Analyst Chris Thornberg doesn’t think this is a bubble market, and suggested that you should go buy anything you can get your hands on.
While the current environment may have the same frenzy/intensity of the last bubble, there are three reasons it won’t blow up like it did last time:
1. Banks have learned to be flexible on foreclosures.
They figured it out – the houses being foreclosed today are those with some equity, and either the bank is getting their full pop at the trustee sale, or if they have to sell it as an REO they might make some extra dough.
2. The government is in full support of the housing market.
Tweak the accounting rules, throw money at loan-mod programs, lower rates, and literally tell the banks to not do anything to harm the economy. Uncle Sam has your back.
3. We learned that a surprising amount of people didn’t freak out over being underwater.
They have to live some place, and with some support from the previous two above, they survived.
If prices stabilize, Bernanke and his buddies will come out looking like heroes. We don’t really need prices to keep going up around here; in most parts of North SD County’s coastal region we are back to peak pricing or higher.
Prices will ebb and flow. But the vast majority of those who bought in recent years are in for the long haul, and won’t care about short-term fluctuations in value – at least not enough to panic-sell.
IMO the biggest contributor to the housing bust in 2008 was the
No down & No Doc loans (more so in the out lying area’s).
Price was not the real issue, really bad loans were.
The test for a housing bubble is simple enough: Are a large fraction of buyers just speculators – buying because they think prices are rising and not because they would normally be in the market for a home? If not – not a bubble.
(large fraction = enough to be the main force driving prices up). That’s what causes a synthetic and escalating rise in price. If the market consists of natural home buyers (even if they’re buying now because of timing concerns more than practical shelter concerns) the market will naturally stabilize.
IMO not allowing really bad loans kind self corrects the over speculation thing.
California has a $2 billion dollar “slush fund” intended to help people avoid foreclosure. There’s $1 billion dollars left to date, and the administration infrastructure to implement it is finally complete as of now.
Better late than never, but it will help ensure softer landings for the intellectually infirm who chose invest in real estate.
Additionally, there’s a new element with this run: millions of Chinese, who are living in China, as well as millions of Chinese living here. In southern california real estate, they’re having a big party. Just because we aren’t invited doesn’t mean the party isn’t going on.
I suspect, if you have the means, it’s probably time to buy.
I agree, the fix is in. The only thing that will bring down home prices now is if interest rates go up. Which seems highly unlikely with gov willing to buy rates down through bailouts.