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An Insider's Guide to North San Diego County's Coastal Real Estate
Jim Klinge, broker-associate
858-997-3801
klingerealty@gmail.com
Compass
617 Saxony Place, Suite 101
Encinitas, CA 92024
Klinge Realty
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Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!

Jim Klinge
Cell/Text: (858) 997-3801
klingerealty@gmail.com
701 Palomar Airport Road, Suite 300
Carlsbad, CA 92011


Posted by on Mar 27, 2017 in Boomer Liquidations, Boomers, CA Homeowners Bill of Rights, Foreclosures/REOs, Jim's Take on the Market, Loan Mods, Market Conditions, Mortgage News | 3 comments | Print Print

Will The Real Estate Bubble Pop Again?

Our local home prices have risen so quickly that it feels like we’re in ‘bubble’ conditions again – could the bubble burst this time?

The last two times the real estate bubble has popped, it was due to banks having to offload their foreclosed properties for whatever the market will bear.  They flooded the market, and buyers – and prices – backed off.

But that has all changed now.

Look at the new devices being used to avoid a flood of desperate selling:

  1. New accounting rules.
  2. California Homeowners Bill of Rights
  3. Reverse mortgages

The accounting rules were altered so banks could hold their REO properties longer, and the California Homeowners Bill of Rights has, in effect, stopped foreclosing.  Lenders are now required to offer a loan modification to anyone in default, and only if the homeowner can’t or won’t qualify are they at risk of being foreclosed.   With today’s higher rents, there isn’t much relief for those in default to give back their house and go lease one nearby.  Besides, with our higher home values today, they can always sell before getting foreclosed.

Homeowners who need money can get a reverse mortgage too, as long as they haven’t been tapping into their equity already.

We end up with virtually no desperate sellers who need to dump on price.  Someone who wants to cash out quickly can price their home at last year’s comps and look like a deal!

The game is rigged – the Banking Cartel won’t let the bubble pop again!

For the bubble to pop, we would need a dramatic shift in the supply and demand – either a flood of homes hit the market, and/or we run out of buyers.

I thought we’d be seeing more baby boomers unloading their homes due to downsizing or sickness, and while the market consists mainly of those listings, there aren’t enough of them to call it a flood – at least not yet.  Because they are in quality locations, more kids are probably trying to buy out their siblings and take over their parents’ house, rather than sell it.  They could be moving in with the folks too, rather than sending them to assisted living.

Could we run out of buyers? You would think there would be a price point where buyers can’t or won’t go any higher, but there seems to be a steady flow of people with more horsepower.  We saw two weeks ago the prediction that the population of San Diego County is expected to grow by 700,000 people by 2050, which is over 21,000 per year – where are they going to live? Will they be rich? They will need to be!

There hasn’t been enough (has there been any?) sellers so desperate that they had to dump on price – instead, they just keep waiting.  We would need more than a few price-dumpers to start a panic, which could cause the market to flood with supply and burst the bubble.

Some air might escape occasionally, but it is doubtful that a market change could occur without the government finding a way to save the bankers.

People like this guy think the conditions are ripe for a downturn.  But if prices started falling, sellers are more likely to wait, than dump, which would cause our market to stagnate, rather than crash.

3 Comments

  1. My sentiments exactly. After four years of watching the local real estate market and witnessing the machinations of the local officials, federal officials and the federal reserve itself, it’s a whole new ball game and they’ve discovered a way to kick the can to infinity if the banks so desire, which they do desire!

    They were too big to fail back in 2005-2008 and they’re even larger today than they were back then!

    So, we decided to go ahead and pull the trigger while it’s still somewhat economically possible. Since I believe that prices will keep increasing and the feds will just bring back the magic juice of making loans more available to people (lower FICO score requirements, etc.)

    Who knows how crazy it’s going to get before it evens out.

  2. What’s your take on all of the Hedge funds that bought up properties 2012-2015. I’m starting to take notice on one fund selling a couple dozen homes in San Diego at steep prices and keeping them on the market to prop up prices until they sell. What will happen when hedge funds short the market and start offloading? This would seem to be a different outcome than banks holding the title.

  3. Yes, they could cause some panic in areas where they unload all at once. Could they be waiting for the tax-reform bill to pass to see if they get more-favorable treatment?

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