Are we in a housing bubble?

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rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

av111 wrote: Fri May 28, 2021 2:20 pm
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
That's the plan. Bring people back into the office by the summer. Zoom fatigue is a real thing.
mervinj7
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Re: Are we in a housing bubble?

Post by mervinj7 »

rockstar wrote: Fri May 28, 2021 2:34 pm
av111 wrote: Fri May 28, 2021 2:20 pm 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
That's the plan. Bring people back into the office by the summer. Zoom fatigue is a real thing.
We were originally planning for the end of the summer but we are moving up that timeline by a month. I hope we still get to keep some WFH flexibility.
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Re: Are we in a housing bubble?

Post by mikejuss »

mervinj7 wrote: Fri May 28, 2021 2:45 pm
rockstar wrote: Fri May 28, 2021 2:34 pm
av111 wrote: Fri May 28, 2021 2:20 pm 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
That's the plan. Bring people back into the office by the summer. Zoom fatigue is a real thing.
We were originally planning for the end of the summer but we are moving up that timeline by a month. I hope we still get to keep some WFH flexibility.
I think that this is actually going to be a rather complicated matter.
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willthrill81
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Re: Are we in a housing bubble?

Post by willthrill81 »

ballons wrote: Thu May 27, 2021 3:23 pm
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.
This line of reasoning makes sense to me as well. Manufacturers across the board have outsourced a large number of their jobs overseas to reduce costs. I don't see why tech firms wouldn't try to do the same. Even if they have to hire more workers to do the same task, it could still be significantly less costly.

Banking on things continuing for many years to come as they have been for the last 20 years seems like a risky proposition to me.

The trolley car business was once very profitable in California. And then it wasn't.
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il0kin
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Re: Are we in a housing bubble?

Post by il0kin »

av111 wrote: Fri May 28, 2021 2:20 pm
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
I would argue that local resources on projects don't matter when the project is hosted in the cloud. Some of the most incredible projects we use in everyday life were built by people distributed all across the world. What I am seeing firsthand is that specialized knowledge/skills > proximity to office.

Point taken on China/India, but plenty of companies have gone down that road, and plenty realize they wasted 5-10 years and millions of dollars, just to turn around and bring development and support back to the US. Outsourcing inside the US is much different than outsourcing to another country with major language and cultural differences, and hiring qualified people at 65% of expensive local salaries isn't exactly outsourcing, it's just taking advantage of a broad labor market.

I very well may be wrong. Like I said, I am making hay when the sun is shining and saving early and often in case I am.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

mervinj7 wrote: Fri May 28, 2021 2:45 pm
rockstar wrote: Fri May 28, 2021 2:34 pm
av111 wrote: Fri May 28, 2021 2:20 pm 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
That's the plan. Bring people back into the office by the summer. Zoom fatigue is a real thing.
We were originally planning for the end of the summer but we are moving up that timeline by a month. I hope we still get to keep some WFH flexibility.
What we have found is that folks tend to be more productive at home. We have also found that Zoom meetings all day long wears people out, so we want to get people back into the office. For my teams, we're flexible. Right now, it's roughly 3 days in the office and 2 days at home. If the person has kids doing virtual learning, it's 100% WFH. I expect in the future for some hybrid, so I'm not quite sure how we're going to save money on office space as we are still practicing social distancing in the office setting. So less people take up more space.
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Re: Are we in a housing bubble?

Post by mikejuss »

rockstar wrote: Fri May 28, 2021 3:08 pm
mervinj7 wrote: Fri May 28, 2021 2:45 pm
rockstar wrote: Fri May 28, 2021 2:34 pm
av111 wrote: Fri May 28, 2021 2:20 pm 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
That's the plan. Bring people back into the office by the summer. Zoom fatigue is a real thing.
We were originally planning for the end of the summer but we are moving up that timeline by a month. I hope we still get to keep some WFH flexibility.
What we have found is that folks tend to be more productive at home. We have also found that Zoom meetings all day long wears people out, so we want to get people back into the office. For my teams, we're flexible. Right now, it's roughly 3 days in the office and 2 days at home. If the person has kids doing virtual learning, it's 100% WFH. I expect in the future for some hybrid, so I'm not quite sure how we're going to save money on office space as we are still practicing social distancing in the office setting. So less people take up more space.
I imagine that most megacorporations are licking their chops at the prospect of spending less on office space for employees and of paying their employees less.
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rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

il0kin wrote: Fri May 28, 2021 3:07 pm
av111 wrote: Fri May 28, 2021 2:20 pm
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
I would argue that local resources on projects don't matter when the project is hosted in the cloud. Some of the most incredible projects we use in everyday life were built by people distributed all across the world. What I am seeing firsthand is that specialized knowledge/skills > proximity to office.

Point taken on China/India, but plenty of companies have gone down that road, and plenty realize they wasted 5-10 years and millions of dollars, just to turn around and bring development and support back to the US. Outsourcing inside the US is much different than outsourcing to another country with major language and cultural differences, and hiring qualified people at 65% of expensive local salaries isn't exactly outsourcing, it's just taking advantage of a broad labor market.

I very well may be wrong. Like I said, I am making hay when the sun is shining and saving early and often in case I am.
The very real challenge with overseas workers is time zone differences. This is how I have seen them fail repeatedly.
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Tubes
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Re: Are we in a housing bubble?

Post by Tubes »

rockstar wrote: Fri May 28, 2021 3:18 pm The very real challenge with overseas workers is time zone differences. This is how I have seen them fail repeatedly.
Yes. 11 1/2 hours is brutal. It isn't fun for anyone. I always felt bad for my overseas colleagues as they were typically working starting at 10PM to share some meeting time with us. It was extremely inefficient and caused a lot of problems.

I'm fairly recently retired in tech. I've seen all the trends come and go. There was a pretty big push to expand in the USA by big corps at various times in the 70s, 80s and 90s. However, some sort of stars aligned in the mid 2000s and seemingly everybody was outsourcing overseas. It seemed to flow from some consulting firm and before you know it, everyone shares the idea in the boardrooms.

It was a bad time for a 50-something to be in tech. I'll just say that.

Now, all of the sudden, everyone is outsourcing back inside again. My friends still working are pretty excited as wage pressure is already mounting. I'm not in silicon valley, but rather a mid-major area. Boomtime. The big FAANGS are all announcing huge hiring sprees.

And of course, what does it do to housing (topic of this thread)? Well, my neighborhood is up solidly about 20% just this year. It is actually nearly impossible to buy a house. We have a friend who sold their house and haven't been able to find a replacement, so they are going to rent. Probably best to do so and let things cool off.
av111
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Re: Are we in a housing bubble?

Post by av111 »

See what 1.36 m bought in east bay SF bay area last month

https://www.redfin.com/CA/Fremont/327-S ... me/1959476
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rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

Tubes wrote: Fri May 28, 2021 3:29 pm
rockstar wrote: Fri May 28, 2021 3:18 pm The very real challenge with overseas workers is time zone differences. This is how I have seen them fail repeatedly.
Yes. 11 1/2 hours is brutal. It isn't fun for anyone. I always felt bad for my overseas colleagues as they were typically working starting at 10PM to share some meeting time with us. It was extremely inefficient and caused a lot of problems.

I'm fairly recently retired in tech. I've seen all the trends come and go. There was a pretty big push to expand in the USA by big corps at various times in the 70s, 80s and 90s. However, some sort of stars aligned in the mid 2000s and seemingly everybody was outsourcing overseas. It seemed to flow from some consulting firm and before you know it, everyone shares the idea in the boardrooms.

It was a bad time for a 50-something to be in tech. I'll just say that.

Now, all of the sudden, everyone is outsourcing back inside again. My friends still working are pretty excited as wage pressure is already mounting. I'm not in silicon valley, but rather a mid-major area. Boomtime. The big FAANGS are all announcing huge hiring sprees.

And of course, what does it do to housing (topic of this thread)? Well, my neighborhood is up solidly about 20% just this year. It is actually nearly impossible to buy a house. We have a friend who sold their house and haven't been able to find a replacement, so they are going to rent. Probably best to do so and let things cool off.
It's going to take a long time to cool down. I'm thinking at least two years.
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Re: Are we in a housing bubble?

Post by willthrill81 »

av111 wrote: Fri May 28, 2021 4:37 pm See what 1.36 m bought in east bay SF bay area last month

https://www.redfin.com/CA/Fremont/327-S ... me/1959476
:shock: :oops: :shock: :oops:
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Ron Ronnerson
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Re: Are we in a housing bubble?

Post by Ron Ronnerson »

av111 wrote: Fri May 28, 2021 4:37 pm See what 1.36 m bought in east bay SF bay area last month

https://www.redfin.com/CA/Fremont/327-S ... me/1959476
The median home price in Fremont is $1.3M. If you went directly across the Dumbarton bridge to the other side of the bay, you would find yourself in Palo Alto. The median home price there is about $3.2M. Both Fremont and Palo Alto have good schools and each one is roughly 15 miles from Downtown San Jose. The people buying the run-down shack in the picture should be able to fix up the place nicely with the $2M they save from buying east of the bay as opposed to on the peninsula.

I live further north of Fremont in the East Bay and prices have increased 35% on my townhome since the start of the year. The sudden increase is sort of absurd but compared to places on the other side of the bay, properties over here are quite a bargain.

I sort of hesitate to speculate on the reasons for the rapid increase but my thinking is that the ability to work from home for at least part of the week is turning out to be a factor for some people. Commuting to Silicon Valley from the East Bay can be torture. If someone starts working from home a couple of days per week, 40% of their commute goes away. It gets better, though, because there are likely a lot of people doing the same thing. So on the days someone does have to go in to the office, traffic is lighter because a bunch of people are working from home that, in the past, would have been on the road.

Add to that the fact that the highway headed north into the East Bay from Silicon Valley recently added a lane and BART (train line) construction which will link Silicon Valley to the East Bay continues slowly but surely. Fremont currently has two BART stations and is expecting to open a third one in the next five years or so. Perhaps the people buying up that junky old place are seeing a good deal to be had. They could be totally wrong, of course. I guess time will tell.
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Re: Are we in a housing bubble?

Post by av111 »

Ron Ronnerson wrote: Fri May 28, 2021 6:33 pm
av111 wrote: Fri May 28, 2021 4:37 pm See what 1.36 m bought in east bay SF bay area last month

https://www.redfin.com/CA/Fremont/327-S ... me/1959476
The median home price in Fremont is $1.3M. If you went directly across the Dumbarton bridge to the other side of the bay, you would find yourself in Palo Alto. The median home price there is about $3.2M. Both Fremont and Palo Alto have good schools and each one is roughly 15 miles from Downtown San Jose. The people buying the run-down shack in the picture should be able to fix up the place nicely with the $2M they save from buying east of the bay as opposed to on the peninsula.

I live further north of Fremont in the East Bay and prices have increased 35% on my townhome since the start of the year. The sudden increase is sort of absurd but compared to places on the other side of the bay, properties over here are quite a bargain.

I sort of hesitate to speculate on the reasons for the rapid increase but my thinking is that the ability to work from home for at least part of the week is turning out to be a factor for some people. Commuting to Silicon Valley from the East Bay can be torture. If someone starts working from home a couple of days per week, 40% of their commute goes away. It gets better, though, because there are likely a lot of people doing the same thing. So on the days someone does have to go in to the office, traffic is lighter because a bunch of people are working from home that, in the past, would have been on the road.

Add to that the fact that the highway headed north into the East Bay from Silicon Valley recently added a lane and BART (train line) construction which will link Silicon Valley to the East Bay continues slowly but surely. Fremont currently has two BART stations and is expecting to open a third one in the next five years or so. Perhaps the people buying up that junky old place are seeing a good deal to be had. They could be totally wrong, of course. I guess time will tell.
All good points. South Fremont is the best location for good public schools and shortest commutes. But sheesh 1.36m for the teardown. It will cost at least 350 per Sq ft to make a new one. And lot would still be 6000 Sq ft
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Blue456
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Re: Are we in a housing bubble?

Post by Blue456 »

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?
That is my job and where I live. Both affect quality of life. Rural area is great for my employment.
Ron Ronnerson
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Re: Are we in a housing bubble?

Post by Ron Ronnerson »

av111 wrote: Fri May 28, 2021 7:52 pm
Ron Ronnerson wrote: Fri May 28, 2021 6:33 pm
av111 wrote: Fri May 28, 2021 4:37 pm See what 1.36 m bought in east bay SF bay area last month

https://www.redfin.com/CA/Fremont/327-S ... me/1959476
The median home price in Fremont is $1.3M. If you went directly across the Dumbarton bridge to the other side of the bay, you would find yourself in Palo Alto. The median home price there is about $3.2M. Both Fremont and Palo Alto have good schools and each one is roughly 15 miles from Downtown San Jose. The people buying the run-down shack in the picture should be able to fix up the place nicely with the $2M they save from buying east of the bay as opposed to on the peninsula.

I live further north of Fremont in the East Bay and prices have increased 35% on my townhome since the start of the year. The sudden increase is sort of absurd but compared to places on the other side of the bay, properties over here are quite a bargain.

I sort of hesitate to speculate on the reasons for the rapid increase but my thinking is that the ability to work from home for at least part of the week is turning out to be a factor for some people. Commuting to Silicon Valley from the East Bay can be torture. If someone starts working from home a couple of days per week, 40% of their commute goes away. It gets better, though, because there are likely a lot of people doing the same thing. So on the days someone does have to go in to the office, traffic is lighter because a bunch of people are working from home that, in the past, would have been on the road.

Add to that the fact that the highway headed north into the East Bay from Silicon Valley recently added a lane and BART (train line) construction which will link Silicon Valley to the East Bay continues slowly but surely. Fremont currently has two BART stations and is expecting to open a third one in the next five years or so. Perhaps the people buying up that junky old place are seeing a good deal to be had. They could be totally wrong, of course. I guess time will tell.
All good points. South Fremont is the best location for good public schools and shortest commutes. But sheesh 1.36m for the teardown. It will cost at least 350 per Sq ft to make a new one. And lot would still be 6000 Sq ft
Yep, I know what you mean!
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Re: Are we in a housing bubble?

Post by LateFire »

willthrill81 wrote: Fri May 07, 2021 11:30 am
LateFire wrote: Fri May 07, 2021 10:39 am In Upper Midwest where I purchased my house in 2002, it has not even kept up with inflation. I live in a fairly vibrant city by mid-western standards.
That can actually be a big plus. Due to our home's appreciation in market value, our property taxes are 30% higher now than they were in 2018 and will very likely continue to go up for a while at least. Yes, we have a lot of appreciated value in the home, but unless we sell and buy a less costly home or rent, that doesn't help us at all.
You can say that. My property taxes are not exuberant by National standards but it has doubled over past 20 years.
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Re: Are we in a housing bubble?

Post by Paul69 »

rockstar wrote: Fri May 28, 2021 3:08 pm
What we have found is that folks tend to be more productive at home. We have also found that Zoom meetings all day long wears people out, so we want to get people back into the office. For my teams, we're flexible. Right now, it's roughly 3 days in the office and 2 days at home. If the person has kids doing virtual learning, it's 100% WFH. I expect in the future for some hybrid, so I'm not quite sure how we're going to save money on office space as we are still practicing social distancing in the office setting. So less people take up more space.
Similar for my company, but we went from 3 buildings of ~6 floors each to one building of 3 floors. One floor is executives and the like and the other two are all hotel space. Most people telework 3 days and are in for two.

On the personal side, I don't know if we are in a bubble but things are a bit frothy. We bought our house back in 2009 for $650k and just sold it for $1.1m. We know we were getting close to needing a new HVAC, roof, etc and can see having to put $50k into maintenance. We were moving anyway in 4-5 years for retirement so figured this was a great time to get out, rent, and hope the bubble burst\comes down to reality in that timeframe so we can buy at a realistic price in our new state. We saw two neighbors with similar houses as ours sell last year pre-COVID in the $875k range, so figure $200k in a year isn't based on normal market returns. Doesn't matter...we took it.
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Re: Are we in a housing bubble?

Post by anoop »

https://www.theatlantic.com/ideas/archi ... ds/619029/

Has some quotes from bill mcbride of calculatedrisk.

With prices headed to the moon and listings blinking in and out of existence like quantum particles, nobody seems to know exactly when this is going to stop. “In my time studying housing markets, I’ve seen bubbles and I’ve seen busts,” says Bill McBride, an economics writer who famously predicted the 2007 housing crash. “But I’ve never seen anything quite like this. It’s a perfect storm.”

“It’s not clear at all to me that things are going to slow down significantly in the near future,” he said. “In 2005, I had a strong sense that the hot market would turn and that, when it turned, things would get very ugly. Today, I don’t have that sense at all, because all of the fundamentals are there. Demand will be high for a while, because Millennials need houses. Prices will keep rising for a while, because inventory is so low.

On his blog,
https://www.calculatedriskblog.com/2021 ... t-out.html
he suggests being careful about buying a "defective" home--something that would have difficulty selling during normal times because of its location or certain features about it.
nydoc
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Re: Are we in a housing bubble?

Post by nydoc »

Is it still a bubble if one doesn’t need to buy a house this year?
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Re: Are we in a housing bubble?

Post by Random Musings »

I sense the higher pricing will incentivize more people to sell rental properties to cash in, hence increasing supply a bit. I guess you can claim millenials as the driver to higher pricing, but my guess is that they will be a bit disappointed if inflation continues and puts pressure on interest rates.

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anoop
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Re: Are we in a housing bubble?

Post by anoop »

Random Musings wrote: Mon May 31, 2021 9:06 pm I sense the higher pricing will incentivize more people to sell rental properties to cash in, hence increasing supply a bit. I guess you can claim millenials as the driver to higher pricing, but my guess is that they will be a bit disappointed if inflation continues and puts pressure on interest rates.
Actually it's the other way around. They appear to be holding on as tight as they can because they think prices are going way higher along with rents that they can collect. Why cash out and pay taxes? The whole point of real-estate investing is to manage taxes.

I think there will be some increase in supply, but this would be people who were on pandemic assistance and who haven't been able to find equivalent work to pay for the mortgage. They will sell, pay the bank, take what's left and move on. But that's going to be very small compared to demand which is from private equity and other such funds.
ballons
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Re: Are we in a housing bubble?

Post by ballons »

Buyers are forgoing home inspections in D-FW's red hot housing market. One realtor calls it 'bananas'
https://www.wfaa.com/article/money/econ ... 0d93afdff1

In the last 12 months, realtors have seen some home values go up 50% in certain areas — almost 10 to 15 times the normal rate.

Last week, Dallas realtor Courtney Michalek told WFAA that she lost a bidding war for a home on the battlefield of North Texas' lucrative and booming housing market.

And the reason why is unheard of in the Lone Star state.

"The seller asked my clients and me to take out their option period," Michalek said, who works with Iconic Real Estate.

"So we lost the deal to someone who waived their option period."
...
Most recently, this story about a buyer forking more than $300,000 over the asking price of a $1 million home in Southlake has been a top story on WFAA's website.

Or how about realtor Todd Tramonte's agency, Dallas Home Realty, sweetening home offers with paid cruises for sellers?

"We're offering them a five-day, four-night cruise for two adults prepaid to help us get our offers accepted," said Tramonte. "So we're offering a cruise on top of a super-aggressive offer...that's the world we're living in."

Tramonte also told WFAA that he's seen buyers waive their option period to stay competitive in a bidding war for a house.
Waived inspection, overpaying, and giving the sellers a cruise. What could go wrong?
anoop
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Re: Are we in a housing bubble?

Post by anoop »

ballons wrote: Mon May 31, 2021 9:44 pm Waived inspection, overpaying, and giving the sellers a cruise. What could go wrong?
Indeed, the cruise is very risky from a health standpoint. They shouldn't be giving away cruises.
DosCommas
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Re: Are we in a housing bubble?

Post by DosCommas »

I’ve been looking for a vacation condo (Tahoe area) to use for weekends here and there year round and rent out when I’m not using it. Ideally something in a resort with management. What I’ve found so far is just plain silly… condo prices appear to have appreciated 50% in the last 3 years but rental rates haven’t come up to match. What I’m wondering is who is actually buying these at these prices and why.
anoop
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Re: Are we in a housing bubble?

Post by anoop »

DosCommas wrote: Tue Jun 01, 2021 1:00 am I’ve been looking for a vacation condo (Tahoe area) to use for weekends here and there year round and rent out when I’m not using it. Ideally something in a resort with management. What I’ve found so far is just plain silly… condo prices appear to have appreciated 50% in the last 3 years but rental rates haven’t come up to match. What I’m wondering is who is actually buying these at these prices and why.
People who made somewhere between millions and hundreds of millions in an IPO and don't know what to do with the cash.
DosCommas
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Re: Are we in a housing bubble?

Post by DosCommas »

anoop wrote: Tue Jun 01, 2021 1:16 am
DosCommas wrote: Tue Jun 01, 2021 1:00 am I’ve been looking for a vacation condo (Tahoe area) to use for weekends here and there year round and rent out when I’m not using it. Ideally something in a resort with management. What I’ve found so far is just plain silly… condo prices appear to have appreciated 50% in the last 3 years but rental rates haven’t come up to match. What I’m wondering is who is actually buying these at these prices and why.
People who made somewhere between millions and hundreds of millions in an IPO and don't know what to do with the cash.
So in an (eventually) efficient market I guess we’re heading into a massive development boom akin to pre-2008 level inventory explosions. It’s not like there isn’t more room for vacation condos to be built.
anoop
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Re: Are we in a housing bubble?

Post by anoop »

DosCommas wrote: Tue Jun 01, 2021 1:24 am
anoop wrote: Tue Jun 01, 2021 1:16 am
DosCommas wrote: Tue Jun 01, 2021 1:00 am I’ve been looking for a vacation condo (Tahoe area) to use for weekends here and there year round and rent out when I’m not using it. Ideally something in a resort with management. What I’ve found so far is just plain silly… condo prices appear to have appreciated 50% in the last 3 years but rental rates haven’t come up to match. What I’m wondering is who is actually buying these at these prices and why.
People who made somewhere between millions and hundreds of millions in an IPO and don't know what to do with the cash.
So in an (eventually) efficient market I guess we’re heading into a massive development boom akin to pre-2008 level inventory explosions. It’s not like there isn’t more room for vacation condos to be built.
There is, but look at the cost of building materials. It's a major deterrent for any builder that hasn't engaged in financial engineering to hedge against these price increases.
DosCommas
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Re: Are we in a housing bubble?

Post by DosCommas »

anoop wrote: Tue Jun 01, 2021 1:32 am
DosCommas wrote: Tue Jun 01, 2021 1:24 am
anoop wrote: Tue Jun 01, 2021 1:16 am
DosCommas wrote: Tue Jun 01, 2021 1:00 am I’ve been looking for a vacation condo (Tahoe area) to use for weekends here and there year round and rent out when I’m not using it. Ideally something in a resort with management. What I’ve found so far is just plain silly… condo prices appear to have appreciated 50% in the last 3 years but rental rates haven’t come up to match. What I’m wondering is who is actually buying these at these prices and why.
People who made somewhere between millions and hundreds of millions in an IPO and don't know what to do with the cash.
So in an (eventually) efficient market I guess we’re heading into a massive development boom akin to pre-2008 level inventory explosions. It’s not like there isn’t more room for vacation condos to be built.
There is, but look at the cost of building materials. It's a major deterrent for any builder that hasn't engaged in financial engineering to hedge against these price increases.
What’s most interesting to me is that rents haven’t followed suit. Housing prices and rents should be highly correlated for these types of properties, heck I can rent these units that are currently on the market. I just got the rental history for a listed unit and was flabbergasted by the asking price. I’m calling it a bubble.
Valuethinker
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Re: Are we in a housing bubble?

Post by Valuethinker »

DosCommas wrote: Tue Jun 01, 2021 1:46 am
anoop wrote: Tue Jun 01, 2021 1:32 am
DosCommas wrote: Tue Jun 01, 2021 1:24 am
anoop wrote: Tue Jun 01, 2021 1:16 am
DosCommas wrote: Tue Jun 01, 2021 1:00 am I’ve been looking for a vacation condo (Tahoe area) to use for weekends here and there year round and rent out when I’m not using it. Ideally something in a resort with management. What I’ve found so far is just plain silly… condo prices appear to have appreciated 50% in the last 3 years but rental rates haven’t come up to match. What I’m wondering is who is actually buying these at these prices and why.
People who made somewhere between millions and hundreds of millions in an IPO and don't know what to do with the cash.
So in an (eventually) efficient market I guess we’re heading into a massive development boom akin to pre-2008 level inventory explosions. It’s not like there isn’t more room for vacation condos to be built.
There is, but look at the cost of building materials. It's a major deterrent for any builder that hasn't engaged in financial engineering to hedge against these price increases.
What’s most interesting to me is that rents haven’t followed suit. Housing prices and rents should be highly correlated for these types of properties, heck I can rent these units that are currently on the market. I just got the rental history for a listed unit and was flabbergasted by the asking price. I’m calling it a bubble.
The variable you are not considering is cost of finance.

House prices move opposite to interest rates.

It's of course more complicated than that because of supply-demand factors. Right now you have:

- constrained supply (both in new houses, and in terms of building materials globally) due to the lingering effects of the Covid-19 emergency and 2020 recession

- the sorts of people who buy houses have, largely, not had their incomes much affected by the recession (that's a sweeping overgeneralization, but restaurant workers, say, were not buying houses)

- a possible structural move away from the office, towards less frequent commuting and thus the possibility of living further away in areas with less crowding/ cheaper housing

Add to that falling interest rates, and declining opportunities for investors to earn returns in other asset classes, and you will get rising real estate prices. As always the business though is a local one so lots of local variations in price movements etc.

Is this a bubble? If monetary conditions tighten significantly, it may have proven to be one.

If the ordinary economic recovery takes hold, with rising rates of vaccination, then demand will continue to be strong. Greater supply will ameliorate the price moves.

I think it is too early to call it an outright bubble. US real housing prices are not that far above where they were in 2006, are they? And the US economy is correspondingly larger.
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Re: Are we in a housing bubble?

Post by gips »

our house’s value is about $150k higher than anytime over the last 20 years. we’re listing today, just hope the bubble hasnt burst here, the market was completely dead this past weekend.

on the wfh model, the tech consulting firm i was working with consistently found great people in small towns and cities, paid them well and has been able to increase net margin. the key is to be able to a) identify world class talent that can b) work effectively remotely and c) understand and adopt their corp culture.

i do believe once the dust settles, companies will examine the lessons learned from this cycle of wfh with near shore resources and apply them to offshore resources. ultimately, there will be comp and offshore pressure if this becomes the new model. anyhow, just my two cents.
Ramjet
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Re: Are we in a housing bubble?

Post by Ramjet »

Knowing that lumber prices are up 400% for Covid related reasons and that there is a shortage of housing inventory I don't understand how you would call this a "bubble", which by definition is speculative. Also, I've never seen so many people call a bubble in my life, which means this likely isn't one. Most everyone doesn't see a bubble coming, right?
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Tubes
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Re: Are we in a housing bubble?

Post by Tubes »

It is more like a surging mass of foam. :D

Foam may not pop, but it does sometimes rapidly dissipate.

Whatever it is called, it is clearly causing some pretty significant disruption. How that disruption ends (levels off versus suddenly reverses) will ultimately determine what we can call this current angst in the market.
Valuethinker
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Re: Are we in a housing bubble?

Post by Valuethinker »

Ramjet wrote: Tue Jun 01, 2021 5:31 am Knowing that lumber prices are up 400% for Covid related reasons and that there is a shortage of housing inventory I don't understand how you would call this a "bubble", which by definition is speculative. Also, I've never seen so many people call a bubble in my life, which means this likely isn't one. Most everyone doesn't see a bubble coming, right?
Supporting what you say the number of stock market gurus who called 2011 or 2012 a "bubble" likely to be followed by implosion was legion.

However on the US housing bubble, a number of commentators called it. Dean Baker (at Economic Policy Institute?) in particular.

Real estate bubbles are perhaps easier to identify because they take such a very long time to inflate, and then when they blow neither the downturn nor the recovery are quick.

I shall be right about the Canadian housing market one of these days ;-). (to be fair I was calling Vancouver and Toronto - the general thing they are undergoing now? I think there's a general recognition things have gone too far).
loganvonstrangle
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Re: Are we in a housing bubble?

Post by loganvonstrangle »

SuperTrooper87 wrote: Fri Mar 12, 2021 5:06 am Makes good sense. I appreciate your insights. Luckily we bought 6-7 years ago for a steal and refinanced even lower. I’d hate to be a kid shopping for a home these days.
literally me :(
Ramjet
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Re: Are we in a housing bubble?

Post by Ramjet »

Tubes wrote: Tue Jun 01, 2021 5:39 am It is more like a surging mass of foam. :D

Foam may not pop, but it does sometimes rapidly dissipate.

Whatever it is called, it is clearly causing some pretty significant disruption. How that disruption ends (levels off versus suddenly reverses) will ultimately determine what we can call this current angst in the market.
Haha, I agree. That's a good way to characterize what we're seeing
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

Good write up on how unaffordable housing is at the moment versus renting.

https://www.bloomberg.com/opinion/artic ... nd=premium
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Re: Are we in a housing bubble?

Post by jfn111 »

Random Musings wrote: Mon May 31, 2021 9:06 pm I sense the higher pricing will incentivize more people to sell rental properties to cash in, hence increasing supply a bit. I guess you can claim millenials as the driver to higher pricing, but my guess is that they will be a bit disappointed if inflation continues and puts pressure on interest rates.

RM
We have seen a lot of the inner city landlords selling off their single family rentals. Those who purchased after the 2008 crash are seeing that they can sell for 3 or 4 times their purchase price. Added to that is the cities changing rental laws to more favor the renter then the landlord and the landlords are figuring it's a good time to take the money and run.
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Re: Are we in a housing bubble?

Post by randomguy »

gips wrote: Tue Jun 01, 2021 5:10 am our house’s value is about $150k higher than anytime over the last 20 years. we’re listing today, just hope the bubble hasnt burst here, the market was completely dead this past weekend.

on the wfh model, the tech consulting firm i was working with consistently found great people in small towns and cities, paid them well and has been able to increase net margin. the key is to be able to a) identify world class talent that can b) work effectively remotely and c) understand and adopt their corp culture.

i do believe once the dust settles, companies will examine the lessons learned from this cycle of wfh with near shore resources and apply them to offshore resources. ultimately, there will be comp and offshore pressure if this becomes the new model. anyhow, just my two cents.

For at least 30 years we have been talking about offshoring, remote work and so on. It is very, very hard to do well. There are a lot more jobs that work well with like 75% home/25% in the office than there are the 100% at home. The first set of jobs make make you willing to do a 1 hour commute but they don't let you live anywhere in the country (or in any country). More at home work will allow companies to have less real estate (i.e. maybe your 1000 person companies plans on only every having 500 in the office at once) but exactly how much is hard to say. And a lot of tech people also fail to understand that ever job isn't sitting in a cubicle coding. There are plenty of jobs that require access to equipment you just don't have at home. I expect that we will see a lot more remote work than we did pre2020. I also expect it will not be anywhere near as much as the advocates for it expect.

The big wild card in housing are interest rates. A mere 15 years ago you were paying 6%-7% for a mortgage. Call it 600/100k of mortgage. Now rates are around 3% and it is only 422/100k. Makes it easy for the person to buy 50% more house. Rates creep back up to 5 and a lot of people get priced out.

And everyones big question is does it end with a bang (house prices drop 25%) or a whimper (house prices appreciate with inflation for 15 years).
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

randomguy wrote: Tue Jun 01, 2021 9:25 am
gips wrote: Tue Jun 01, 2021 5:10 am our house’s value is about $150k higher than anytime over the last 20 years. we’re listing today, just hope the bubble hasnt burst here, the market was completely dead this past weekend.

on the wfh model, the tech consulting firm i was working with consistently found great people in small towns and cities, paid them well and has been able to increase net margin. the key is to be able to a) identify world class talent that can b) work effectively remotely and c) understand and adopt their corp culture.

i do believe once the dust settles, companies will examine the lessons learned from this cycle of wfh with near shore resources and apply them to offshore resources. ultimately, there will be comp and offshore pressure if this becomes the new model. anyhow, just my two cents.

For at least 30 years we have been talking about offshoring, remote work and so on. It is very, very hard to do well. There are a lot more jobs that work well with like 75% home/25% in the office than there are the 100% at home. The first set of jobs make make you willing to do a 1 hour commute but they don't let you live anywhere in the country (or in any country). More at home work will allow companies to have less real estate (i.e. maybe your 1000 person companies plans on only every having 500 in the office at once) but exactly how much is hard to say. And a lot of tech people also fail to understand that ever job isn't sitting in a cubicle coding. There are plenty of jobs that require access to equipment you just don't have at home. I expect that we will see a lot more remote work than we did pre2020. I also expect it will not be anywhere near as much as the advocates for it expect.

The big wild card in housing are interest rates. A mere 15 years ago you were paying 6%-7% for a mortgage. Call it 600/100k of mortgage. Now rates are around 3% and it is only 422/100k. Makes it easy for the person to buy 50% more house. Rates creep back up to 5 and a lot of people get priced out.

And everyones big question is does it end with a bang (house prices drop 25%) or a whimper (house prices appreciate with inflation for 15 years).
We are still spacing people out at the office, so we have fewer people taking up less space. And we have everyone back in the office in July. What's most likely will happen is that we will have folks on a rotating schedule, so that we can maintain social distancing in the office. We're still using the same office space, but we far fewer people. I don't see office spaces returning to normal for at least another year. My expectation is only about half of the employees will be vaccinated, and right now, we're not asking.

While I keep hearing about the death of commercial real estate, I don't see it happening. Eventually, everyone will be back in the office, and this WFH experiment due to COVID will come to an end. However, I do think we'll see more people splitting time between the office and at home.
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Re: Are we in a housing bubble?

Post by willthrill81 »

randomguy wrote: Tue Jun 01, 2021 9:25 am For at least 30 years we have been talking about offshoring, remote work and so on. It is very, very hard to do well.
The last ~15 months have shown that at least in undergraduate studies, higher ed does not generally work very well in a purely online environment. Online resources can be a great compliment to in-person activities, but it's not an effective substitute in a number of situations.
The Sensible Steward
ImUrHuckleberry
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Re: Are we in a housing bubble?

Post by ImUrHuckleberry »

We are thinking of selling our house right now and renting for a while. Our house needs a lot of work but is already one of the most expensive in the neighborhood and so we don't think renovating and staying is a good idea. Only problem is, we can't find any suitable rentals in the immediate area, which we want to stay in while my daughter completes HS over the next 4 years.
Coltrane75
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Re: Are we in a housing bubble?

Post by Coltrane75 »

There have been at least one if not more quotes from financial pundits alleging they knew back c. 2005 that the housing market was going to correct. I'm skeptical of this.

Is it fair to summarize the thread's stance on the future of the housing market as pretty much unknown? (NKN)

I have no firm opinion on the future of WFH and living patterns as a result of covid over the long-term. I think this is too difficult to predict.
vv19
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Re: Are we in a housing bubble?

Post by vv19 »

I feel sorry for the first time home buyers who have saved for 2-3 years but are now completely priced out of the market. :-(
porter351
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Re: Are we in a housing bubble?

Post by porter351 »

jay22 wrote: Tue Jun 01, 2021 11:37 am I feel sorry for the first time home buyers who have saved for 2-3 years but are now completely priced out of the market. :-(
That's me!
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Tubes
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Re: Are we in a housing bubble?

Post by Tubes »

My business (programming) was heavily off-shored starting in the early 2000s. My company and others have pulled back from it, but not abandoned it. For a while, we truly looked like it would go 100% off-shore.

If I were about to graduate right now, I'm not sure I'd want to work from home. But that's maybe my bias as a 60 year old. My reason would be socialization. When I started work, I moved 1/2 way across the country. It was a great adventure and a huge life experience. I made fast friends with others like me, even though I'm an introvert. Perhaps graduates today are happy socializing on-line? If so, power to them, but I think it takes away something. Do they move back to mom and dad's and work from their home and keep the old high school friends? Maybe that's OK. I don't know, I'm just babbling, but losing socialization at work seems to take away something.

Come to think of it (and back to the thread topic), they may not have much of a choice but to move back with mom and dad -- depending on what happens to rent.
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Re: Are we in a housing bubble?

Post by B4Xt3r »

porter351 wrote: Tue Jun 01, 2021 11:56 am
jay22 wrote: Tue Jun 01, 2021 11:37 am I feel sorry for the first time home buyers who have saved for 2-3 years but are now completely priced out of the market. :-(
That's me!
And me.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

jay22 wrote: Tue Jun 01, 2021 11:37 am I feel sorry for the first time home buyers who have saved for 2-3 years but are now completely priced out of the market. :-(
I'm against the saving 20% thing. Having 5% plus fees is good enough. You'll either get to 20% via the home price going up or via paying it down faster. In either case you can eventually refi, so I don't know why anyone would wait to have 20% before buying. I'm pretty sure I've said that here before the market blew up.

The problem with housing is that it's leveraged and it's tied to interest rates. Both work against you. It's also a lot like equities. Time in the market really matters. It matters for housing too. But you lose the flexibility to move.
SmallSaver
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Re: Are we in a housing bubble?

Post by SmallSaver »

rockstar wrote: Tue Jun 01, 2021 12:29 pm
jay22 wrote: Tue Jun 01, 2021 11:37 am I feel sorry for the first time home buyers who have saved for 2-3 years but are now completely priced out of the market. :-(
I'm against the saving 20% thing. Having 5% plus fees is good enough. You'll either get to 20% via the home price going up or via paying it down faster. In either case you can eventually refi, so I don't know why anyone would wait to have 20% before buying. I'm pretty sure I've said that here before the market blew up.

The problem with housing is that it's leveraged and it's tied to interest rates. Both work against you. It's also a lot like equities. Time in the market really matters. It matters for housing too. But you lose the flexibility to move.
As someone in the boat, it's not the down payment, it's getting priced out. I know it's normal on these boards for people to buy $500k starter homes, but that's not an option for most people (including myself).
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Random Musings
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Re: Are we in a housing bubble?

Post by Random Musings »

B4Xt3r wrote: Tue Jun 01, 2021 12:09 pm
porter351 wrote: Tue Jun 01, 2021 11:56 am
jay22 wrote: Tue Jun 01, 2021 11:37 am I feel sorry for the first time home buyers who have saved for 2-3 years but are now completely priced out of the market. :-(
That's me!
And me.
Reversion to mean is your friend. We can safely say that there is not "blood on the streets" when it comes to housing prices.

RM
I figure the odds be fifty-fifty I just might have something to say. FZ
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