[phaster]

was driving around today listening to the radio and there happened to be a segment on real estate.

basically in my neck of the woods, real estate in 2014 is now more expensive than the peak prices of 2007 (just before the bust), yet the "experts" say there isn't a bubble!

http://www.kpbs.org/news/2014/may/29/sa ... es-easing/

I just happen to have a few residential/commercial rental properties and looking at the valuations, it just kinda blows my mind

historically a quick and dirty way for a real estate investor to benchmark a property is use the GRM (gross rent multiplier) which in my neck of the woods has has ranged between 8 on the low end to 13 on the high end

http://realestate.about.com/od/knowthem ... howgrm.htm

had some brokers pitch me a property a few weeks ago and they mentioned one sale that they had was 18.5 (which I calculated is 3 standard deviations from the mean)

Sure california is "historically" higher than the national average, but an article just published caught my eye (San Diego had the second highest housing market salary requirements)

http://www.hsh.com/finance/mortgage/sal ... ities.html

Even though I'm closer to the 1% than most in terms of real estate wealth, this trend in "local" real estate prices is something I find troubling and have to wonder are the "experts" missing signs like they did back before the peak then crash that happened just a few years ago...

Personally I don't think an investment in real estate in my neck of the woods can be economically justified because the rents can't service the loans on a property

[copious.abundance]

California and the Bo-Wash corridor are outliers.

Here Are The Most Expensive Places In America

Check out the map in the article. You just happen to live in one of the most expensive places in the country.

[Keith_McClary]

There's a website for that:
http://patrick.net/

[phaster]

$this->bbcode_second_pass_quote('copious.abundance', 'C')alifornia and the Bo-Wash corridor are outliers.

Here Are The Most Expensive Places In America

Check out the map in the article. You just happen to live in one of the most expensive places in the country.

[Shaved Monkey]

Our local market has been going backwards or treading water for years.(its pretty remote)
Here the peak was pre GFC and we are less than half that in some places.
I was getting phone calls out of the blue with mad offers before the GFC and I wasnt even for sale.
Now the neighbours have had for sales signs up for years with no bites.
While capital cities and especially inner city is still going through the roof
Dads house is apparently going up at nearly 30% a year 2 years in a row.
Australian urban real estate is going mad and its only a matter of time before it pops.
But its being driven by rapidly increasing population (immigration),self funded retirees buying property for their personal superannuation funds and rich Chinese(and other Asian) investors.

[ROCKMAN]

Monkey - I'm not sure if it qualifies as a bubble but the market remains strong in Texas especially in hot spots like Austin. Even after the big economic bust back in '08 houses in Austin seldom stayed on the market for more than a month. During the boom it was only three days and on average sold above asking price. Similar to your neck of the woods: constant increase in population for job opportunities and a boom in salaries. The highest rate of salary increases over the last few years has been in the middle to higher income brackets. It might slide some if oil prices drop a lot but I wouldn't expect that to happen unless the country/world slips back into a serious recession. And if that happens Texas will probably feel less pain the other states.

[peterjames]

How is it that this particular thread is able to disconnect from the rest of the forum. Of course there is a real estate bubble. In a world without oil, I suspect in 30 years time, a house will equal 100 cans of baked beans. Thus right now, a house is worth 500,000 cans of baked beans, and over the next 30 years, it will decrease ( or baked beans will increase), until it is equal to 100 cans. Thats a bubble. You may even be able to pick up a 50th floor penthouse apartment for 10 cans (although you wont feel like taking your other 90 cans up).

[Pops]

Found this map of rent vs buy, pretty cool
http://www.trulia.com/vis/rentvsbuy-summer-2013/

Also this for san Diego (you've probably found it already, phaster)
http://piggington.com/



That is his personal brew of price/rent/income and it is perfect! Back in 2000-2001 when I thought the market was about to top I found a chart showing the real estate cycle is about 12-14 years going back to the war. This chart shows just how out of whack things got when instead of values falling in 2001 after the .dot bust, deregulation let all the money that was in the markets flow into RE with no restrictions on what kind of flim flam the mortgage "industry" could pull and it went out of sight. Since the "industry" no longer had to hold their own paper, they turned into used car salesmen - everyone from the local agent to the mort. broker, inspector, appraiser, underwriter and right on up the line to the slicer/dicer/ CDO hukster had no skin in the game so the only motive was commission and the final buyer got a black box with a worthless warranty from a rating agency in the seller's pocket!

What could go wrong?


Anyway, you can see from his chart that SD prices never did reach the typical low "clearing point" around the "index" level of 85 because of the government's continued bankrolling of the flim-flammery! - Damn, that pisses me off! Because of that, his index is actually back above the typical top value of 120 and I'd guess a bunch of crappy loans are still out there. So just on the value of that chart, I'd say you're heading into bubble territory and it seems logical that without major intervention like we have and have had, when that index falls, like it always does, it will fall at least to the typical historic clearing point if not further.

Personally, I think replacement cost is the best gauge, if buying existing is more than a few percent higher than building new, then it's too high. But I don't own any investment property so don't listen to me, LOL


And to PJs point, the world today doesn't work on PO time, it's still on OIl Age time, it mostly counts it's wealth in virtual bytes. But in the future, just like in the past, real wealth will be in the physical. The trick is to make the transition because someone will still be needing a roof and a payment in pork n beans will make wealth measurable in actual bites.

LOL.

[Tanada]

I sometimes wonder if future Historians will divide our history into three periods, Before Oil, up to say 1850, Plentiful oil 1851-2005, and After Oil 2005----

[peterjames]

$this->bbcode_second_pass_quote('Pops', '
')And to PJs point, the world today doesn't work on PO time, it's still on OIl Age time, it mostly counts it's wealth in virtual bytes. But in the future, just like in the past, real wealth will be in the physical. The trick is to make the transition because someone will still be needing a roof and a payment in pork n beans will make wealth measurable in actual bites.
LOL.

[AgentR11]

Nope.

Nice, comfortable houses available here all through the $100-200k range. Jobs are fine, commerce is fine. Mine's valued by the taxguy at about $80K, probably sell for a $100k or so if I did the lawn and got out a bucket of paint...

Its just not trendy to live here.

You want trendy, you PAY for trendy.. and pay big.

There was a similar article in the FT about UK housing, turns out, if you look at the country as a whole, housing has been getting more affordable over the past decade or so... *BUT* in the heart of London, trendy-central, prices are through the roof.

[Pops]

$this->bbcode_second_pass_quote('peterjames', 'E')ven if life does continue somewhat normal after FF depletion, I foresee law and order getting a little questionable. 3 households of 3 families are more likely to
become 1 household of 3 families, for protection and warmth etc.

[SILENTTODD]

Prices are rising again in Southern California. My best friend bought a house in Riverside California (which is nowhere near a beach!) for $280K two and a half years ago, at the bottom of the market. It's assessed value has gone up over $100K in that time.

My friend is a realtor herself and she tells me over half of her business involves cash offers from investors. They are not having to borrow the money.

[Pops]

LOL, P!

[FoxV]

I'll chime in with my little antidote.

I'm in a medium size town in Eastern Ontario, Cornwall that has been going through a mini housing boom lately. Although good for me and the great location/house/deal I have, however it is not a good thing for the rest of the country.

My town is (was) an industrial town in the post-industrial age. With the long death of factories and good paying jobs property values in my town are half the national average and a quarter of the big bubble cities (of which we are close too).

Now that everyone has been hosed on their savings and retirement plans they are selling there small and expensive houses in the big city and retiring to a large and cheap house here. I don't have an official number but I think 10% appreciation per year since 2010 is not unreasonable.

As for what you guys in the US are experiencing. It isn't so much a housing bubble as it is a Big Funds liquidity bubble chasing yeilds in REITS and rental "investments". All cash purchases are through the roof while home ownership is declining. Welcome to the Rentor society.

I say "Investments" though because being a landlord within the REIT model is doomed to fail, especially for single family homes. Margins on house rentals are thin and only work if you personally know your tenants and do most if not all the repairs. Add in property manager fees, Trust fees and repairs for unvested or even disenfranchised tenants and there won't be much left for a yield payout.

Its a bubble brought on by clueless financiers and easy helicopter money. It will only last as long as "The check is in the mail". And with GDP printing -1%? Hmm, I guess the mailman lost that check, again.

[Newfie]

$this->bbcode_second_pass_quote('Pops', '')$this->bbcode_second_pass_quote('peterjames', 'E')ven if life does continue somewhat normal after FF depletion, I foresee law and order getting a little questionable. 3 households of 3 families are more likely to
become 1 household of 3 families, for protection and warmth etc.

[Pops]

I don't see people leaving town for a while. High density, high value property sounds like a good thing to own as long as you own it clear.

[phaster]

$this->bbcode_second_pass_quote('Pops', 'F')ound this map of rent vs buy, pretty cool
http://www.trulia.com/vis/rentvsbuy-summer-2013/

Also this for san Diego (you've probably found it already, phaster)
http://piggington.com/



That is his personal brew of price/rent/income and it is perfect! Back in 2000-2001 when I thought the market was about to top I found a chart showing the real estate cycle is about 12-14 years going back to the war. This chart shows just how out of whack things got when instead of values falling in 2001 after the .dot bust, deregulation let all the money that was in the markets flow into RE with no restrictions on what kind of flim flam the mortgage "industry" could pull and it went out of sight. Since the "industry" no longer had to hold their own paper, they turned into used car salesmen - everyone from the local agent to the mort. broker, inspector, appraiser, underwriter and right on up the line to the slicer/dicer/ CDO hukster had no skin in the game so the only motive was commission and the final buyer got a black box with a worthless warranty from a rating agency in the seller's pocket!

What could go wrong?


Anyway, you can see from his chart that SD prices never did reach the typical low "clearing point" around the "index" level of 85 because of the government's continued bankrolling of the flim-flammery! - Damn, that pisses me off! Because of that, his index is actually back above the typical top value of 120 and I'd guess a bunch of crappy loans are still out there. So just on the value of that chart, I'd say you're heading into bubble territory and it seems logical that without major intervention like we have and have had, when that index falls, like it always does, it will fall at least to the typical historic clearing point if not further.

Personally, I think replacement cost is the best gauge, if buying existing is more than a few percent higher than building new, then it's too high. But I don't own any investment property so don't listen to me, LOL


And to PJs point, the world today doesn't work on PO time, it's still on OIl Age time, it mostly counts it's wealth in virtual bytes. But in the future, just like in the past, real wealth will be in the physical. The trick is to make the transition because someone will still be needing a roof and a payment in pork n beans will make wealth measurable in actual bites.

LOL.