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.