Mish suggested yesterday that the real estate market will end up the same as last time for many folks who are feeling pressured to buy now or be priced out forever. He is probably right that there are buyers who don’t investigate enough and end up making bad decisions – get good help!
He was commenting on this Bloomberg article that cobbled together a bunch of unrelated quotes, and topped it off with the sexy headline:
Locally the inventory has seen a dramatic change – here are the number of NSDCC houses listed under $900,000 in the first seven months of the year:
| Year | |
| 2010 | |
| 2011 | |
| 2012 | |
| 2013 | |
| 2014 |
It has definitely been tough on the lower-end buyers, with prices rising rapidly over the last two years. But buyers would be crazy to compromise on location – buy a smaller house or fixer instead, or just wait and see what happens.
Potential buyers who haven’t bought by now are exhausted. As soon as school starts, and the Chargers begin their Super Bowl run, buyers will have plenty of distractions, and demand will be visibly reduced. There will be sellers who need to sell that will be disguised as over-priced turkeys too – make offers!
Reader elbarcosr left this comment:
And I am not sure anyone is yelling the buy now or be priced out forever bs anymore. I *think* the prevailing wisdom is that with the gains over the last 24 months or so, prices are back to where they should be more or less, and given all the other factors, huge gains or dips are not really in the cards. So if you want to buy a house to live in, go for it. Speculating on big short-term price appreciation at this point is folly — as is waiting for a big dip in prices. Put 20% down, grab your 4% 30 year fixed loan, and be happy.
None of those articles provide any evidence of bubble-like behavior. I quote calculated risk here: A bubble requires both overvaluation based on fundamentals and speculation. There’s no speculation right now: no more all-cash/investors, owner-occupied financing is 100% solid with skin in the game. Mish asks how you’ll hang onto your house if you loose your job – you don’t! Divorce and job loss / move are the normal reasons to sell. And maybe lose money, or maybe not. Depends on circumstances.
Everyone suggesting that “we’re going to end up like 2008” has yet to advance any coherent argument. Why sell when you’re paying 4% and don’t have to? Short of losing your job, of course. 40% decline? Why and how?
Oh, and the renting utopia? Unfortunate story for one of my daughter’s friends from school: turns out a landlord doesn’t need to renew your lease, and school boundaries aren’t big. I am sure everyone knows how much kids love changing schools. They bought a house last month.
Agreed, and thank you bode.
The doomers like to chide over the “it’s different this time” thoughts, but when it comes to getting a mortgage…..it is different this time.
We were reminiscing the other day about Countrywide financing at the last peak. Not only did they finance anyone with a 700 credit score with no questions asked, but you could also submit a rental agreement to cover your existing house payment and move up with ease. We would sell the previous house later after the buyers moved into the new one, which today is virtually impossible. Buyers now have to qualify using the PITI payments for both houses with no rent credit.
The condition of the home didn’t matter either. I sold an old house that was a teardown – missing windows and doors, and had holes in the roof – and Angelo financed 90% of that purchase!
Last week I had an appraiser call to tell me he wouldn’t appraise the house unless it had smoke detectors! I asked, “You mean carbon monoxide meters, right?” Nope – it had to have smoke detectors on a purchase with 25% down payment!
Are you sure. Id on’t remember the stock market having excessive speculation back in 2006-2007. Everybody was speculating in real estate and the stock market was going along for the ride. Did the fact that there wasn’t tons of speculation in the stock market at the time prevent the market from crashing over 50%. The real estate market might not have excessive speculation but what’s prevents it from being collateral damage to some other bubble bursting. Especially when Wall street has become involved heavily in investing in residential real estate. I would expect real estate to weather the next bubble bursting better than some other asset classes but I certainly don’t expect real estate to be unscathed.
“prices are back to where they should be more or less”
Oh really? I guess it would follow that…
* Interest rates are back to where they should be
* Government deficits are back to where they should be
* Central bank interventions are back to where they should be
* Household real incomes are back to where they should be
* Employment levels are back to where they should be
I could go on.
Are you sure you want clients to wait until the Bolts start a Super Bowl run? 😉
Anyway, the number I watch is the typical mortgage payment for SoCal buyers published every month by Dataquick. That is well below the peaks of both 89 and 06.
If we can keep it on the rails, real estate may continue on the upward track due to demographics:
http://www.businessinsider.com/calculated-risk-demographics-2014-8
Your market isn’t what I’d call “first time” home buyer territory.
I sure wish you’d include Oceanside in your data, we’ve got a lot of sub 400k homes sitting right now.
Thanks again for the interesting articles regardless
Tim – welcome.
I don’t think this is solely a first-timer problem – anyone who wants to spend under a million is faced with low inventory, rapidly-rising prices, and little hope.
The sub-$400,000 homes in Oceanside suffer from the same problem you have in towns like Vista or Escondido. They are older crapshacks that are all different, yet agents try to price them off the $/sf metric. Those in great condition sell, and the losuy ones sit.
Oceanside is this blog’s Kryptonite, sorry. If I start talking about that, I lose my higher-end readers in a flash.