Posted on 01/30/2008 8:15:28 PM PST by Freedom_Is_Not_Free
It is obvious to most people that we are in the midst of a national housing bubble. Nevertheless, there are still plenty of naysayers who are telling anyone who will listen that there are local bubbles only.
Using the 2.8 formula, it is clear that local bubbles aren't the problem. Median home prices are inflated in every U.S. region. In the West, where the median household income is $52,249, median home prices are more than double what they should be. The situation is similar in the Northeast, where the median household income is $52,057.
Median home prices are not quite as high in the South and the Midwest, where median household incomes are $43,884 and $47,836 respectively. Even so, prices are still 30 percent higher than what they should be in the South and 16 percent higher than what they should be in the Midwest.
(Excerpt) Read more at homeguide123.com ...
From what I see, folks used their house equity as a money well and drew off of it for stupid crap instead of just leaving it alone and using the house to live in. Using the equity in their house as a bank for meaningless junk is not the same as using a house for what it is designed for.
Of course, all the modern whiz-kid finance whizzy economists will say that the money does no good sitting as equity in a house.(I heard that our economy would have been in the dumper if real estate equity loans had not put a ton of money into circulation.) I will take issue with them though as our house is paid for and just gets more valuable every year. No loans of any kind now and will never be again for us.
Now these folks are going down the tubes and blaming it on the mortgage companies and banks.
Jim Cramer tonight said the housing market will rebound in 6 months due to the Fed’s actions over the past 10 days.
I want a big house and a big yard. However, I’m in California where typically you get a small house and a tiny yard.
I have a large house, and a small yard. The yard is big enough for a decent sized pool, a swing set and a large patio. However, my neighbors are toooooo close. Plus there is not grass to speak of in the back yard except where the swing set is.
Unfortunately, in San Jose most houses don’t have large yards, especially if they were built in the last 20 years.
2157 finished feet is not an average size home.
Depends on where you live. In many parts of Texas, you could do it easily. You can get a very, very nice house on a decent sized lot for $80/SF or less.
I would suggest you sell it and buy it back in 2 or 3 years.
“My modest house in California that I bought in 1972 for $18,500 and sold in 1975 for $30,000 now goes for half a million. Insanity.”
After returning to KC from almost 20 years in Los Angeles, I bought my very first home, a 3 bed, 1-1/2 bath, 1950s Cape Cod for under $200,000. Looking at similar homes online, it would have cost me between $600,000-$800,000 in LA. Even more in Brentwood, where I lived. A friend had her small Van Nuys home on the market for $625,000 and when she moved to Lawrence, KS (where KU is) she bought 2 bedroom townhome for about $90,000. Even the crappy 1 bedroom condos in LA start around $350,000. Just amazing.
Competition in over-built marketplace of new housing-- areas effected are always regional and those areas suffer over and over again every few years repeating the same bad habits. Poor land management, planning boards which cater to big developers for more tax money, self interests, etc.
Second Home Buyers are still building million dollar homes, or remodeling in the upper income because they do not have debt hanging over their heads. These buyers are often mostly all cash. Takes years to build true wealth. It is so common to see families that want to look like they have wealth, hire someone to clean their home, mow their lawns, care for their kids when that money saved over time would have built real wealth ! Their fantasized destiny is doomed to fail.
Try the coast/lakes of Maine where you cannot replace the land/location. Look at Long Island, NYC..same scenario. Often sellers can afford to wait it out and wait for the paranoia (these stories are nothing new) to pass.
Parts of the North East - parts of Maine, Long Island and NYC are areas that has always held their value, land is scarce. The Midwest - Chicagoland - has burbs that are always stable resulting from better growth plans/controls; however, other areas more west have build in great mass with slower returns because of the competition from new vs. new and existing homes.
Florida has always been over built with condos, etc. Florida has, to many buyers, now dropped out of favoritism for their second homes.
Overseas real estate markets are coming into play--Paris, Bordeaux, Tuscany etc. Might say real estate investment for many Americans has moved offshore. Away from the same shopping centers with the same football sized parking lots and chain stores/eateries, etc. People are traveling abroad as their "generation genre" reaches later years to recapture the beauty, romance and history which still remains.
Don't buy with too little money down just to flip. Too many Einsteins listen to these get rich quick morons on TV scamming their books and tapes on how you too can be rich like them while standing next to their(doubtful) yacht or beside a Ferrari! People have to take responsibility for their actions! If you can't afford it, buy something you can afford. If you are afraid what your friends will think, get new friends.
These articles make my stomach turn as they play on paranoia of Americans. What a stupid country we have become!! Spoiled, always belly aching and downright Dumb!!! Markets always have and will continue to make adjustments.
A Foreclosure too often is just an easy way out from one's responsibility. There are always exceptions--health, loss of jobs; but still proper planning can help one weather any storm.
What bothers me now is that "these people" will expect the government to bail them out with our money, which one could argue, with attitude, that our government will spend it anyway. But shouldn't our tax money be used for the betterment of us all and not on just a few in order to feed this so called overspending addiction which has become so epidemic?
It was more than just Clinton. Dubya promoted his “Ownership Society” and added gas to the fire Clinton had lit.
Cramer needs to lay off the crack pipe. The Fed cuts won’t solve the affordability problem, at least in California. Either incomes will rise dramatically or prices still have a long way to fall.
You're right. Good points.
Prices will not bottom out until they reach the point on the curve where they would have been, had there not been a bubble. To find that value, just calculate the average rise over the last 25 years, then extrapolate to the current year.
Exactly, and as per usual, they're blaming President Bush for the problems they created.
There have been at least two ‘bubbles’ that burst since we bought our first home in 1982. It’s called a real estate cycle, and it happens every 10 years or so.
Lordy, I hope so!! We hope to be putting our house on the market in the summer! We want to get out of MA and head back home to MS!
It's even worse in Northern Virginia, even though annual household incomes in Fairfax, Loudoun, and Prince William tend to approach the $100,000 range.
Nice to see someone finally agreeing with my dad (a portfolio manager), who has been telling this to the folks that we know for quite some time already.
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