bubble?

Post by JAZZISCOOL »

I listened to a Goldman Sachs podcast where they said 2020 was a "hot" RE market with about 10% price appreciation. They expect 2021 to evolve to a "warm" RE market with price appreciation of 4-5%, FWIW. One data point.

The numbers I see on BH and in other articles suggest we're still seeing the "hot" market so far in 2021. :?
MBB_Boy
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Re: Are we in a housing bubble?

Post by MBB_Boy »

I think a major part of the reason it "feels" like a bubble is because houses are regularly going above the asking price. Well.....doesn't that mean that the asking price was just wrong? How would everyone feel if the asking price was just higher at the onset, and there were less offers and houses weren't selling 10%+ over asking?

I'd like to toss in the possibility that there is a lot of mispricing, and that the mispricing is tied to the incentives of seller's agents. It doesn't take any work or risk to price a house too low - you believe that the market will decide the fair price through bidding.

In fact, perhaps the bidding results in a HIGHER price than if the listing was just higher, because people get emotional and stupid when they get competitive. Is it possible that sellers and their agents have an incentive to price low and start a frenzy?

Moreover, if I was a real estate agent looking to have a happy customer, wouldn't I WANT to engineer a situation where a bunch of people showed up, there was lots of bidding, and the house went for over asking? My customer (the seller) would take that as a sign that I did a good job, which would burnish my reputation and lead to their future business, right?

Just a thought
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

Supply by me continues to be constrained. And building has slowed down as the cost of lumber has gone up.

It's likely we'll see some price correction in real estate as both mortgage rates and inventory should go up next year. No idea what's going to happen with building costs.
Tingting1013
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Re: Are we in a housing bubble?

Post by Tingting1013 »

MBB_Boy wrote: Wed Mar 31, 2021 9:56 am I think a major part of the reason it "feels" like a bubble is because houses are regularly going above the asking price. Well.....doesn't that mean that the asking price was just wrong? How would everyone feel if the asking price was just higher at the onset, and there were less offers and houses weren't selling 10%+ over asking?

I'd like to toss in the possibility that there is a lot of mispricing, and that the mispricing is tied to the incentives of seller's agents. It doesn't take any work or risk to price a house too low - you believe that the market will decide the fair price through bidding.

In fact, perhaps the bidding results in a HIGHER price than if the listing was just higher, because people get emotional and stupid when they get competitive. Is it possible that sellers and their agents have an incentive to price low and start a frenzy?

Moreover, if I was a real estate agent looking to have a happy customer, wouldn't I WANT to engineer a situation where a bunch of people showed up, there was lots of bidding, and the house went for over asking? My customer (the seller) would take that as a sign that I did a good job, which would burnish my reputation and lead to their future business, right?

Just a thought
But then why hasn’t this been the modus operandi of agents since the beginning of time? Something has changed
MBB_Boy
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Re: Are we in a housing bubble?

Post by MBB_Boy »

Tingting1013 wrote: Wed Mar 31, 2021 9:59 am
MBB_Boy wrote: Wed Mar 31, 2021 9:56 am I think a major part of the reason it "feels" like a bubble is because houses are regularly going above the asking price. Well.....doesn't that mean that the asking price was just wrong? How would everyone feel if the asking price was just higher at the onset, and there were less offers and houses weren't selling 10%+ over asking?

I'd like to toss in the possibility that there is a lot of mispricing, and that the mispricing is tied to the incentives of seller's agents. It doesn't take any work or risk to price a house too low - you believe that the market will decide the fair price through bidding.

In fact, perhaps the bidding results in a HIGHER price than if the listing was just higher, because people get emotional and stupid when they get competitive. Is it possible that sellers and their agents have an incentive to price low and start a frenzy?

Moreover, if I was a real estate agent looking to have a happy customer, wouldn't I WANT to engineer a situation where a bunch of people showed up, there was lots of bidding, and the house went for over asking? My customer (the seller) would take that as a sign that I did a good job, which would burnish my reputation and lead to their future business, right?

Just a thought
But then why hasn’t this been the modus operandi of agents since the beginning of time? Something has changed
Certainly something has changed, not saying it hasn't. Years of low inventory, more expensive building due to various factors, etc etc.

I guess my point is to explore why it feels like a "bubble", as opposed to housing simply getting justifiably more expensive
drk
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Re: Are we in a housing bubble?

Post by drk »

Tingting1013 wrote: Wed Mar 31, 2021 9:59 am But then why hasn’t this been the modus operandi of agents since the beginning of time? Something has changed
This was the MO in Seattle in 2015-17. What you're seeing is price discovery. Most of the time, housing markets don't support it because you don't have multiple legitimate buyers interested in every property, so pricing depends mostly on "expert" judgment.
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
Wellfleet
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Re: Are we in a housing bubble?

Post by Wellfleet »

Flannelbeard wrote: Wed Mar 31, 2021 7:31 am
Flannelbeard wrote: Sun Mar 28, 2021 6:00 pm Just submitted an offer here in central MA. House ~$500k, last updated in mid-80's. In good shape but needs ~$80k worth of renovations to come into the 21st century. 50+ groups at open house, and agent had another 30 private showings this weekend. We initially liked this one because we thought it would generate less interest due to how outdated it is. Definitely not a flipper magnet, priced too high and not enough profit after renos.

$10k over asking with escalation by $2k up to $30k over. $20k appraisal gap coverage. Kept inspection, but won't ask seller for credit unless issues total over $2500.

Crossing my fingers but won't be surprised if we get blown out with $50k over and waived inspection.
This property received 29 offers. The seller's agent is still sorting through them and expects to make a decision today but it's not looking hopeful for us unless most of the offers were sitting at or around asking price, which doesn't seem likely.
Wow crazy. Would've never imagined. Are you moving out from Boston? Did it seem like everyone at open house was too?
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Random Musings
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Re: Are we in a housing bubble?

Post by Random Musings »

Feels like it. I believe real returns moving forward will disappoint for a while, especially in HCOL areas out west.

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firebirdparts
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Re: Are we in a housing bubble?

Post by firebirdparts »

I have no plans to build a house, but I have picked up on some discussions that it's getting harder and harder to build one and there are significant material shortages. Steel is now in short supply as well as lumber and people can't get appliances. FWIW. This prompted me to look at housing starts at FRED and they have never recovered post 2009. I guess everybody knew that but me.

The market is just getting crazier and crazier according to the general sound of rumor. I'm not an agent, so I don't really see it. I just see how fast a house goes here on my street.
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catdude
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Re: Are we in a housing bubble?

Post by catdude »

Here's another data point for y'all. I bought my current house (3 bed, 2 bath) here in Central Oregon about 18 months ago for $312K. I was texting with my RE agent a few days ago, and she told me that the market value of this place is now about $450K. That's a 44 percent increase in a year and a half.

My agent also said that a loan officer recently told her that about 75 percent of his business these days is from people moving into this area. Folks from California, Portland, Seattle .... I imagine that someone from the Bay Area would regard a 3-bedroom, 2-bath house for $450,000 as a real bargain.
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KlangFool
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Re: Are we in a housing bubble?

Post by KlangFool »

Folks,

Unless we have extreme population increase, people are moving from place A to place B. So, if place B is booming, then, place A is going down. If we agree that real estate in some place is booming and where people moving from is busting. Where do those people move from? It is within the USA.

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jackbeagle
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Re: Are we in a housing bubble?

Post by jackbeagle »

I was reading this thread, and something I remember from one of my middle school classes (paraphrased) popped into the forefront of my thoughts:

"On many family farms, near the turn of the (20th) century, the plan was, when the kids grew up, the PARENTS moved out."

I am curious if this would provide the "answer" to many households in places like CA who experience the phenomenon in which they could no longer afford to buy their own homes again at current market prices.

Parents retire, move (somewhere much cheaper), and the house remains paid-for and enjoys Prop 13 (even if can no longer be transferred, it will still apply until the property transfers out of the parents' names).

Could this work?
Tingting1013
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Re: Are we in a housing bubble?

Post by Tingting1013 »

KlangFool wrote: Wed Mar 31, 2021 2:12 pm Folks,

Unless we have extreme population increase, people are moving from place A to place B. So, if place B is booming, then, place A is going down. If we agree that real estate in some place is booming and where people moving from is busting. Where do those people move from? It is within the USA.

KlangFool
Or increased wealth is increasing second home purchases
jackbeagle
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Re: Are we in a housing bubble?

Post by jackbeagle »

retireIn2020 wrote: Thu Mar 25, 2021 7:53 pm NO we are not in a housing bubble!

Here's my data.

https://realestatedecoded.com/real-mont ... ice-index/
Why are we adjusting for mortgage interest rates, and how does this factor in when homes are not bought with a mortgage? Is purchasing power, not just adjusted value, a component of this study?
drk
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Re: Are we in a housing bubble?

Post by drk »

KlangFool wrote: Wed Mar 31, 2021 2:12 pm Unless we have extreme population increase, people are moving from place A to place B. So, if place B is booming, then, place A is going down. If we agree that real estate in some place is booming and where people moving from is busting. Where do those people move from? It is within the USA.
This ignores new household formation. For example: if two generations live in one house, and one of those generations decides to move, we now need two houses without any population growth.
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
KlangFool
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Re: Are we in a housing bubble?

Post by KlangFool »

Tingting1013 wrote: Wed Mar 31, 2021 2:43 pm
KlangFool wrote: Wed Mar 31, 2021 2:12 pm Folks,

Unless we have extreme population increase, people are moving from place A to place B. So, if place B is booming, then, place A is going down. If we agree that real estate in some place is booming and where people moving from is busting. Where do those people move from? It is within the USA.

KlangFool
Or increased wealth is increasing second home purchases
Tingting1013,

Please explain what do you mean by that.

The second home is a vacation home.

Or something else...

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KlangFool
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Re: Are we in a housing bubble?

Post by KlangFool »

drk wrote: Wed Mar 31, 2021 2:48 pm
KlangFool wrote: Wed Mar 31, 2021 2:12 pm Unless we have extreme population increase, people are moving from place A to place B. So, if place B is booming, then, place A is going down. If we agree that real estate in some place is booming and where people moving from is busting. Where do those people move from? It is within the USA.
This ignores new household formation. For example: if two generations live in one house, and one of those generations decides to move, we now need two houses without any population growth.
drk,

Do you have data showing this is the main cause of the property price increase?

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drk
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Re: Are we in a housing bubble?

Post by drk »

KlangFool wrote: Wed Mar 31, 2021 3:06 pm Do you have data showing this is the main cause of the property price increase?
I didn't make that claim. My point was that this is not a valid assumption:
KlangFool wrote: Wed Mar 31, 2021 2:12 pm Unless we have extreme population increase, people are moving from place A to place B. So, if place B is booming, then, place A is going down.
That said, the data on demographics (i.e. the largest generation in US history entering prime years for household-formation) have been posted a few times on these housing threads.
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
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firebirdparts
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Re: Are we in a housing bubble?

Post by firebirdparts »

jackbeagle wrote: Wed Mar 31, 2021 2:38 pm I was reading this thread, and something I remember from one of my middle school classes (paraphrased) popped into the forefront of my thoughts:

"On many family farms, near the turn of the (20th) century, the plan was, when the kids grew up, the PARENTS moved out."

I am curious if this would provide the "answer" to many households in places like CA who experience the phenomenon in which they could no longer afford to buy their own homes again at current market prices.

Parents retire, move (somewhere much cheaper), and the house remains paid-for and enjoys Prop 13 (even if can no longer be transferred, it will still apply until the property transfers out of the parents' names).

Could this work?
Without any effort on my part, I have been running into the opposite situation on vacation. On several occasions I've struck up a conversation with a stranger and they'll say they moved out of a HCOL area because their children would never be able to live there under any circumstances, and they had grandchildren they wanted to see. So all 3 generations moved out.

That might only apply to areas where you have $20,000 property tax though. Some states are able to provide loopholes.
Last edited by firebirdparts on Wed Mar 31, 2021 4:05 pm, edited 1 time in total.
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firebirdparts
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Re: Are we in a housing bubble?

Post by firebirdparts »

Tingting1013 wrote: Wed Mar 31, 2021 2:43 pm
KlangFool wrote: Wed Mar 31, 2021 2:12 pm Folks,

Unless we have extreme population increase, people are moving from place A to place B. So, if place B is booming, then, place A is going down. If we agree that real estate in some place is booming and where people moving from is busting. Where do those people move from? It is within the USA.

KlangFool
Or increased wealth is increasing second home purchases
I think it's prices that are increasing rather than purchases. I don't have any data on how many vacation homes there are, don't know how anybody would collect it, so I am just editorializing.
This time is the same
ballons
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Re: Are we in a housing bubble?

Post by ballons »

firebirdparts wrote: Wed Mar 31, 2021 4:01 pm Without any effort on my part, I have been running into the opposite situation on vacation. On several occasions I've struck up a conversation with a stranger and they'll say they moved out of a HCOL area because their children would never be able to live there under any circumstances, and they had grandchildren they wanted to see. So all 3 generations moved out.
I believe during the last housing bubble they were referred to as equity locusts. They bid up the affordable and livable areas to turn them into the places they left. The cycle just continues as their children can't find local jobs to buy the homes they bid up.
ballons
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Re: Are we in a housing bubble?

Post by ballons »

drk wrote: Wed Mar 31, 2021 3:16 pm
KlangFool wrote: Wed Mar 31, 2021 3:06 pm Do you have data showing this is the main cause of the property price increase?
I didn't make that claim. My point was that this is not a valid assumption:
KlangFool wrote: Wed Mar 31, 2021 2:12 pm Unless we have extreme population increase, people are moving from place A to place B. So, if place B is booming, then, place A is going down.
That said, the data on demographics (i.e. the largest generation in US history entering prime years for household-formation) have been posted a few times on these housing threads.
Fertility rates are below replacement and multi-generation households are surging to record highs. Covid baby boom has turned into a huge baby bust. "It's different this time/New paradigm/X generation is going to buy them/etc" was used during the last housing bubble as well.

=====

Evictions have been steadily increasing in my area. They slap paint on it and sell for double. Empty lots are now getting bidding wars. If they start construction now, they will build homes 4-5x the comps. I fully expect these homes to be abandoned mid construction.
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Re: Are we in a housing bubble?

Post by drk »

ballons wrote: Wed Mar 31, 2021 5:56 pm Fertility rates are below replacement and multi-generation households are surging to record highs. Covid baby boom has turned into a huge baby bust. "It's different this time/New paradigm/X generation is going to buy them/etc" was used during the last housing bubble as well.
The people newly buying houses and forming families (which don't require kids, by the way!) were born 30 years ago. Fertility rates now aren't important.
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
jackbeagle
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Re: Are we in a housing bubble?

Post by jackbeagle »

joaquin168q wrote: Wed Mar 24, 2021 7:47 am quite possibly in a bubble.

I just sold several of my ~5 year old rental properties for ~160% over purchase price.
What in the decision-making process lead you to sell rather than keep rentals in your portfolio?
ballons
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Re: Are we in a housing bubble?

Post by ballons »

drk wrote: Wed Mar 31, 2021 6:00 pm
ballons wrote: Wed Mar 31, 2021 5:56 pm Fertility rates are below replacement and multi-generation households are surging to record highs. Covid baby boom has turned into a huge baby bust. "It's different this time/New paradigm/X generation is going to buy them/etc" was used during the last housing bubble as well.
The people newly buying houses and forming families (which don't require kids, by the way!) were born 30 years ago. Fertility rates now aren't important.
Fertility rates have been declining since 1970's and only recently has it gotten bad. Yes it is important because you can't maintain bubble pricing if you don't maintain replacement rates. We are definitely in a bubble if DINK's are panic bidding up McMansions just so their dogs have room to run in the backyard.
ballons
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Re: Are we in a housing bubble?

Post by ballons »

jackbeagle wrote: Wed Mar 31, 2021 6:02 pm
joaquin168q wrote: Wed Mar 24, 2021 7:47 am quite possibly in a bubble.

I just sold several of my ~5 year old rental properties for ~160% over purchase price.
What in the decision-making process lead you to sell rather than keep rentals in your portfolio?
I would imagine the “Pigs Get Fat. Hogs get Slaughtered.” idiom is applicable.
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Re: Are we in a housing bubble?

Post by LINY »

KlangFool wrote: Wed Mar 31, 2021 2:12 pm Folks,

Unless we have extreme population increase, people are moving from place A to place B. So, if place B is booming, then, place A is going down. If we agree that real estate in some place is booming and where people moving from is busting. Where do those people move from? It is within the USA.

KlangFool
I can vouch for the NYC apartment market. Rental rates are down 25%-30% across the board and vacancy rates have increased from 2.5% -3.0% to over 5.0% in most Manhattan submarkets. I know co-op and condo prices have dropped at around 15% year-over-year as of the 4th Qtr. 2020.

As such, the Long Island, Westchester and some southwestern Connecticut single family home markets have been very hot. To say the least.
ImmigrantSaver
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Re: Are we in a housing bubble?

Post by ImmigrantSaver »

LINY wrote: Wed Mar 31, 2021 11:08 pm
KlangFool wrote: Wed Mar 31, 2021 2:12 pm Folks,

Unless we have extreme population increase, people are moving from place A to place B. So, if place B is booming, then, place A is going down. If we agree that real estate in some place is booming and where people moving from is busting. Where do those people move from? It is within the USA.

KlangFool
I can vouch for the NYC apartment market. Rental rates are down 25%-30% across the board and vacancy rates have increased from 2.5% -3.0% to over 5.0% in most Manhattan submarkets. I know co-op and condo prices have dropped at around 15% year-over-year as of the 4th Qtr. 2020.

As such, the Long Island, Westchester and some southwestern Connecticut single family home markets have been very hot. To say the least.
Agree on above. However I noticed many more apartments went into contracts (after a long time on the market) in the past month, at least in the neighborhoods I've been following: UES, UWS and northern Brooklyn
IMO
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Re: Are we in a housing bubble?

Post by IMO »

LINY wrote: Wed Mar 31, 2021 11:08 pm
KlangFool wrote: Wed Mar 31, 2021 2:12 pm Folks,

Unless we have extreme population increase, people are moving from place A to place B. So, if place B is booming, then, place A is going down. If we agree that real estate in some place is booming and where people moving from is busting. Where do those people move from? It is within the USA.

KlangFool
I can vouch for the NYC apartment market. Rental rates are down 25%-30% across the board and vacancy rates have increased from 2.5% -3.0% to over 5.0% in most Manhattan submarkets. I know co-op and condo prices have dropped at around 15% year-over-year as of the 4th Qtr. 2020.

As such, the Long Island, Westchester and some southwestern Connecticut single family home markets have been very hot. To say the least.
Yes the population just didn't suddenly magically increase over the last year. The housing inventory for the most part was just fine last year in every place except HCOLA/VHCOLA areas. "Place A" people include those who sold their homes in a HCOLA/VHCOLA area to move to a more expensive place to a less expensive area. This has always happened in the past, but at a slower rate that would typically correspond to retirements mainly. "Place A" people would then normally be replaced by either new career people moving in, or current local career people/renters moving into those sold homes in the city. This has always happened, but a much slower rate. Housing had been in a reasonable equilibrium in less expensive locations unlike most HCOLA/VHCOLA which have historically typically been out of equilibrium.

The factor that is responsible for the sudden change was the pandemic and everyone at once being allowed to WFH. Lower interest rates enticed those now WFH people decide to buy vs. rent in less expensive areas which would have been an option. Everyone deciding to buy at the same time creates panic as the previous housing equilibrium is thrown out of wack, causing FOMO. It's not because suddenly not enough new housing wasn't being built, or there typically wasn't reasonable inventory, and wasn't simply because of low interest rates. Take away the WFH overall, and things settle down. Otherwise scaring them by getting mortgage rates to go up by 1-2% (maybe), but it might take 2-3% but even that could back-fire as it may create more panic and more FOMO to get in before rates go up 4%+. Only time will tell.
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Re: Are we in a housing bubble?

Post by anoop »

National house price index is at all time highs -- both nominal and real. Real is 4% above bubble peak.
https://www.calculatedriskblog.com/2021 ... -rent.html
sojersey
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Re: Are we in a housing bubble?

Post by sojersey »

I don't know whether we are in a bubble or not, but I've all but given up on buying a house anytime soon. My friends just paid 1.2M for the first + basement + small back yard (~2000 sq ft) of a triple decker in Somerville MA. Its a nice place, and I'm happy for them, but it just seems insane to me… at least as a single person.

I'm about to give up on this area and try living elsewhere, though expect everywhere to be just as competitive. Years of under-building and general NIMBY policy isn't going to alleviate anytime soon.
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Re: Are we in a housing bubble?

Post by av111 »

sojersey wrote: Wed May 05, 2021 3:18 pm I don't know whether we are in a bubble or not, but I've all but given up on buying a house anytime soon. My friends just paid 1.2M for the first + basement + small back yard (~2000 sq ft) of a triple decker in Somerville MA. Its a nice place, and I'm happy for them, but it just seems insane to me… at least as a single person.

I'm about to give up on this area and try living elsewhere, though expect everywhere to be just as competitive. Years of under-building and general NIMBY policy isn't going to alleviate anytime soon.
As a single person several benefits of home ownership are not used so it is suboptimal to buy a home for personal consumption. Still look for duplexes (live in one and rent the other) or rental SFR at decent rent/expense ratio if you want to benefit from low interest rates and potential increase in price
AV111
jpdion
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Re: Are we in a housing bubble?

Post by jpdion »

I'd say yes - I couldn't afford to buy the house I'm living in if I was in the market today. But, I could make a nice big profit in selling it! Question is: would I qualify for a replacement house in this market?
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Re: Are we in a housing bubble?

Post by willthrill81 »

The only reasons I've heard as to why we are currently in a housing bubble are that prices have gone up significantly in a relatively short period of time and because housing prices are higher now, adjusted for inflation, than they were before the GFC.

However, I've heard far more reasons, which I also find more compelling, as to why we are not currently in a housing bubble. Those include the facts that it's much harder to get a mortgage these days and those mortgages are generally not for 100% or more of the value of the property, the price of new construction being much higher now than ~14 years ago, there not being enough housing for everyone who wants it, and interest rates being significantly lower now than before.

For those who think we're in a bubble already, what's going to 'pop' it? Interest rates are very unlikely to suddenly spike, people aren't likely at all to suddenly default en masse (the delinquency rate on SFH mortgages didn't even hit 3% in 2020 and has remained lower than where it was for all of 2018), and demand for housing isn't likely at all to suddenly drop.
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Re: Are we in a housing bubble?

Post by smitcat »

willthrill81 wrote: Thu May 06, 2021 11:32 am The only reasons I've heard as to why we are currently in a housing bubble are that prices have gone up significantly in a relatively short period of time and because housing prices are higher now, adjusted for inflation, than they were before the GFC.

However, I've heard far more reasons, which I also find more compelling, as to why we are not currently in a housing bubble. Those include the facts that it's much harder to get a mortgage these days and those mortgages are generally not for 100% or more of the value of the property, the price of new construction being much higher now than ~14 years ago, there not being enough housing for everyone who wants it, and interest rates being significantly lower now than before.

For those who think we're in a bubble already, what's going to 'pop' it? Interest rates are very unlikely to suddenly spike, people aren't likely at all to suddenly default en masse (the delinquency rate on SFH mortgages didn't even hit 3% in 2020 and has remained lower than where it was for all of 2018), and demand for housing isn't likely at all to suddenly drop.
"For those who think we're in a bubble already, what's going to 'pop' it?"
I do not know about a 'pop' but housing will adjust down relatively speaking as folks readjust to working in metro areas. This along with the markets long rise has supported much of what we see now.

"there not being enough housing for everyone who wants it"
Yet there is no real population surge.
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Re: Are we in a housing bubble?

Post by willthrill81 »

smitcat wrote: Thu May 06, 2021 11:37 am
willthrill81 wrote: Thu May 06, 2021 11:32 am The only reasons I've heard as to why we are currently in a housing bubble are that prices have gone up significantly in a relatively short period of time and because housing prices are higher now, adjusted for inflation, than they were before the GFC.

However, I've heard far more reasons, which I also find more compelling, as to why we are not currently in a housing bubble. Those include the facts that it's much harder to get a mortgage these days and those mortgages are generally not for 100% or more of the value of the property, the price of new construction being much higher now than ~14 years ago, there not being enough housing for everyone who wants it, and interest rates being significantly lower now than before.

For those who think we're in a bubble already, what's going to 'pop' it? Interest rates are very unlikely to suddenly spike, people aren't likely at all to suddenly default en masse (the delinquency rate on SFH mortgages didn't even hit 3% in 2020 and has remained lower than where it was for all of 2018), and demand for housing isn't likely at all to suddenly drop.
"For those who think we're in a bubble already, what's going to 'pop' it?"
I do not know about a 'pop' but housing will adjust down relatively speaking as folks readjust to working in metro areas. This along with the markets long rise has supported much of what we see now.

"there not being enough housing for everyone who wants it"
Yet there is no real population surge.
I'm not sure that metro areas will go back to the way they were. There will certainly be at least a partial return, but I doubt that there will be a full return. Further, housing prices were increasing long before COVID hit.

There isn't a population surge, but there are other reasons for the shortage, some of which are outlined here. Regulations on new housing seem to be a major factor.

Personally, I think that low interest rates are the biggest driver of the boost in housing prices in recent years, and I don't see those jumping up anytime soon.
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Re: Are we in a housing bubble?

Post by hnd »

i assumed the bubble was created due to everyone and their grandma qualifying for ridiculous loans they would certainly not be able to afford. basically bad loans. it seems like the demand today is due to cost of materials to build and very low interest rates. not due to everyone getting approved for ridiculous loan amounts.

so may be bubble but would be for different reasons i guess.
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Re: Are we in a housing bubble?

Post by smitcat »

willthrill81 wrote: Thu May 06, 2021 11:46 am
smitcat wrote: Thu May 06, 2021 11:37 am
willthrill81 wrote: Thu May 06, 2021 11:32 am The only reasons I've heard as to why we are currently in a housing bubble are that prices have gone up significantly in a relatively short period of time and because housing prices are higher now, adjusted for inflation, than they were before the GFC.

However, I've heard far more reasons, which I also find more compelling, as to why we are not currently in a housing bubble. Those include the facts that it's much harder to get a mortgage these days and those mortgages are generally not for 100% or more of the value of the property, the price of new construction being much higher now than ~14 years ago, there not being enough housing for everyone who wants it, and interest rates being significantly lower now than before.

For those who think we're in a bubble already, what's going to 'pop' it? Interest rates are very unlikely to suddenly spike, people aren't likely at all to suddenly default en masse (the delinquency rate on SFH mortgages didn't even hit 3% in 2020 and has remained lower than where it was for all of 2018), and demand for housing isn't likely at all to suddenly drop.
"For those who think we're in a bubble already, what's going to 'pop' it?"
I do not know about a 'pop' but housing will adjust down relatively speaking as folks readjust to working in metro areas. This along with the markets long rise has supported much of what we see now.

"there not being enough housing for everyone who wants it"
Yet there is no real population surge.
I'm not sure that metro areas will go back to the way they were. There will certainly be at least a partial return, but I doubt that there will be a full return. Further, housing prices were increasing long before COVID hit.

There isn't a population surge, but there are other reasons for the shortage, some of which are outlined here. Regulations on new housing seem to be a major factor.

Personally, I think that low interest rates are the biggest driver of the boost in housing prices in recent years, and I don't see those jumping up anytime soon.
Not what we have seen in the areas we have been active in the past 6-12 months.
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