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patb.
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February 25, 2013 at 11:22 AM #760071February 25, 2013 at 11:31 AM #760070
sdduuuude
ParticipantIt isn’t clear to me that “there is a bubble coming” is consistent with “it is time to rent again.”
The time to rent is not when the bubble is developing, but when the bubble starts to burst. There is no way you can say that the mediocre rise of the last 12 months has brought us to the top of a bubble about to burst.
Bubbles grow for many years before bursting and what I saw with the last bubble is that even smart people who identified the bubble correctly called for the top much earlier than the top actually arrived. Even the good Professor Piggington was a couple years early. Bubbly behavior begets bubbly behavior and the market can remain irrational for a long time. So, if you really think we are in a new bubble, expect it to get even bubblier.
Now, with that said, I’m not so sure I would classify current conditions as a bubble or even the start of something that can become a bubble. Prices have come up, but we are still within a range that goes back to 2008. The telling factor for me would be a revival of the home price vs. rent charts Rich used early in the days of Piggington to ID the bubble. Rich ? Might be nice to see, that in a rodeo some time, eh ?
We are definitely a period of rising prices, though, and it is the inventory levels driving it. Last year I didn’t think this selling season would have the momentum to bring prices above last season, but it looks like it will.
Many folks – including me – expected to see higher prices drive owners to sell. In fact, owners are seeing prices come up and deciding they could get more later and that is delaying listings. Perhaps it will take a stall in prices, after a run-up to get inventory on the market.
The path forward that I see is this – prices rise until the upside down people (UDPs) see a way to get out. Folks may cry “bubble” as prices comes up, but the conditions just aren’t there to allow the bubble to continue because the UDPs will eventually decide to list their house, cutting the bubble growth short.
Plus, long-term macro-economic conditions will push downward on prices for several years (I didn’t say, “push prices downward” – I said “push downward on prices”). The stimulus that drove the last bubble won’t come, or won’t have the same effect.
And – as I wrote in an earlier post – I’d be wary of a rally in low-inventory or low-volume conditions.
I’d be OK buying now, expect to see a year or two of appreciation, then another couple years of moderate pain or flatness as the country (and the world) start to deal with debt and spending issues.
February 25, 2013 at 11:32 AM #760072Participant[quote=bearishgurl]I disagree that the long-term owner occupier buyer can’t find a decent house in the $320-$400K range. Some of them may need a little work, but they’re out there.[/quote]
Ya “out there” as in “way the hell out there” as in Santee, Lakeside and Ramona.
February 25, 2013 at 11:36 AM #760073SD Realtor
ParticipantSo funny…
Here is what I wrote
Conditions are not favorable throughout the county compared to the past few years. Not for investment grade, not for owner occupancy grade. . . .
Here is what was commented on.
I disagree that the long-term owner occupier buyer can’t find a decent house
****
I think it is awesome to make up things to disagree with. Kind of like playing chess against yourself!
February 25, 2013 at 11:47 AM #760074bearishgurl
Participant[quote=sdduuuude][quote=bearishgurl]I disagree that the long-term owner occupier buyer can’t find a decent house in the $320-$400K range. Some of them may need a little work, but they’re out there.[/quote]
Ya “out there” as in “way the hell out there” as in Santee, Lakeside and Ramona.[/quote]
No, there are quite a few other areas in SD County which have this calibur of SFR’s …. yes, even 4 bdrm SFR’s!
A buyer in this price range is in the “FTB range,” whether they are actually shopping for their “first home” …. or not.
Beggars can’t be choosers.
Notice that all three of the areas you mentioned, sdduuuude, are already FULL of residents, a large percentage with a much HIGHER net worth than many Piggs!
And “Ramona” not longer qualifies to have this “calibur” of home readily available. It is mostly out of this price range.
February 25, 2013 at 11:48 AM #760075
Rich ToscanoKeymasterGreat post sdduuuude.
Things selling fast, or prices going up fast, don’t necessarily make for a bubble. To me, a necessary condition of a bubble is that valuations are extremely high on a historical basis. We just aren’t there on housing — not even close.
I have been meaning to update the long term valuation charts and will soon when I get some time. But, just extrapolating from last year’s chart, we are probably pretty close to “fair value” (which I define as the median historical price to income or price to rent ratio).
More charts soon-ish!
February 25, 2013 at 11:50 AM #760076Participant[quote=SD Realtor]So funny…
Here is what I wrote
Conditions are not favorable throughout the county compared to the past few years. Not for investment grade, not for owner occupancy grade. . . .
Here is what was commented on.
I disagree that the long-term owner occupier buyer can’t find a decent house
****
I think it is awesome to make up things to disagree with. Kind of like playing chess against yourself![/quote]
What exactly did you mean by “owner occupancy grade,” then?
And do you think owner-occupants should buy and flip or buy and hold??
I was actually “agreeing” with ER’s statement. But I can see by this statement that you’re too much in the “argumentative mode” to understand that.
February 25, 2013 at 11:59 AM #760077Participant[quote=Rich Toscano] . . . just extrapolating from last year’s chart, we are probably pretty close to “fair value” (which I define as the median historical price to income or price to rent ratio). . . . [/quote]
I agree with this. That “fair value” was in sales occurring sometime between 1999 and 2003 (depending on micro-area).
edit: as I’ve stated here before, the residential RE values in many areas of SD County became decimated beyond fundamentals, due primarly to SS closings (many of which were “fraudulent” and/or “non-arms-length” transactions). These (numerous) closed SS’s skewed the sold comps much lower than they should have been.
February 25, 2013 at 12:02 PM #760080ParticipantNobody else seems to read ambiguity into my response, even the person who I was responding to. Guess you will have to figure it out.
February 25, 2013 at 12:13 PM #760081Participant[quote-sdduuuude]….In fact, owners are seeing prices come up and deciding they could get more later and that is delaying listings…..[/quote]
I agree with this statement. I’ve seen articles and videos online over the weekend that “boomers” have decided to mostly stay put …. for now.
The “boomers” recently interviewed all over the country are apparently “happy” with where they live and don’t particularly want to “downsize.”
Part of this has to do with not being able to re-purchase today the quality of home/location they are currently living in, even if they sell. And a large portion of them can’t qualify for purchase-money mortgages, and, in any case, don’t want one at this late date. I myself can identify with this mindset.
Since there are presumably 77M of us and the vast majority own their own homes, that is a LOT of current listings across the country that don’t seem to be materializing.
Of course, in a few years, this could change, depending . . .
February 25, 2013 at 12:15 PM #760082Participant[quote=SD Realtor]Nobody else seems to read ambiguity into my response, even the person who I was responding to. Guess you will have to figure it out.[/quote]
That’s because “nobody else” is responding to you 😉
February 25, 2013 at 12:20 PM #760083SK in CV
ParticipantGreat comments by both Rich and sdduuude (though I disagree about the last few words in sdduuude’s comment).
One of the essential parts in building a bubble is speculators driving price increases, based on the expectation that the market can only go one direction. I don’t think we’ve had that. We have had investors buying up large quantities of properties in some markets, and while by most appearances there is no difference between speculators and investors, intent is a huge difference. Investors buy for yield. And I think that’s what we’ve seen. Even flippers aren’t always speculators. When they buy, remodel and sell, that added value makes their intent very different from buyers that buy and turn around and try to sell for based solely on rising prices.
It’s way too early to call this a bubble. Rich’s pending graphs will shed some light. It may become one, but there are too many other unusual market conditions (limited new construction, extraordinarily low interest rates, very low yield on alternative investments among them, and possibly the most significant, low inventories) to label this very short term rise in prices a bubble. Twelve to eighteen months out, maybe sooner, we’ll know more.
February 25, 2013 at 3:32 PM #760093The-Shoveler
ParticipantIn SD I think you have more of a wireless/SmartPhone Bubble than anything else.
Me I think we will continue to have bubble/burst .. bubble/burst until we go back to using assets as part of the CPI (like pre-1981 — the introduction of OER and the beginning of the destruction of the middle class).
I saw something by Nouriel Roubini where he thinks we are on the verge of the biggest mother of all credit bubble yet!!
Much bigger than the last one.I don’t know, I think watching Japan will tell us what is likely to occur here (they are launching a new experiment in economics, State controlled markets!!).
Hey, you got a market that is not increasing, no problem, just force it!!
February 25, 2013 at 4:22 PM #760094no_such_reality
Participant[quote=bearishgurl]
Yes, this is also the “flipper” price range, but if the asking and bid prices are too close to what the property would sell for flipped, the flipper won’t want it.
…
It’s different for the long-term owner-occupier buyer because they don’t have to fix everything at once to get it back out on the market ASAP. They can move in (or partially move in) and fix as time/money permits.
[/quote]You’re correct if the price was too close to post fix, but they’re not. The market hasn’t heated to the point that those cosmetic fixes aren’t major price hitters.
There-in is problem in our current marketplace. The pool of people willing to pay premium price for fully gloss coated greatly outweighs the price of those willing to deal with good enough.
And hence, people that want to live there while they fix it are being out bid by people that want to flip it, because the people that want it fixed right now are outbidding all of them.
February 25, 2013 at 4:29 PM #760095spdrun
ParticipantThat’s a West Coast thing to some extent. I remember seeing some condos in Chula-Vista that weren’t horrible, just ugly, but the other people at the open house complained to no end about minor things. Whereas on the East Coast, people are used to old houses and don’t expect perfection when buying. Having to repaint and replace some cabinets, zOMG, the horror!
(And speaking for myself, I’d rather have original 1920s details if possible than live in a crappy renovation, though my current apartment was pretty much the latter.)
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