WatchAll bubbles in ANY investment before completely crashing have a incomplete crash, denial, a false bottom, a sucker's rally & then finally a complete shit hit the fan crash into cannibal anarchy.
Who here thinks a false rally is happening due to low inventory from banks not listing & homeowners in denial; waiting for prices to go up, then planning on listing.
Thus, prices are only temporarily going up & a very short-term bubble is happening due to a larger ratio of demand going after a manipulated false ratio of actual inventory. This is why you have multiple offers & increased competition , thus increased prices...
Homeowners will then see the prices going up.... Millions of underwater homeowners will start listing & everybody will try selling including banks...
This will crash the market again like in 2008. I expect another crash in the end of 2012, this time much more severe & no more false rallies afterwards; just a rally of cannibals.
Do you guys agree? What do you predict? Do you think I'm right? Your thoughts?
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SFace says
This is true for me. I intend to sell most of my holdings when the yield/return doesn't make much sense. I would keep them forever if the market stayed stagnant because the cash-flow is good and the tenants are paying off my mortgages. The rental market will have to collapse 30%-35% for me to be cash-flow neutral. I will keep properties in good locations for my family and keep passing them down from generation to generation. That's the game plan, but who knows?
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Raw says
I hope you are being ironic, or heavily drinking.
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The only way new buyers in this economy can afford such prices is to be either the beneficiaries of rare circumstances (inheritance, lottery, being able to sell a similarly priced home, etc.), or via such exotic and unhistoric financing products that they are effectively renters whether they know it or not. The bottom is nowhere near here so long as prices remain so out of whack vs. incomes, and incomes are mostly going down or have been flat for the last decade with no end in sight. Prices will have to adjust to what people can afford, or else the property sits unsold, becomes derelict (Grey Gardens, anyone?), or gets eminent domained and turned into something else (like the way a lot of the mansions and near-mansions of old cities like Philly got chopped up and turned into apartments. This process will likely take decades to work out, because that's how long it took in times past.
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Mill Valley, CA
The 'numbers' don't support the prices today, in aggregate. Isolated markets may have individual characteristics and home prices have plunged enough already...but, in aggregate US home prices seem richly valued.
Median household wages have declined 4% in the past 12 years...if the under reported official CPI numbers (relative to the model used prior to 1990) are used...inflation adjusted wages have declined over 30%. This is not a recipe for higher home prices going forward.
Our government now forcibly controls over 90% of the residential mortgage lending in the US - thru nothing down Fannie and Freddie and close to nothing down FHA. As recently as the late 90's one had to put 10% down...and either pay PMI for having under 20% equity or, dependent on income, it was sometimes a better deal to have a higher interest, 2nd mortgage on the balance. All of this has evaporated.
Government has simply stepped in and forced lower down payments and created lower mortgage interest rates to make the average US family more comfortable with higher levels of debt while real income declines.
One doesn't know the Minsky Moment when these government led subluxations of normal market actions cease to have positive effect...but when that debt load becomes too great for the average US family to bear will be the time home prices tumble again.
But, it surely will....
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KILLERJANE says
No, there will be a cash crash. I don't know when, but it will have to be soon or people will be committing a lot of cash to an investment that is very fickle.
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KILLERJANE says
Here is the problem, wages are not increasing. Therefore, house prices cannot sustain themselves higher. If you understand that the stable housing market was based upon a 20 percent down, and you see that all we have is cash buying and 3 percent down, you can see that the market is very unstable. This instability will cause ups and downs.
It will cause bubbles of more frequency and crashes. 20 percent down is dead due to wage declines in a global society. We are not at the bottom of that. So, all the talk about the train leaving and all this bubble baloney is just fluff.
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Robber Baron Elite Scum says
Not to mention the losses they handed to the pension funds they sold the bogus MBS to, and the so called insurance, unregulated 'credit default swaps', they collected on that were paid by printing money that the banks paid to themselves. Now working people, especially you young folks, need to get back to work so you can pay the rent. Forget about owning. The stolen goods are not for sale.
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KILLERJANE says
Seems like a fair assessment. Even if PHX, LVS, or MIA were to lose another 20% ... actually home prices would fall ... what? Another $500 apiece? haha j/k
CA doesn't make any sense. Have relatives who make around $50k renting what they can afford ... a small, dumpy apartment that doesn't even have a real front door. They'd love to buy but everything in LA County is priced at $400k+. And those aren't the nice houses.
And they are the lucky ones who have a job. At some point in the next 10-20 years, those houses are going to have to change hands. And if incomes aren't WAY up by then ... I expect a slow, gradual decline in LA RE prices over several decades, which will gobble 30%+ or more.
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rfsanders says
People have to wake up and live multigenerationally. Seriously, take a look at Phoenix. The housing market is manipulated with few houses on the market, and rentals are hard to come by. Either leave Phoenix or move in with other wage earners.
Seriously, it has come to this and then the people wonder why the economy is not recovering. This is all about the banks recovering and Bernanke could give a rat's ass about the rest of us.
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Mill Valley, CA
I wanted to add to my post, but it was already getting too long, there is in all likelihood higher taxes on the way at both state and local levels and the aging of Amerika(sic) is happening. 10,000 Baby Boomers per DAY retiring bodes not well for resale prospects of today's mini-mansions.
Further, with Mexico and Sourh American economies, as well as the VAST majority if Asia better poised for future success...I don't see the waves of immigrants coming to the US as in decades gone by competing for homes.
There will be blips and dips, government intervention and innate yearning for a home of your own all pulling prices all over the place...but for all reasons I listed, and probably more I haven't, home prices would seem to be trending down, not up, in the future.
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taxee says
Oooooooooo.
America's Epitaph.
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APOCALYPSEFUCK is Shostakovich says
Royalty own all valuable land. The peasants rent the junk.
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taxee says
If people live multigenerationally, and are frugal and hate the banks enough to avoid getting loans, they can save money and the new normal will be that they have some savings.
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Robber Baron Elite Scum says
I think there will not be a bubble reflation n housing, though there will be asset bubbles elsewhere in other commodities. Housing will over-correct past the mean just as all asset bubbles throughout human history have done, but at a much much slower rate, a la Japan, and with a few bumps and troughs along the way. IOW not a linear decay. Since time is an asset (hard to quantify) you need to do the personal math and decide whether the personal dividends are there for owning your primary as opposed to renting. It all depends. I know a guy who records music and wants a home studio, so a primary residence in his case might make more sense. Not in the Bay Area, though. Why would anyone buy in a hot market? That's just poor financial savvy.
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bgamall4 says
You are thinking miles outside of the box with that one. We are a pain-free society, and unless pain becomes marketable or fashionable, people will endure as little of it as possible.
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JodyChunder says
People have already endured, Jody. Not in the bay area as much, but in the bubble areas. They know and they are changing their behavior as we speak.
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bgamall4 says
I know people have had a lot of woes these last few years. What I meant is, saving is painful. It's nearly a dirty word. Change comes second to frugality in the pain index.
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Madison, WI
It's not really a suckers rally, houses are cheaper or expensive (take your pick), because the interest payments are cheaper. That's why investors are gobbling up single family and they rent great. For many, just having a family is all they can afford. Eat or be eaten, in the U.S., we eat our own, it's a fact of life here.
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bgamall4 says
Endured what exactly? Most Americans consider $4/gal gas as a source of great suffering.
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everything says
That rent income may look like chump change compered to the losses those owners may have to eat if house prices crash again. The bailouts may not be so generous next time.
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New Renter says
The government and fed has manufactured this 2nd bubble... So why wouldnt the bailouts be as generous? If anything, unlike the last bubble... The FED is fully to blame for homebuyers going under the 2nd time around. Finger pointing will be much easier.
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I'm sure they are terrified. While they cackle and count up the trillions that are now legally theirs they are quaking in their boots.
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Buying real things with money you print in your basement is a sweet business.
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New Renter says
Many Americans drive a long way to work and 4 dollar gasoline is difficult. There is no transportation infrastructure. You watch, 4 dollar gas will take this economy down.
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BoomAndBustCycle says
The Fed and the banks were totally at fault for the first bubble, and for this bubble. I wrote an ebook, Ponzi Housing Scheme 21st Century and I make the case that the central banks were responsible for the first bubble in premeditated fashion.
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New Renter says
Yeah, the wealthy could end up with a lot of houses on their hands. It will get interesting. Some want to pool the rents into bogus securitized bonds and sell them to investors! Then they want to buy up the rest of the houses.
I think people will be able to drive rent prices down if that becomes the case.
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bgamall4 says
really? "people will be able to drive rent prices down..."
how to people do that? are you aware of supply and demand? do you even understand economics at a high school level??
This proves my point about anyone who believes 911 conspiracies, they are simply so lacking in ablility to think, they should never ever think... and ESPECIALLY not express those thoughts. It is better to be silent and thought a fool, then to post on a blog and prove it to everyone!
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When people who got foreclosed on in 2009 are getting $600,000 of loan money to throw around any way they like, I would say it's not a "suckers rally" per say, more like a suicidal rally.
The bubble is back.
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robertoaribas says
Leave unrelated topics and subjects out of a debate.
Otherwise, go shit on some other thread.
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bgamall4 says
Well, like all the rest of SHITE this crew has creeped up on a stupid public, food has doubled, gas has doubled, utilities are at all time highs.
Wait, if they get re-elected watch the TAX CREEP
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Robber Baron Elite Scum says
RobberBaron Scum, don't waste your time, just consider the source of the previous statement.
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Pleasanton, CA
Children in fortress neighborhoods are much less problematic. If they don't get a 4.8 gpa and get into Harvard, Stanford, Yale, CalTech, or MIT, they simply commit suicide! Problem solved!
If the decide to live and "only" go to UC, then they agree to wander the earth until wealthy before contacting their families again.
That makes the fortress neighborhoods worth the money. They will never deflate.
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robertoaribas says
Multigenerational living will free up rentals. It already has in many cities. It drives rents down.
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Reader says
Yes, there is a squeeze, as gas and other factors go up in price, and wages drop. That is a real squeeze and is caused a lot by speculaton in those markets. There are many more speculators than ever before.
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El Cerrito, CA
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When buying trillions in property with money printed in your basement you can rent them out just for the taxes. The object is to make it look like you're running a business and that you're a nice guy.
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Heck, If you are the 'right' people you can even let folks live for years in houses for free in order to extinguish any value or claim that some sucker investors thought they had. Then pick up the property for almost nothing with the full knowledge and cooperation of the US government.
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Ceffer says
What is this so-called "fortress" or GPA, big name school language bullshite? Real money, real old money doesn't live this way or act this way. You sound like a typical social climber by the language you use. You are watching too many movies.
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bgamall4 says
No, rising rents and home prices will bring the economy down.
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New Renter says
Combination of all the above. Rents are dropping in many areas. House prices are bubbling in some areas and should be watched. Rents are tight in some cities and that will hurt the economies of those cities.
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taxee says
It works a little differently than that. The banks get the money as reserves. They can't lend those out to anyone but other banks. But they are more confident if the other banks are strong. So they lend to the rich.. The rich then pay cash for the houses.