[BMW F22]

As we are aware, the real estate market has gone up like crazy in the last few years. Homes are being snatched up within days of hitting the market- many sold for over asking price. New, cookie cutter homes are being built every day to satisfy demand.

As a prospective home buyer, one should, IMO, think about how much those homes will be worth in the coming years. With prices being at an all time high, the danger of overpaying is real.

So, will the RE market stabilize or crash in the next few years or will the trend continue? What are your thoughts? An example is that a home in a good area was $170k in 1995. That same home was about $800-900k in the early 2000s. Now it is going for $1.2M+. These are homes built in the 50-60's.

PS- I live in NorCal so this trend may not apply to other parts of the country.

[Alen E90]

Well the California RE market is skyrocketing at the moment, but from what I have heard from many people that I have spoken with is that there is a huge chance that unfortunately the market will crash again

[kprocivic]

I think your example is more specific to the location. The market isn't really inflated right now.

[JasonCSU]

The housing market here in the Denver metro area is one of the hottest in the country right now. There was a recent article I read stating there was "false demand" prior to the last bubble caused by the relaxed lending of the banks which allowed many buyers into the market. This shot up home prices, but many of the buyers used adjustable rate mortgages which they could no longer afford once the rates adjusted and payments went up. This forced many to sell which then flooded the market with a "false supply" sending prices down.

The article went on to say the high home prices around Denver we are seeing now are due to basic supply and demand which is probably true because people are moving here in droves, which sucks by the way.

[okusa]

Originally Posted by Alen E90

Well the California RE market is skyrocketing at the moment, but from what I have heard from many people that I have spoken with is that there is a huge chance that unfortunately the market will crash again

The California RE market is not skyrocketing and is not in jeopardy of a correction. It is only 3 years off the 2012 rebound and growing at a historically steady rate. Based on history, not what "many people" say, there should be at least another 4 years of growth before there is any sort of correction. The LA job market is rapidly growing. However, the housing supply is not increasing. That means the increasing prices are the direct result of increasing demand and limited supply. Also, as foreign markets continue to struggle, investors will be increasingly looking to relocate their money back in stable U.S. assets, e.g., real estate.

[ScBlacksunshine]

Nah, housing will never go, it will only go up and up

[TXSTYLE]

Originally Posted by kprocivic

I think your example is more specific to the location. The market isn't really inflated right now.

This. I have worked in all aspects of the mortgage and real estate industry. Thank goodness home values and consumer spending/consumption is up! But it's not epic or anything. As a whole, absolutely home prices and real estate is up. But it varies greatly from market to market. A friend of mine in So FL said that his condo has gone up nearly $150k in the past 12 months. Whereas here in my area (just North of Dallas) I am ecstatic that my home value shot up $60k (I could actually get even more if I sold) this last year. Definitely a "sellers market". But it is not overly inflated like in 2006 by any stretch.

[Alen E90]

Originally Posted by okusa

The California RE market is not skyrocketing and is not in jeopardy of a correction. It is only 3 years off the 2012 rebound and growing at a historically steady rate. Based on history, not what "many people" say, there should be at least another 4 years of growth before there is any sort of correction. The LA job market is rapidly growing. However, the housing supply is not increasing. That means the increasing prices are the direct result of increasing demand and limited supply. Also, as foreign markets continue to struggle, investors will be increasingly looking to relocate their money back in stable U.S. assets, e.g., real estate.

If you look at all the local RE ads in magazines and newspapers, you will see what I'm implying about. Also, which foreign markets are you referring to?

[fazman]

Originally Posted by BMW F22

As we are aware, the real estate market has gone up like crazy in the last few years. Homes are being snatched up within days of hitting the market- many sold for over asking price. New, cookie cutter homes are being built every day to satisfy demand.

As a prospective home buyer, one should, IMO, think about how much those homes will be worth in the coming years. With prices being at an all time high, the danger of overpaying is real.

So, will the RE market stabilize or crash in the next few years or will the trend continue? What are your thoughts? An example is that a home in a good area was $170k in 1995. That same home was about $800-900k in the early 2000s. Now it is going for $1.2M+. These are homes built in the 50-60's.

PS- I live in NorCal so this trend may not apply to other parts of the country.

Do you have a way to create more land on this rock we call a planet? If not... then land is a scarce resource. Even if markets crash, it will skyrocket again... because all markets are cyclical.

As long as you can afford the home comfortably and can make the payments for the commitment term... you should be fine to ride out any crash. Your home is an investment you can live in (unlike stocks... you can't live in them). Plus you have protections even when you can't make payments to still live in the home until you get the boot by the court.

The key is to buy a home that you will one day move out of and can rent to someone else as an income property (That way your renter makes your payments for you).

[Alen E90]

Originally Posted by fazman

Do you have a way to create more land on this rock we call a planet? If not... then land is a scarce resource. Even if markets crash, it will skyrocket again... because all markets are cyclical.

As long as you can afford the home comfortably and can make the payments for the commitment term... you should be fine to ride out any crash. Your home is an investment you can live in (unlike stocks... you can't live in them). Plus you have protections even when you can't make payments to still live in the home until you get the boot by the court.

The key is to buy a home that you will one day move out of and can rent to someone else as an income property (That way your renter makes your payments for you).

This is exactly why I love the RE industry so much! Stocks will never be a long term investment.

[fazman]

Originally Posted by Alen E90

This is exactly why I love the RE industry so much! Stocks will never be a long term investment.

However, in the long run, stocks are a much more profitable investment since I don't have to pay for insurance/property taxes/etc on them. If you look at 50 years of any index and 50 years of home gains... you will see that stocks make more money.

[BMW F22]

Originally Posted by fazman

Do you have a way to create more land on this rock we call a planet? If not... then land is a scarce resource. Even if markets crash, it will skyrocket again... because all markets are cyclical.

As long as you can afford the home comfortably and can make the payments for the commitment term... you should be fine to ride out any crash. Your home is an investment you can live in (unlike stocks... you can't live in them). Plus you have protections even when you can't make payments to still live in the home until you get the boot by the court.

The key is to buy a home that you will one day move out of and can rent to someone else as an income property (That way your renter makes your payments for you).

I realize that land is limited. However, there is plenty of land outside of the major metropolitan areas. So while prices are going up here, they are more stable elsewhere. I think that as prices shoot up, it will drive people to move elsewhere (e.g. denver or houston where prices are much lower). As more people move out of high demand areas, prices should stabilize.

[fcman]

Originally Posted by okusa

The California RE market is not skyrocketing and is not in jeopardy of a correction. It is only 3 years off the 2012 rebound and growing at a historically steady rate. Based on history, not what "many people" say, there should be at least another 4 years of growth before there is any sort of correction. The LA job market is rapidly growing. However, the housing supply is not increasing. That means the increasing prices are the direct result of increasing demand and limited supply. Also, as foreign markets continue to struggle, investors will be increasingly looking to relocate their money back in stable U.S. assets, e.g., real estate.

Eh, but we are going to continue to see fewer and fewer new buyers entering the market. The average college student has something like $20k in student loans (and this value increases significantly every year) and are entering a workforce that has been victim to stagnant wages for decades, so their buying power is going to be significantly lower. I don't think this has had much of an impact yet. But I think it's very possible that we will see the impact of the $1.2 trillion dollar debt that continues to increase, that's a lot of money removed from the buying power of new college graduates. Hopefully we just see wage increases (yeah right) instead of a housing crash though.

PS, I'm not a communist, I just think the current state of student loan debt is outrageous, and the market has become inflated and predatory (textbook prices have increased 3x the rate of inflation since the 70s and tuition ~2.5x...) to a point where we will soon see negative effects on the economy.

[Needbmwpartzz]

Originally Posted by BMW F22

I realize that land is limited. However, there is plenty of land outside of the major metropolitan areas. So while prices are going up here, they are more stable elsewhere. I think that as prices shoot up, it will drive people to move elsewhere (e.g. denver or houston where prices are much lower). As more people move out of high demand areas, prices should stabilize.

This!
Simple supply and demand forces here folks......unless something tragic happens to a city which scares people away(think terrorism,nuclear disaster,or just dive in economy(Detroit))

[okusa]

Originally Posted by Alen E90

If you look at all the local RE ads in magazines and newspapers, you will see what I'm implying about.

Marketing materials aren't relevant to the topic.

Originally Posted by Alen E90

Also, which foreign markets are you referring to?

China in particular.

Originally Posted by fcman

Eh, but we are going to continue to see fewer and fewer new buyers entering the market. The average college student has something like $20k in student loans (and this value increases significantly every year) and are entering a workforce that has been victim to stagnant wages for decades, so their buying power is going to be significantly lower. I don't think this has had much of an impact yet. But I think it's very possible that we will see the impact of the $1.2 trillion dollar debt that continues to increase. Hopefully we just see wage increases (yeah right) instead of a housing crash though.

College students? They are irrelevant to this discussion as they are not homebuyers. The debt does not have an impact until interest rates and inflation increase.

[NickyC]

If you believe the problems of 2007-2008 have been fixed, and that home values can continue to skyrocket while wages remain stagnant then no, there won't be another crash.

If you however believe the problems of 2007-2008 really haven't gone away, and we're in a temporary bubble right now fueled by central bank intervention, zero percent interest rates, and foreign entities buying up real estate as investments, then yes, we're in for one monumental crash.

[shoei]

Originally Posted by NickyC

If you believe the problems of 2007-2008 have been fixed, and that home values can continue to skyrocket while wages remain stagnant then no, there won't be another crash.

If you however believe the problems of 2007-2008 really haven't gone away, and we're in a temporary bubble right now fueled by central bank intervention, zero percent interest rates, and foreign entities buying up real estate as investments, then yes, we're in for one monumental crash.

^^ Finally... If I had a cookie, I would give you one...

[bosstones]

Most of IL still hasn't recovered. we'll probably just get f'ed again. I have my eye on this place just in case:

http://www.zillow.com/homedetails/18...61492597_zpid/

[Ali Shiralian]

My son is in the process of buying a house in Toronto. Real estate market here has gone through the roof and a house that's valued at 750K is a house that's not even in living condition. You basically pay 750 to demolish the house and build a new one. There's been speculation about a housing market crash in TO for the past 15 years and not only no crash happened, prices have tripled since and will go even higher. I'd say anyone who can afford to buy a house and keep the payments current should do so or it'll be Absolutley impossible to buy in five years. The influx of Chinese buyers in Canada is enough for the prices to skyrocket...

[BMW F22]

Originally Posted by bosstones

Most of IL still hasn't recovered. we'll probably just get f'ed again. I have my eye on this place just in case:

http://www.zillow.com/homedetails/18...61492597_zpid/

Wow very nice!! Thinking perhaps when it's time for me to buy I should look at Denver or Texas.

[Alen E90]

Originally Posted by okusa

Marketing materials aren't relevant to the topic.


China in particular.

They actually are because marketing materials show the status of how the market is currently doing. ie: high or low

China? China has taken over almost the entire world.

[Alen E90]

Originally Posted by fazman

However, in the long run, stocks are a much more profitable investment since I don't have to pay for insurance/property taxes/etc on them. If you look at 50 years of any index and 50 years of home gains... you will see that stocks make more money.

I agree with most of what you're saying here, however with stocks you never have any control over it as opposed to RE.