housing bubble?

[The-Shoveler]

I can tell you L.A. earners fared somewhat better than the national especially in the 80’s.
Yea but I know nothing…

[an]

[quote=bearishgurl]AN, are these numbers nationwide statistics or for SD County? And what do the numbers in the parentheses mean?

All by themselves, these numbers really mean nothing unless you put the average SFR sold prices for that year next to them. Then list the average size family in that locale during that year. (Remember that the “avg family-size” was larger 40+ yrs ago.) And, just for fun, list the average prevailing (conventional) 30-yr fixed interest rate for that year next to each year.

I maintain that at all times, the AVERAGE price paid for a SFR in a given area was 4-6 times the total gross household income for that area, depending on locale.

And this is still true today in all but the most expensive locales (SD County not being one of them).

It didn’t matter what the prevailing mtg interest rate was or is or whether gas was .34.9 or $3.95.9.

With this census data, are you attempting to infer that life in the US was easier for the “average” parents in the ’60’s thru ’80’s or that the “avg” buyer could buy more house in those eras than you or I could buy today?[/quote]These number are from the census bureau. Go here to do your own data mining: http://www.census.gov/hhes/www/income/data/historical/people/. I’m not sure what those number in parenthesis mean. This is the historical data for home price nationally from the Census Bureau as well: http://www.census.gov/hhes/www/housing/census/historic/values.html. Housing went up 53% between 1960-1970 and 266% between 1970-1980 in CA.

What I’m trying to infer is, if history repeats itself, then when we see high inflation, we’ll see higher housing price and higher rent. I don’t know if life was easier or not for average Americans and really, I don’t really care. I don’t care if they can buy more house or not. What I care about is if price will rise like the last time we saw 10%+ mortgage rate and inflation going crazy.

[spdrun]

SD Realtor – golden opportunities? I’ve seen a few condos in SD that would pull in 7+% return go in the last month.

Lots of ridiculous pricing, but the condos that are priced stupidly are seeing reduction after reduction, where they may have sold three months ago.

The SD market is extraordinarily sensitive to incentives. Remember the $8000 credit and the run-up it caused? Guess what: a rise from 3.5% to 4.75% or so was the equivalent of pulling this credit, if not more.

I highly doubt we’ll see 2011 pricing in the near future, but mid to early 2012 pricing is for sure possible. This run up has been too far, too fast.

[an]

[quote=The-Shoveler]A lot of these were not loanable in the “as is” condition.[/quote]You’re right, there were properties that were not loanable but the vast majority were loanable. For those that were not loanable, those went at a MUCH steeper discount to all cash buyers. They then fix it up and refi then rent or flip.

[bearishgurl]

[quote=AN]…Income went up 145% between 1970-1980. Income went up only 85% between 1980-1990. Income went up only 55% between 1990-2000. Income went up 19% between 2000-2010…[/quote]

[quote=AN]…Housing went up 53% between 1960-1970 and 266% between 1970-1980 in CA…[/quote]

I have a few questions for which I will need to do some “data mining” to answer. Maybe you can beat me to the punch, AN. For starters:

1. Did income go up 53% between 1960-1970 and 266% between 1970-1980 in CA? If not, how much did income actually go up in CA during these decades?

2. Did (nationwide) housing prices actually go up 19% between 2000 and 2010?

My hunch is that (nationwide) housing prices were less, on average, in 2010 than 2000 in most major markets.

[all]

Could the growth of per capita income be in part due to adjustments in workforce?

The income of males 15y or older grew 6.5%/year between 1970 and 1980 and the male workforce grew from 55MM to 78.6MM. Female income grew at higher rate (from lower base) and more importantly the workforce grew from 51MM to 80MM. The recorded per capita growth of 10%/year is in part due to more people having a job.

[an]

[quote=bearishgurl][quote=AN]…Income went up 145% between 1970-1980. Income went up only 85% between 1980-1990. Income went up only 55% between 1990-2000. Income went up 19% between 2000-2010…[/quote]

[quote=AN]…Housing went up 53% between 1960-1970 and 266% between 1970-1980 in CA…[/quote]

I have a few questions for which I will need to do some “data mining” to answer. Maybe you can beat me to the punch, AN. For starters:

1. Did income go up 53% between 1960-1970 and 266% between 1970-1980 in CA? If not, how much did income actually go up in CA during these decades?

2. Did (nationwide) housing prices actually go up 19% between 2000 and 2010?

My hunch is that (nationwide) housing prices were less, on average, in 2010 than 2000 in most major markets.[/quote]
1. Here’s the data for US vs CA: http://www.dof.ca.gov/HTML/FS_DATA/LatestEconData/FS_Income.htm

2) Nationally, there’s no housing data from Census for that time frame. But it went up 43% between 60-70. It went up 178% between 70-80.

So, while income went up 145% between 70-80, housing went up 178% during that same time frame. All the while seeing mortgage rate went up from low 7% in 1970 to ~18% in 1981. So, rates went up DRASTICALLY, while income and home price also increased as well. So, I stand by my point that I don’t see and correlation between rate and price. Can this time be different? Sure it can. But you won’t finding me betting on it.

[The-Shoveler]

One thing you have to remember here as well is that before 1981/2 the cost of a house was used to calculate the cost of living (not rent as is the case now).

so really as long as everyone is getting cost of living raises then housing bubbles are well they are much harder to have.

Something I think did not register to the buyers in the last bubble or the one in the late 80’s (inflation was not there to save them).

Like I always said this could have ended a lot different. but in the end, it was they way they wanted it to end.

[an]

Here’s the historical data for rent: http://www.census.gov/hhes/www/housing/census/historic/grossrents.html

Up 52% between 60-70 and up 125% between 70-80. So, if history repeats itself, rent of a 2/2 apartment in MM will go from $1500/month today to $3375. Wow, that’s pretty crazy. It must have sucked pretty bad for those who don’t have assets in the 70s and renting.

[The-Shoveler]

Funny you did not notice it as much cause everything was going up (even your pay),

But yea it was like hitting the lottery to be a home owner in those days.
And yea I rented until the 80’s I was having too much fun to pay attention though.

Yep those horrible 70’s where no one would order the domestic beer at the Disco.

[an]

[quote=The-Shoveler]Funny you did not notice it as much cause everything was going up (even your pay),

But yea it was like hitting the lottery to be a home owner in those days.
And yea I rented until the 80’s I was having too much fun to pay attention though,[/quote]If that’s the case, I wonder if it’s also not noticeable if it happens again today. $3300/month rent for a 2/2 in Mira Mesa!!! wow, You’re getting me salivating if renter didn’t really care seeing their rent went up 125% over 10 years.

[The-Shoveler]

This was Key,

“One thing you have to remember here as well is that before 1981/2 the cost of a house was used to calculate the cost of living (not rent as is the case now).”

You did not feel you were falling behind really.

[livinincali]

[quote=AN]
What I’m trying to infer is, if history repeats itself, then when we see high inflation, we’ll see higher housing price and higher rent. I don’t know if life was easier or not for average Americans and really, I don’t really care. I don’t care if they can buy more house or not. What I care about is if price will rise like the last time we saw 10%+ mortgage rate and inflation going crazy.[/quote]

I think rates can go up without high inflation. See Greece, Spain, Portugal, etc. That’s where the problem lies in betting that buying a higher price home at a low interest rate guarantees good positive returns on rent in the future. It’s certainly possible that you’d see deflation in a rising rate environment as we are witnessing in Europe. Unemployment can rise, vacancy can rise, and rates can rise at the same time.

The big bet on residential real estate is that higher than average inflation is coming and that a fixed 30 year rate going to allow you to win huge when that inflation shows up. Of course you’re screwed if deflation shows up along with higher rates. At the same time I can’t find any recent occurrences of a 1970’s type environment. Japan has been mired in deflation and low rates forever. Europe is experiencing higher rates and deflationary forces as well. Yet here we are in America thinking the worst can happen is 1970’s stagflation with asset owners hitting the jack pot. It’s possible but I don’t know that’s it’s likely.

Even if it does pan out this government has shown no respect for contract law so what makes you think they won’t stick it to the little man holding 30 year fixed mortgages on rental properties. Hi little man, we’re going to be adding a new fee to mortgages on second properties that were obtained in the years 2008-1015.

[no_such_reality]

[quote=AN][quote=The-Shoveler]Funny you did not notice it as much cause everything was going up (even your pay),

But yea it was like hitting the lottery to be a home owner in those days.
And yea I rented until the 80’s I was having too much fun to pay attention though,[/quote]If that’s the case, I wonder if it’s also not noticeable if it happens again today. $3300/month rent for a 2/2 in Mira Mesa!!! wow, You’re getting me salivating if renter didn’t really care seeing their rent went up 125% over 10 years.[/quote]

Au contaire. While I was still a young child at the time, I distinctly remember my parents discussions at the dinner table about money, Dad’s union threatening to strike over the raises and COLA, mom an office worker talking about prices going up.

Working class middle income were very aware of the rising prices in the 70s. They were getting raises, but mostly driven around a cost of living increase which companies at the time were starting to phase out or underestimate and then pinch the real raise because they had 8% COLA increases.

SD, appreciated the post about inventory. The SoCal housing inventory and DOM for home for sale has been distorted to the low end for so long, that a return to historical 90-120 days to sell and 9+ months would be extremely psychologically depressing to most.

I bought during the window of opportunity. It wasn’t easy. In another blog, I referred to as like a comment the guys from Motley Crue made about getting a music contract in the 80s involving swimming through a pool of burning sewage to get to crawl through broken glass.

In the 2008-2010 window, inventory was sh*t, house quality for sale was sh*t, many deals needed vision and $50-$100+k rehab above the 30%+ down and financing to close on a place to remove it from borderline slumlord status. If it wasn’t slumlord ready, they’re were 30 people putting offers in. Yes, 30, as in that is a literal number our agent shared with us on a house on which she was the selling agent. It was common to go to a showing an wait in line to get in a house, and then see the entire kitchen counter covered in realtor cards.

[an]

[quote=livinincali]I think rates can go up without high inflation. See Greece, Spain, Portugal, etc. That’s where the problem lies in betting that buying a higher price home at a low interest rate guarantees good positive returns on rent in the future. It’s certainly possible that you’d see deflation in a rising rate environment as we are witnessing in Europe. Unemployment can rise, vacancy can rise, and rates can rise at the same time.

The big bet on residential real estate is that higher than average inflation is coming and that a fixed 30 year rate going to allow you to win huge when that inflation shows up. Of course you’re screwed if deflation shows up along with higher rates. At the same time I can’t find any recent occurrences of a 1970’s type environment. Japan has been mired in deflation and low rates forever. Europe is experiencing higher rates and deflationary forces as well. Yet here we are in America thinking the worst can happen is 1970’s stagflation with asset owners hitting the jack pot. It’s possible but I don’t know that’s it’s likely.

Even if it does pan out this government has shown no respect for contract law so what makes you think they won’t stick it to the little man holding 30 year fixed mortgages on rental properties. Hi little man, we’re going to be adding a new fee to mortgages on second properties that were obtained in the years 2008-1015.[/quote]I agree that it could happen. But then again, every country is different and we’ve never experienced a Greece/Spain/Portugal/etc situation before. That doesn’t mean that it can’t happen. It’s just that it hasn’t. We can print more USD while Greece/Spain/Portugal/etc can’t print more Euro to increase inflation.

So, I’m still betting that our country is different than others and we’re more likely to repeat our past than repeat other country’s past/current. Only time will tell and my crystal ball is broken, so I’ll just have to wait.

[Author]

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