patrick.net

yeah, I'm familiar with redfin as a source. I wasn't meaning 1990 exactly, but there abouts. What would people say price/sqft SHOULD be at to equate to historical, prebubble levels. When you look at a house today, how would you determine "oh, this house SHOULD go for xxxx, pre bubble levels"

UAVMX says

yeah, I’m familiar with redfin as a source. I wasn’t meaning 1990 exactly, but there abouts. What would people say price/sqft SHOULD be at to equate to historical, prebubble levels. When you look at a house today, how would you determine “oh, this house SHOULD go for xxxx, pre bubble levels”

There is no yardstick to measure that because heavy government involvement into the housing business has thrown all the equations off. Some may not agree with me but we are in for Japan style of 2+ lost decades if rates were to stay super low, IMO.

People say 90's because the 90's saw so little growth in RE. That was the sole reason for the start of the Bubble in the places hit first and hardest like in South Florida and Las Vegas Nevada. That a correction was long over due. Now it's easy to say you want more, simply because something has been selling for the same thing for so long. But the fact is, if not for Easy Loans and Zero interest Liar Loans, then there would have not been the buyer Volume to create the demand to pay the new premium due home prices, that became the bubble.

Well how about now, would home value have gone up by now, if not for the bubble? I mean would there be some appreciation from the stagnant prices of the 90's? If not just a little?

I say probably, but where there is an action there is an equal opposite reaction. So it's only natural that the Bull curve RE saw through 2007, that there would be an equally impressive Bear Curve just as extreme on the other end, before flexing back somewhere healthy in the middle. But thanks now to all of the hemming and hawing to manipulate the natural order of the Market. The frequency of the curve has been altered and now is a sloppy bouncing squiggly line, that is likely to go anywhere.

The market is no longer operating on the natural order of things.

Going back to 90's prices, while that might be extreme, we might be lucky if that's as far as it falls in some neighborhoods, while other neighborhoods, will seem like the bubble never busted.

I saved some real estate flyers from the mid 90s from my part of California (rural). A nice house in my area back then was around 179,000 dollars, or 2.5 times my annual income back then (3 times my current income)

That median price went up to 500,000 around 2005, and is now down to 300,000.

I'm in a bad rental, but negotiated a 20 percent rent decrease two weeks ago. So I am staying put for now.

You can try to use historical home price to income and home price to rent, and verify it by graphs from back then, too.

ptiemann says

In some areas the 1990 prices were abnormally low, because of the earthquake in late 1989.
E.g. I saw a house that sold for 250k in 1988 and for 125k in 1990.
It may have had serious damage in 1990.

Yes, Santa Cruz was heavily damaged as was the Marina in SF. But not much was hit between the two locations. A few homes off Broadway in Los Gatos was flattened while the home across the street were untouched.

This building on East Main st was hit bad but the large glass windows across street of an insurance broker and Los Gatos Ferrari dealer (long gone) was untouched. Go figure.

thanks for the comment guys....

so it sounds like the only trusted way to figure all this out is RENT/ BUY ratio calculations, but who's to say in some areas rents aren't high?

For example, in my area most houses are being rented between 1000-1400 a month, lets say thats a 1600-2000sq ft house. So if you can buy a house for 150k to 200k and rent at those prices it makes sense to buy now.

The house I'm renting now, is $950 for 2000 sq/ft, because the rental market was more flooded then it is now. As with everything else, rent prices fluctuate, so how are you supposed to calculate that rent/buy ratio? Who's to say rents in my area aren't too high right now, and that when prices continue to come down, so will the rents?

Everyone can shout (and I agree) that right now it not the time to buy in most places, and I think the same of where I live in SOCAL. But how do I make the right, informed, calculated decision on when IS the right time to buy? Running the numbers right now, it seems like its starting to make sense to buy, but I still think prices will come down. (the quality of the houses for 150-200k aren't the greatest)

UAVMX says

(the quality of the houses for 150-200k aren’t the greatest)

Yeah you gotta be careful with that. I remember when houses finally started falling in that range, the choices available were appallingly insulting. I was beginning to think this is it. But finally after another few years, better houses started showing up in that range, then prices on those got even lower. 150-170K. Could I have bought lower? Sure but the math works for my needs, and my monthly nut is comparable to what I've been paying in rent, so I try not pick at it. I didn't buy this house to make money, flip or hedge against inflation. I bought the house to live a family life, that we've been missing in rental life.

Like seeing something cool for the yard, or a permanent fixture for a house, things renters don't or shouldn't buy for the house they rent. "Yeah someday when we get a house..." we would say. We said that so much in the last decade, that the last few years. I have just gotten tired of feeling like a part of my life is on hold because America failed elementary math, and operated on the mantra "It is what it is" for ten years, over inflating home values.

That's gotta be worth something, when you factor in when and where the bottom will be.

"How long do you really want put your life on hold for these idiots?"

I mean how much is it worth just to not be in the bad place of worrying and wondering when will that last 20-40K fall? I think at one point I would have given someone 20K just to find me a house that could close with out bullshit, or one end playing the other end, banks not accepting offers, and ghost bidding wars.

I paid 160K, But if the house falls another 20-40K just not having the stress from Sept '10 - now May '11, is worth that easy.