Next housing bubble

[Rick Potter]

Saw an interesting video, where a very impressive case was made for Boise Idaho being the area where the first evidence of a housing bubble should manifest itself.

He didn't actually predict a bubble soon, but did advise not investing there for the next couple years.

In another video, he noted that the area most hit by the 2006 drop was Phoenix, where prices fell 50%, and took longer than the rest of the country to come back.

Just thought it was interesting, he wasn't really trying to sell anything, but I am sure he works for some sort of investment company, although he didn't mention it.

[Lisa Starr]

I actually just read a very well written article about housing bubbles and the economics behind them. The article wasn't trying to predict where/when the next bubble would occur, but rather why it would occur. Boise, Idaho may very well fit the profile.

[Myk Rian]

7-8 homes on our street have changed owners in the last 3 years. Prices are 1/3 higher than what I would consider reasonable.
It makes no sense to sell the house now, as anything else we might find would be bid to over value.

[Jim Becker]

While I do think there will be some market adjustment at some point, I do not believe there's going to be anything like what was previously experiences. It's a different situation now and not driven by nefarious activity in the finance industry like it was the last time.

Myk...what you mention is exactly why Professor Dr. SWMBO and I were happy we were able to buy first and then sell. There was no way we wanted to be in the position of having to move and not having anyplace to go, especially since the rental market is also impacted by low inventory. While it's taking longer to sell our previous property than we would have liked (unique property in a much higher price range than the "hot spot" range for the RE feeding frenzy), we still preferred to have to pay for two properties for a while, given we can, than be "homeless" trying to downsize.

[Michael Weber]

As a father of a daughter that just purchased an unbelievably (at least to me in Arkansas) priced 2 bedroom one bath home in Portland, Oregon I hope any correction is mild.

[Dick Strauss]

Wait until the evictions start for people that haven't made their mortgage payments during the pandemic. Only then will the real housing market show itself. I expect there will be lots of supply after the evictios and home prices will more than likely drop or at least moderate. Ridiculously low interest rates are falsely driving prices higher as well.

[Edwin Santos]

In another video, he noted that the area most hit by the 2006 drop was Phoenix, where prices fell 50%, and took longer than the rest of the country to come back.



FYI, I do not believe this statement is accurate. But don't believe me, here are two references:

Phoenix Shiller Housing Index trend: https://fred.stlouisfed.org/series/PHXRNSA

National Shiller Housing Index trend: https://fred.stlouisfed.org/series/CSUSHPINSA

I live in Phoenix and it is true the drop here was steeper than many places, but not all. Nevada and parts of Florida were severe too. But my recollection was the rebound was actually better (steeper) than most of the country. What is happening right now on the Phoenix chart is crazy, and hard to imagine it is sustainable. If not a downturn, one would think it has to flatten out. But I don't have a prediction, and my opinion is no better than anyone else's. I gave up listening to the fortune tellers.

[Edwin Santos]

A troubling trend is the degree to which housing prices have outpaced wages.
This makes it very hard for young people to get established. At least much harder than it was for prior generations. My first starter home was 3x my annual gross salary. Today, I think it would be 8x-10x in most metro areas for the average college graduate.
Yes interest rates are very low, but if debt levels are that high, does it mean a person is on a rolling over mortgage treadmill for life?

Not to mention student loans for education that have also outpaced wages.

[Ron Selzer]

I bought my first house at 10% interest and was very happy to get that low of a rate. Second house was bought at 8% interest and third, current house was bought at 5 7/8% refinanced down to 3 1/2 % before paying it off. Know people who paid 15% interest locked down for 5 years no refinancing out or even selling without paying penalty
Now trying to find something for daughter and current rate is 2.9%, this lets her pay over 100k more than I did for the same monthly payment. Have not bought anything yet as either more than she can afford or someone else is offering 8k to 15k more, even with her offering well over asking price. She currently is paying $1500 per month for a 2 bedroom apartment.

[Ronald Blue]

With the current housing craziness in most areas I certainly have concerns that a repeat of 2008 could occur. When people are paying 100k over asking price to get a property that seems foolish. I just had a friend from the Nashville area tell me that was common there and he agreed it was risky. He's also a financial adviser so he see's lot of things. I'm not sure if when people pay these inflated prices if they have that cash in hand or if banks are loaning them that amount. I just don't see how this can end well. I really hope I'm wrong.

[ChrisA Edwards]

I live on a cut-de-sace of about 20 houses. Medium prices $500K-$700K, 3500-5500sq on average when we moved in 5 years ago.

Four houses, just went on the market and sold within 2 weeks, three of those didn't even put a 'For Sale' sign out. One was listed at $900K, my estimate, it was a $625K house when we moved in 5 years ago.

When we bought 5 years ago, we paid $540K. Zillow and a local real estate agent, who is looking for potential houses for us, estimates our house is currently around $840K.

Nashville and a 25 miles radius is exploding in growth.

[Rich Engelhardt]

In another video, he noted that the area most hit by the 2006 drop was Phoenix, where prices fell 50%, and took longer than the rest of the country to come back.I'm not sure I'd place any stock in what he says.
Here in NE Ohio - our market crashed in 2005/2006 and we're still upside down. :(

[Ronald Blue]

I'm not sure I'd place any stock in what he says.
Here in NE Ohio - our market crashed in 2005/2006 and we're still upside down. :(

I can't comment on home values but my daughter and family live on the west side of Cleveland in a booming area and when they bought their current home 3 years ago they were in a bidding war. Seems like between new construction in her area and existing homes nothing is on the market long. Technically she is probably 20 miles west.

[Ron Citerone]

Hard to call a bubble, hard to catch a falling knife.

[Mike Ontko]

I agree with what was said earlier on in this discussion; that the market conditions are notably different now than they were preceding the 2008 crash. At the same time though, prices have been going bananas because of low interest rates and the Feds pumping cash into the system as a stimulus. I'm currently sitting in an interesting position, having sold my house back in April for a hefty profit; a difference of nearly $300K, offered in cash, from what I'd paid only 2-1/2 years earlier. The downside is that I sold all of my large shop items (table saw, band saw, jointer, and drill press) in preparation for moving into a rental condo while I wait things out.

Rick, I saw that same video this week and thought several of his points seemed to make sense. But given that you're in CA you should already be aware of the effects on the housing market resulting from a large number of people moving in from out of state. The Seattle area has been experiencing the same thing since about 2014, largely due to Amazon, Google, and other high-tech companies. But I don't think it's going to be sustainable at this same rate, especially once interest rates start to rise again and, as was also pointed out, the twice extended (because of COVID) moratorium on foreclosures will eventually end. Once that happens, and building materials start to come down again (if that's even possible), there should be a large number of homes coming onto the market that help to bring prices back down.

That's the point at which I'm expecting to jump back into the market and scoop up something that's appropriately sized...and priced, hopefully, for my retirement in the not too distant future. In the meantime, I've put the proceeds to work and hope to have a much healthier and happier nest egg by that time.

[Rick Potter]

I have a bit of personal experience with a couple of the posts, for what it's worth.

Edwin, my daughters started a business in Phoenix in 2007 and traveled back and forth from CA, staying in motels in PHX when they were there. They found a condominium for sale cheap, and decided to buy rather than Motel it. I went to look at it, and there were about half the units empty, and the empty ones had foreclosure notices on the doors, and they told what the outstanding mortgage was.

Almost all stated the mortgage amounts were about $125K. We bought them a two bedroom one bath single story unit for $37K, A couple weeks later we bought ourselves a 2BR, 2BA unit in the same square of a dozen units each for the same amount. The business failed after two years, and we kept both units hoping they would go up in value. Rented one, and the whole family and friends use the other when in PHX.

It has been almost 14 years, and the value creeped up slowly until about two years ago, it then was about $100 when it finally shot up to about $190. I imagine it will come back down somewhat , but we are in it for the long haul.

It took 12 -13 years to come back to what it was in 2005 when all those folks bought it for $125 (plus whatever down payment).

The other personal experience. My niece and her family just moved from CA to Boise Idaho a week ago, and the house they bought was a million bucks, and they are selling fast. Her husband works for a large house building company.

Mike, from where I sit, the situation has changed. People with the money and ability are moving out, especially retirees who sell their homes and buy elsewhere where it is less expensive to live. The state is still growing overall, but businesses are moving out in droves, and good paying jobs are less plentiful than they were.



Favorite places to go are Texas, Boise Idaho, Las Vegas, and AZ.

[Perry Hilbert Jr]

What doesn't make sense, is the number of houses that should be changing hands due to the additional covid deaths last year. Some houses are selling, others here have been sitting empty for almost a year. There is one notable place nearby that has been empty and for sale for almost 30 years. Somebody takes care of it. Just no one in it and always for sale. There are still houses going to foreclosure here. My neighbor's place will be going up soon, stupid solar energy con. Owes $80k for the panels and installation and still has an electric bill. For all the people who couldn't work due to shut downs etc, suddenly money seems to be growing on trees. Real estate has been a floating falsely bloated economy for almost a century, but rarely has it crashed to depression values. I recently saw the house where my great grandfather raised his 22 children. The kids must have been stacked like cord wood to sleep in that tiny place. Not like the McMansions popping up like mushrooms now. Two adults and one kid in a 5,000 sq ft shell on a 1/6th acre lot. We considered downsizing, but we can't find a smaller place that would be less in cost, taxes and insurance than what we have, at least not here. If we move 4 hours further south or west, yes. I would go in a heart beat, but Mrs. has a few years until retirement, and her employer's benefits are too good to just abandon for another employer.

[Rich Engelhardt]

I can't comment on home values but my daughter and family live on the west side of Cleveland in a booming area and when they bought their current home 3 years ago they were in a bidding war.We do have our spots - but - for the most part, NE Ohio prices have been stagnant until very recently. I can't complain though since it allowed us to accumulate 6 rental properties between 2002 & 2018.
Prices have been going up recently though - but - it's all due to demand & lack of product.
People just aren't going anywhere - so - there's no need for people to buy/sell.

[Jeff Roltgen]

But given that you're in CA you should already be aware of the effects on the housing market resulting from a large number of people moving in from out of state.
That's interesting - very contrary to what we're experiencing. Big influx of west-coast home buyers moving to the mid-west. Our local housing market average home price has gone from $150k to almost $300k in 5 years. According to highly reputable/experienced realtor in local networking group, inventory is record-low, cash sales at unprecedented levels, 60% of all sales in the region are due to out of state buyers with boatloads of cash = locals priced right out of it all. $40-$50k over asking price with written clauses to disregard appraisal values is the norm. Absolute heartbreak for first-time buyers.

General perception is an invasion of refugees from West-coast states jumping ship, as they discovered SD was and remains one of the most open states in the country, as it relates to Covid situation. Seems we got discovered by folks who wanted a vacation from self-quarantine, and we were the only place open. Many obviously decided it's their new home, which they can even more readily work from, again, as Covid necessitated. Lower housing costs, lower density of population, bringing much higher average wage levels with no state income tax to pay. (which we fear won't last much longer now, with this influx and brick/mortar going the way of the dodo)

Anecdotally, I'm hearing Nebraska (southern neighbors) experiencing the same influx.
U-Haul has regular visits from out of state clients travelling here to pick up units from our glut of U-Haul trucks and trailers due to influx, then heading all the way back to load them for their move out of their home states. Crazy.


Once that happens, and building materials start to come down again (if that's even possible)

Local Menards peaked close to $15 per 2x4 a month or so back. Now just over $4, so looks like the prediction of July building materials futures reducing the pain has indeed played out as expected.
We've never seen so many apartments and houses slamming up everywhere.
We also have an expansion taking place at local air base, so we're in a frenzy out here, to heck with what it costs. Build build build.

Wife and I realize how even more fortunate we are, considering we found our happy place 5 years ago. Our ideal shop and home location would have remained just a dream if we were faced with today's real-estate dollar figures.

[Tom M King]

This time, it's different than the 2008 crash.

Back then, lenders would lend the Village Idiot money to buy a million dollar house. Around here, new builders went into the business, and if they couldn't sell one house, they'd build two more to use those loans to pay off the first one. Things became Way overbuilt.

Now, anything that comes on the market gets sold quickly, and for more than the asking price. Realtors here have lists of potential buyers waiting for something to come up.

Our place has 60 to 75 waterfront homes on each of two opposite sides, and another 50, or so, that drive through our place to get to them (on a state road).

Last week alone, a nosy neighbor told me that 7 of the homes on one side had sold, in a couple of days each, for at least 10% over the asking price.

With so many people working from home now, a lot of those people are renting lake houses to work out of. The Nosy Neighbor told me all those houses were bought to put on the rental market. I'm sure the average price was well over one million. Houses that I built, and sold in the late 80's, and into the 90's for 3 to 400k have resold for a million and a half. Lots that we thought no one would ever want have some for 300k, and million plus houses being built on them.

I built one house a year, from 1974 to 2007 on this lake, but figured that everyone had gotten a lot smarter than me by 2007, so I decided I didn't want to have a house on the market in 2008. I was tired of it by then anyway.

I just hope this doesn't make property taxes go up accordingly, or we will have to sell out, and move somewhere else. I'll be like John Dutton, but with no one to murder to be able to keep the place.

[Dave Zellers]

This time, it's different than the 2008 crash.
.......
I just hope this doesn't make property taxes go up accordingly, or we will have to sell out, and move somewhere else.

Populating rural areas, means eventually sewers, town water and many other amenities. I live in such an area. It is not a question of if, but when, and how much, will taxes go up. The people who are bidding up these properties to buy them want these amenities. And they can afford them. Plan accordingly. Your taxes are going up.

[Tom M King]

There will never be sewers out here. They already have county water out here. We're on one little tip on one side of the river that forms one of the borders of the second poorest county in the state. It's a fairly large county, with total population of 20,000. They depend on these few square miles to fund the whole county.

About a decade ago, our taxes went up 400% in one revaluation. There is not a lot of space to build new houses, only on the worst lots that no one has bought before, and there are not many of those. Valuation has gone up simply because it's waterfront property, which goes up more relative to other places, as the population goes up in other places, and there are more and more people wealthy enough to pay larger, and larger prices for it.

We own a fairly sizeable chunk right in the middle of it, that I'm sure the county would love to have covered with houses. If property taxes go up into six figures, we'll have to let them have it.

[Richard Hart]

Wait until the evictions start for people that haven't made their mortgage payments during the pandemic. Only then will the real housing market show itself. I expect there will be lots of supply after the evictios and home prices will more than likely drop or at least moderate. Ridiculously low interest rates are falsely driving prices higher as well.

Well, I'll get in trouble for this comment but gonna say it anyway... that happens and we'll be that much closer to Civil War II.

[Curt Harms]

Wait until the evictions start for people that haven't made their mortgage payments during the pandemic. Only then will the real housing market show itself. I expect there will be lots of supply after the evictios and home prices will more than likely drop or at least moderate. Ridiculously low interest rates are falsely driving prices higher as well.

Anybody remember 18% mortgage interest rates in the early '80s? That would chill the hot R.E. market in a heartbeat. Let's hope inflation doesn't become as much of an issue as it was then.

[Howard Garner]

Definitely remember. Kept me from a job in Nashville, TN. Stayed in Goose Creek (Charleston area) after retiring from the Navy. Could not afford to buy at the higher interest rate of the day.
Happy with the way things turned out in the long run. Now in the Greenville, SC area.

Howard Garner MTC (retired)

[Kev Williams]

Anybody remember 18% mortgage interest rates in the early '80s? That would chill the hot R.E. market in a heartbeat. Let's hope inflation doesn't become as much of an issue as it was then.

Remember the sales pitches to buy at 18% back then? --the income tax deduction on the interest... How would that play out these days, as an offset?