Housing analysis – Bubble 2.0

[Coronita]

[quote=kev374]just because lending standards are tight does not mean speculators do not exist. The speculators this time around have been private equity and foreign investors, this is a widely known fact. It’s a repeat of the past but just the actors are different.

It’s not a matter of IF but when the next recession occurs and rents start softening. Oh yes, all the experts here proclaim that rents never fall – that is utter BS. I know during the last crash my rent fell by 30% in south OC, rents were crashing as well. What happens to all the rental investments, the rental backed securities held by private equity? Will they start bailing?

I am not saying that I know what is going to happen, but completely dismissing the possibility that prices are over inflated is completely short sighted.[/quote]

If it floats your boat….If you say so…Meanwhile life goes on…

[Coronita]

Foreign investors we already covered this. They at most make up of 1/4-1/3 of purchases at the high end…That still doesn’t explain the 2/3 to 3/4 people who aren’t foreign investors that are still buying. Institutional buying at these levels? no way…

.And the foreign investors you are probably referring to, ie China investors, aren’t just “investors”. We’ve already covered this over and over again… Unlike Japan, China investors aren’t just parking their money here in the U.S…They are buying as plan B in case of political instability that will throw the wealthy class into jail.

I know for people in this country it’s a concept really hard to understand. But look at those activists who are investigating Ivana Trump’s sweetshops in China… One has been arrested and the other two just “disappeared”….This sort of arbitrary thing is what keeps the wealthy there concerned, because any sort of regime change, you can easily be the next target.

Unless the government significantly changes in in China (which it won’t for a long time), that sort of instability will always be concern for the 0.1% wealthy there…unlike taiwan, japan, korea…And with a billion people, 0.1% is still a lot of people….
Just look at what’s going on….MiraMesa slowly turning into something that is reminiscent of what happened in places like Diamond Bar.

[img_assist|nid=26340|title=yumyum|desc=|link=node|align=left|width=400]

Just happening lately, a bunch of targeted businesses specifically for the asian community, in SD which historically been small…this is happening because there is a demand for it. demographics is changing significantly.Probably because the rest of SoCal is saturated and now San Diego is getting the spillover effect..And it isn’t going to let up, especially that Trump crew now just greenlighted encouraging investment immigration (invest $500k+, get a greencard)…Looks like Emerald, Jasmine, Ding Ta Fung in UTC now has even more competition…..

[(former)FormerSanDiegan]

[quote=kev374]just because lending standards are tight does not mean speculators do not exist. The speculators this time around have been private equity and foreign investors, this is a widely known fact. It’s a repeat of the past but just the actors are different.

It’s not a matter of IF but when the next recession occurs and rents start softening. Oh yes, all the experts here proclaim that rents never fall – that is utter BS. I know during the last crash my rent fell by 30% in south OC, rents were crashing as well. What happens to all the rental investments, the rental backed securities held by private equity? Will they start bailing?

I am not saying that I know what is going to happen, but completely dismissing the possibility that prices are over inflated is completely short sighted.[/quote]

You may be right, but Prices in San Diego were overinflated relative to rent and income in 2001. That didn’t make it a bad time to buy or a good time to sell. Waiting 3-4 more years to sell or never selling resulted in much better outcomes than selling in 2001.

I agree that prices feel pretty frothy. At this stage I’m not betting on price declines from this point in the near future, but I’m also not advocating jumping in and buying anything either…

[kev374]

[quote=flu]FThat still doesn’t explain the 2/3 to 3/4 people who aren’t foreign investors that are still buying. Institutional buying at these levels? no way…[/quote]

People with good credit and good high income jobs, particularly dual high income earners. In a recession they are laid off the first. Even very responsible people are willing to highly leverage themselves with real estate based on their current financials with the mindset that it is the responsible thing to do because home ownership is a responsible activity – that is the common wisdom.

I know plenty of very responsible people who lost or almost lost their homes due to job loss during the last crash.

The key thing is that we are overdue for a recession and the political climate is also very tenuous. Is this pessimism on my part, I would just call it being guarded – history tells us the good times don’t last forever. Recessions happen and the fallout from the next one could be serious.

[SK in CV]

[quote=harvey][quote=kev374]funny, I heard the same comments prior to the last crash! Some of the comments by users and economists here are very reminiscent of 2006 where contrarians were mocked and we know what happened shortly thereafter.[/quote]

It’s like that guy who has accurately predicted 14 of the past 3 recessions – and the naysayers still dismiss him![/quote]

It’s even easier to explain that someone trying seriously to make predictions based on real data. I don’t know who she is, but I suspect she works for the company that posted the video (which I admit, I only watched a few minutes). The company that posted the video sells gold. While I hate this phrase, it really is all you need to know.

[Coronita]

[quote=kev374][quote=flu]FThat still doesn’t explain the 2/3 to 3/4 people who aren’t foreign investors that are still buying. Institutional buying at these levels? no way…[/quote]

People with good credit and good high income jobs, particularly dual high income earners. In a recession they are laid off the first. Even very responsible people are willing to highly leverage themselves with real estate based on their current financials with the mindset that it is the responsible thing to do because home ownership is a responsible activity – that is the common wisdom.

I know plenty of very responsible people who lost or almost lost their homes due to job loss during the last crash.

The key thing is that we are overdue for a recession and the political climate is also very tenuous. Is this pessimism on my part, I would just call it being guarded – history tells us the good times don’t last forever. Recessions happen and the fallout from the next one could be serious.[/quote]

If you say so…Like i said, trying to predict a future, you’re better off throwing darts……

Frankly, I don’t think you will ever be ready for home ownership. Because from all your historical posts, the only time it appears you would be comfortable to buy is an ideal situation in which there is a huge economic demise such that everyone else gets wiped out and housing is 50+% off, but magically you survive from layoffs, and emerge from it better than others and also be in position to buy…. That’s despite your financial dependency being the same as everyone else that will be losing their job… If you really believe that we are headed for a huge recession, then being you are an IT worker, you will be laidoff just like everyone else you think will be (probably even earlier, because IT projects get cut early and shipped abroad at the slightly misses of a a company’s wall street profit goals…it’s an expense)…..That is, unless you no longer count on your job to pay the bills.

It’s the classic paradox we see time and time again by folks posting here, over and over and over again…Magically, despite most of us being not that much different from everyone else, that gets affected the same way by the say economic conditions, magically some of us feel we will be immune versus others…As you say, being financially responsible doesn’t mean you won’t get laidoff, or lose your job, or make you any more prepared in a large economic shitstorm, anymore so than last time when the shitstorm hit, and you were having a hard time finding an IT job…..So it appears, you’re just looking for reasons not to buy…ever….which is really fine… Home ownership isn’t really needed… it depends on each and every one of us, and what each and every one of us wants to get out of it.or not…

Sorry. I’m just calling it as I see it…Just saying….

[FlyerInHi]

Flu, this is how foreigners get EB 5 visa at $500k in “depressed” areas. Otherwise, it’s $1 million.

I know some people who got visa but all them head to Cali because education sucks in Nevada. Pretty much all the new casinos in Vegas have foreign investors. There is a gaming commission website where foreign investors are listed.

The investors are not rich. They are middle class people who want an American education for their kids. Not a bad return for in-state tuition.

https://www.washingtonpost.com/investigations/jared-kushner-and-his-partners-used-a-program-meant-for-job-starved-areas-to-build-a-luxury-skyscraper/2017/05/31/9c81b52c-4225-11e7-9869-bac8b446820a_story.html?hpid=hp_hp-top-table-main_kushnerjc-blurb-330pm%3Ahomepage%2Fstory&utm_term=.7a9b7291d8f3

[poorgradstudent]

[quote=Rich Toscano]I feel like people aren’t making enough fun of the video.[/quote]

I’m fairly sure she has an awesome skull ring on her right hand.

And those paper charts are amazing.

[Escoguy]

Go to Balboa some evening, must be 50 Asian restaurants in the area,
Korean BBQ, Japanese BBQ, great stuff but often $25/plate for starters

Many Asian kids from UCSD go there to celebrate/relax on weekends.

[SK in CV]

[quote=Escoguy]Go to Balboa some evening, must be 50 Asian restaurants in the area,
Korean BBQ, Japanese BBQ, great stuff but often $25/plate for starters

Many Asian kids from UCSD go there to celebrate/relax on weekends.[/quote]

Is this evidence of a bubble about to burst? Or that prices are going higher? Or just that people like Asian food? There have been a lot of Asian restaurants there for many decades.

[kev374]

[quote=flu]Because from all your historical posts, the only time it appears you would be comfortable to buy is an ideal situation in which there is a huge economic demise such that everyone else gets wiped out and housing is 50+% off, [/quote]

you make that statement like it hasn’t happened ever in the past…it’s happened in the very recent past, prices crashed 40% in 2008. Memories are short. It’s happened in the past and there are indicators we are heading in the same direction.

The lady in the video is selling gold but that wasn’t in context to what she was presenting. In addition she just presented some facts and said time will tell what happens. If her data is wrong then it would be make for a better response to refute it specifically than just calling her names..

You debate vehemently against a downturn yet do not provide any facts whatsoever. Please provide hard data as to why you think prices will NOT fall?

Yes, it’s true that I don’t have a crystal ball, but you don’t either. The bottom could fall out tomorrow and real estate could crash 40% again just like in ’08, the truth is nobody can know for sure. But you guys act like the downside can NEVER happen but of course the UPSIDE can because you are all vested in that area… this is not rational thinking, rather it is you who are looking at the situation with rose colored glasses just the the huge number of fools that did so in 2008.

[Coronita]

[quote=kev374][quote=flu]Because from all your historical posts, the only time it appears you would be comfortable to buy is an ideal situation in which there is a huge economic demise such that everyone else gets wiped out and housing is 50+% off, [/quote]

you make that statement like it hasn’t happened ever in the past…it’s happened in the very recent past, prices crashed 40% in 2008. Memories are short. It’s happened in the past and there are indicators we are heading in the same direction.

The lady in the video is selling gold but that wasn’t in context to what she was presenting. In addition she just presented some facts and said time will tell what happens. If her data is wrong then it would be make for a better response to refute it specifically than just calling her names..

You debate vehemently against a downturn yet do not provide any facts whatsoever. Please provide hard data as to why you think prices will NOT fall?

Yes, it’s true that I don’t have a crystal ball, but you don’t either. The bottom could fall out tomorrow and real estate could crash 40% again just like in ’08, the truth is nobody can know for sure. But you guys act like the downside can NEVER happen but of course the UPSIDE can because you are all vested in that area… this is not rational thinking, rather it is you who are looking at the situation with rose colored glasses just the the huge number of fools that did so in 2008.[/quote]

I’m only making 3 statements….

1. The real estate crash of 2007 and the one during the S&L crisis in the 80ies all had the recipe of loose lending standards given a lot of people who otherwise aren’t credit worthy the ability to buy homes they have no real ability to pay for.
Home prices might trickle down, but it’s all about staying power…People who weren’t very credit worthy had no way to weather any sort of blip in the economy. Most people are putting at least 20% down, some even more, especially in SoCal. For every one of your peers that is stretched thing, I can point at many equivalent peers who have no problem managing their debt load or have no debt on any of their homes they own. NorCal and SoCal are quite different from rust belt/blighted regions of the US which has no chance of recovering.

2. Home prices didn’t crash 40-50% across the board all over SoCal and NorCal. IT wasn’t a “widespread thing”. It was a widespread thing in particular demographics where again sketchy financing, sketchy buyers with sketchy income was more prevalent. Did home prices crash 40-50% in Newport Beach on average? What about La Jolla?

3. I really don’t understand the fascination of trying to predict a catostrophic crash that *might* happen god knows when maybe in your lifetime, and then basing a majority of one’s financial decisions on that one time event… (Deja vu…)….As I said before, it’s a parodox that I don’t think folks that subscribe to these extreme viewpoints understand….IF that were to happen, you would be just as affected as anyone else that depends on a W2/1099 paycheck. You’re in IT… I think during the real estate bust, you went unemployed for some time. The same reasons why you didn’t buy during the last bust would be exactly the same reason why you aren’t going to buy in the next bust cycle if it happens.

Before you go off an assume I’m bullish. I’m not… I don’t care which way the home prices are going to go. I don’t plan on selling. I plan on milking as much rental income as possible and passing my portfolio to my heirs so they can enjoy an easier life. The exception would be if I can get 3-4x of what I paid for those properties, then I might sell…… I don’t deny a “correction” can happen… I just don’t plan all my financial decisions based on that it will happen. Seems like a losing proposition….

[moneymaker]

Good banter. The average 401k is the same as the average home equity for the average person. So what would hurt more a stock drop or a real estate plunge? Before 2008 i would have said that a real estate plunge would take longer and give people time to exit, but no longer. The real question in my mind is if things are as rosy as the markets and employment numbers say they are then why isn’t gold down around $1000? Luck has been on my side so far but I recognize that it was just luck. We have an interesting situation now economically where the markets are hot and yet people like Carl Icahn and Bill Ackman are losing money,weird. I’ve increased my 401k contribution to lower my taxes but beyond that I have no investment advice. P.S.- Herbal life, clearly an investment pyramid, is up for the year as is McDonalds. Who would have believed that people would still be paying $5 for coffee that they could make at home for pennies on the dollar.

[Coronita]

[quote=moneymaker]Good banter. The average 401k is the same as the average home equity for the average person. So what would hurt more a stock drop or a real estate plunge? Before 2008 i would have said that a real estate plunge would take longer and give people time to exit, but no longer. The real question in my mind is if things are as rosy as the markets and employment numbers say they are then why isn’t gold down around $1000? Luck has been on my side so far but I recognize that it was just luck. We have an interesting situation now economically where the markets are hot and yet people like Carl Icahn and Bill Ackman are losing money,weird. I’ve increased my 401k contribution to lower my taxes but beyond that I have no investment advice. P.S.- Herbal life, clearly an investment pyramid, is up for the year as is McDonalds. Who would have believed that people would still be paying $5 for coffee that they could make at home for pennies on the dollar.[/quote]

Neither, if you aren’t planning to touch it for some time..And if your close to retirement, your 401k probably should be mostly in stock, but instead in cash or fixed income…just for the reason stated…in case it drops for a few years while you need it.

[Anonymous]

[quote=flu]I really don’t understand the fascination of trying to predict a catostrophic crash that *might* happen god knows when maybe in your lifetime, and then basing a majority of one’s financial decisions on that one time event…[/quote]

https://en.wikipedia.org/wiki/Loss_aversion

[Author]

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