Friday, April 4, 2014

Bubble indicators

"In the Bay Area, the cash is coming from deep-pocketed tech workers. In New York, Wall Street workers, flush with bonus checks, and foreign buyers looking to park assets, are paying with cash. Meanwhile, South Americans have been buying up real estate in South Florida as a safe haven for their money. In February, more than 71% of sales in the Miami area were all-cash deals.
...As housing becomes more expensive some worrisome trends that occurred during the bubble years are re-emerging, said Stan Humphries, chief economist for Zillow. These include a greater reliance on non-traditional financing, like low-downpayment loans and adjustable-rate mortgages, and a greater pressure to move further away from urban job centers in order to find affordable housing."

CNNMoney
h/t Icepick
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Has anyone noticed indications of an inflating bubble?

26 comments:

edutcher said...

I don't think it ever went away, they've just been papering it over with QE, but The Blonde, who used to do real estate and wants to move to a warmer climate, says she sees bad things right now.

bagoh20 said...

I have a few homes in Florida. They were very cheap to purchase in recent years, but they are rising quickly now. The return on income property in Florida is great, because the purchase prices are so low relative to the rents. If you buy with cash the return is hard to beat. Regardless, I'm trying to sell all mine there, because it's just too much hassle to manage from 3000 miles away, and paying a management company eats up most of the income. If you can manage and repair things yourself, you can do pretty well and consistently make a 10% return per year on the investment, not even counting appreciation, which has been adding another 10% annual the last couple years.

bagoh20 said...
This comment has been removed by the author.
bagoh20 said...

The prices of homes are rising everywhere, because banks are starting to get loose again with credit, and as in the article, cash buyers are using real estate to get their money out of banks where it's not doing anything.

I've heard of some banks starting to do the same stupid shit they did before like loaning on stated income rather than proven. Still, this is not widespread, the prices are still pretty low historically, so a big downward move is unlikely in my mind - maybe a stagnation or slight pull back, but there is no room to go much lower like before. If it's a bubble, it's just a tiny one, and I don't expect it to pop.

Shouting Thomas said...

Thank God, my little cottage in the Catskills is paid off!

You can't even rent a room in the towns around Woodstock for what I pay in real estate taxes and utilities.

deborah said...

Bago:
"I've heard of some banks starting to do the same stupid shit they did before like loaning on stated income rather than proven. Still, this is not widespread, the prices are still pretty low historically, so a big downward move is unlikely in my mind - maybe a stagnation or slight pull back, but there is no room to go much lower like before. If it's a bubble, it's just a tiny one, and I don't expect it to pop."

So is all of this to make the economy look like it's in recovery, for the midterms?

deborah said...

Where does she want to go, Ed? I think you two would make great Texans :)

Paddy O said...

I didn't see if it noted it, but I've heard anecdotal evidence about this affecting the SoCal market, with a lot of Chinese money (especially) keeping prices inflated.

One particular story (though I've heard a lot other indications). Some friends were looking to rent a house, and found a great one, with two prices, one a higher (little higher than market rate) and then another one about $200 less, but they had to keep a room available for the Chinese owner to stay in once a year for a few weeks to keep his Green Card active.

Shouting Thomas said...

If you read Steve Sailer, you already know that it is the Fed that is pushing for "liar's loans" once again, in the purported pursuit of non-discrimination.

Appeals to "fairness" and "equality," in case you haven't noticed, have now become the favorite tactic of the con man seeking to fleece the sucker.

ricpic said...

How can you not notice the bubbles? Food bubble. Gas bubble. Clothing bubble. Medical care bubble. All of life's necessities inexorably rising. Meanwhile those who managed to save have nothing safe to invest in that will yield a decent return, or any return. Because zero rates must continue so that the compassionate ones can INCREASE the compassion ha ha ha ha ha ha........

edutcher said...

deborah said...

Where does she want to go, Ed? I think you two would make great Texans :)

Why, thank'ee, ma'am. Fact is, we've been considering Texas.

Problem is, we know know but one lady in the Lone Star State, but The Blonde has some family and a couple of friends in AZ.

PS From where are you (if it's OK to ask)?

deborah said...

I split my time between VA and OH.

Two summers ago I went out to NM for a few days. Love-ly. I could easily see myself vacationing there one month a year, or so.

deborah said...

Ricpic, I originally had this entitled crash indicators, but felt that might be too much. These interconnected bubbles could take years to pop. I take comfort from bago's 12:37.

Icepick said...

You can't even rent a room in the towns around Woodstock for what I pay in real estate taxes and utilities.

Nothing feels so good as a paid off mortgage. We desperately need a major overhaul of the house, but the only way to raise the funds would be to take a loan out on the house, and I am loathe to do so. For about $400 a year in property taxes, I own this sucker. It's the reason we stay in this fer shit 'hood, and the one big plus in our financial situation.

Needless to say, property values are NOT rising in my neighborhood.

If any of you want to help me bust these blocks, I can tell you were you can buy houses for about $30,000 cash.... IF you can figure out who owns the property!

Icepick said...

This is a weird bubble. So many of the homes are being bought with cash by the seven percent (or so) who have not only recovered but are actually making money hand over fist now.

So, if prices crash, this shouldn't hit the banks as hard, nor the owners. They don't have mortgage payments that won't come in, or mortgage payments to make, respectively.

What this looks like is what happened to China in various times during its history, when the economy tanked, and all the rich connected folk bought up all the property turning most of the peasants into serfs.

There's also a section in the Bible about a similar scheme. But I don't think I'm allowed to mention that.

Icepick said...

And I hope to get to the new employment numbers sometime over the next few days. The White House is touting something that isn't exactly kosher. (Yeah, who'd a thunk it? The White House lying!)

Actually, if' I'm lucky someone else has already crunched the numbers.

Icepick said...

Oh, actually easier to get to the numbers I want than I thought it would be. (The FRED site from the St. Louis Federal Reserve Bank is a wonderful resource for data hounds.)

I'm Full of Soup said...

Anecdotal- spoke to a realtor the other day and she said they need more listings i.e homes for sale.

If she is correct and the number of buyers does exceed the number of sellers, asset values will tend to bubble up.

edutcher said...

deborah said...

Two summers ago I went out to NM for a few days. Love-ly. I could easily see myself vacationing there one month a year, or so.

I agree. I read a lot about that area as a kid (mountain men, Santa Fe Trail, etc.), so it intrigues me.

The Blonde initially wanted to retire to Albuquerque (wasn't crazy about the fact the highway is on stilts around the town), but, if we ended up in NM (unlikely), wouldn't mind Socorro.

deborah said...

I think the biggest factor should probably be friends/relatives that live where you're going. I don't want you two to feel 'alone.'

deborah said...

Ice, has your neighbor been hauled away yet?

Icepick said...

Ice, has your neighbor been hauled away yet?

Yes and no. Two weeks ago he got arrest for felony domestic battery, along with two misdemeanors. He spent a week in jail before he could raise the $5250 he needed to bond out. (He needed $1250 for the new charges and another $4000 as additional bond on the hit and run charge.)

I don't know who he attacked but it seems most likely it was his girlfriend. I know a no-contact order was put in place. If so, they were violating that as they had gone by the house next door for the first time in four days to check on their dogs.

In all honesty, those dogs should eat the two of them. You know I'm no fan of the dogs, but this is purely a problem with the owners. And they've been leaving them alone for long stretches again.

Anyway, his pre-trial conference on the hit and run was Wednesday. His trial for that is set for the 14th. One way or the other, mostly likely much sooner than later, he's going to end up in a prison.

And the foreclosure is preceeding as well.

Icepick said...

deborah, I've got a new post up about the employment situation. I'd kind of like for it to get some more attention, so I'd love it if you either linked it up here or even made it a guest post.

Thank you for the kind attention.

deborah said...

I'm glad for you about the neighbor.

You're so welcome, and I'd be happy to...ANY time. But will you email me the link to the chart, I'm having trouble getting it to transfer...thx.

deborah said...

Okay, I figured it out.

Michael Haz said...

Depends on where the property is located.

My home in a green, leafy suburb in Wisconsin is worth about $100K less than in 2006. There's upward movement, though, evidenced by recent sales prices of other homes on the block. That market is still skittish, and a DOW crash will hammer prices again.

I'm selling a place in eastern Tennessee next month. I'm taking a $75K haircut, which is about half of the loss had I sold it last year at this time.

I want to look for a home in Florida, and it's really a mixed bag. Miami and eastern Naples are booming. The Panhandle still has good bargains, as do some iffy communities. The Keys also have rapidly rising home prices.