Real estate bubble coming again?

el mechanico

Owl
Gold Member
I've been kicking around the idea of building a new house on some vacant land I have and this concerns me.

I talked to a friend yesterday who's a real estate attorney and he seems to think a bubble is coming and real estate is going to be down to cash money prices after the government stops backing Fannie/Freddy and it will happen. Banks will bump their interest up and require 50% down (as he thinks) to hold the notes themselves..

So, being curious I went on Zillo and noticed in my area houses have gone up..A lot in the last year and so has rents...

As for my house idea I'm going to the sky on huge stilts to get a waterview. If anyone has cool ideas about that post them.
 
I've been watching the market start to heat up here in SoCal, and decided not to wait to buy my so-called retirement home...glad I did, now that it's mine! All cash - first home I've ever owned that was not financed; stoked that I never have to pay a mortgage again!
 

Onto

Ostrich
Gold Member
If you're building, I don't see raw materials going down in price as much as pre-existing homes people are trying to move. Also, if you're building for the pupose of residing there and are not looking to flip it, then it shouldn't matter if the market goes to pot.

If you need a loan, then it will be a lot harder to get one if Fannie/Freddie go under without another program to replace.
 
anyone who is in debt when shit hits the fan s going to wipe out hard

build it, or dont

but don't take on debt doing it

Real Estate values aren't the only thing that are going to get squeezed.
 

AntiTrace

Ostrich
When do you guys think this second crash is going to happen? I missed out on a lot of opportunities by being too young to have enough cash in the last one. If it happened soon I would be pumped.
 

el mechanico

Owl
Gold Member
jimukr104 said:
yes its coming...a commercial RE crash that will be much bigger.
Why do you think it's coming?

I was going to build with cash over the next two years but...Why build a house that's not going to be worth what you spent to build it? If there's a crash it would be worth half (i think)
 

Harvey Specter

Robin
Gold Member
el mechanico said:
I've been kicking around the idea of building a new house on some vacant land I have and this concerns me.

I talked to a friend yesterday who's a real estate attorney and he seems to think a bubble is coming and real estate is going to be down to cash money prices after the government stops backing Fannie/Freddy and it will happen. Banks will bump their interest up and require 50% down (as he thinks) to hold the notes themselves..

So, being curious I went on Zillo and noticed in my area houses have gone up..A lot in the last year and so has rents...

As for my house idea I'm going to the sky on huge stilts to get a waterview. If anyone has cool ideas about that post them.
No chance this happens. If US govt doesn't back fnma & flmc they will subsidize another way. That would absolutely wreck the economy and be worst then the depression. No houses would sell, rents would go through the roof, it would be pure anarchy.

As far as the CRE crash, we are supposed to be in the middle of it. Half of all mtgs maturing this year are underwater. You don't hear shit about it, banks extend terms, unless they are real bad then they sell to investors and file for bankruptcy, but banks don't want to show the losses so they extend loans/refiance anyways. So all this doom and gloom just isn't happening it will stay just like it is for the foreseeable future. Go ahead and build.
 

zwyjibo

Sparrow
Gold Member
Highly local. Right now I wouldn't buy in LV - too few houses on the market for how many are delinquent / should be foreclosed on / vacant. Last I looked into it a few weeks ago, something like 64000 houses were empty and only about 7500 were on the market, but residential prices are up 20% this year. I wouldn't do it.

Simultaneously, I was recently on a trip to NY. Manhattan real estate is its own thing and an alright store of value if you can afford it. There are some real gems upstate that I would buy now if I had any way of living in upstate and using the property. Really prestigious stuff from the 1850's-1880's that would be awesome to live in, though ruinously expensive to maintain.

Ultimately, the bubble or lack thereof is all local. If the economy gets worse, which is not immediately likely but not unthinkable either, people everywhere are going to suffer though. I personally wouldn't buy without a significant equity position.
 

paninaro

Woodpecker
King Solomon said:
anyone who is in debt when shit hits the fan s going to wipe out hard

build it, or dont

but don't take on debt doing it
Why would people with loans get hit? I'm thinking people with 30-year fixed rate loans. As long as they are making the monthly payments, what is the bank going to do?
 

Thomas the Rhymer

Ostrich
Gold Member
paninaro said:
King Solomon said:
anyone who is in debt when shit hits the fan s going to wipe out hard

build it, or dont

but don't take on debt doing it
Why would people with loans get hit? I'm thinking people with 30-year fixed rate loans. As long as they are making the monthly payments, what is the bank going to do?
collapse of housing market -> collapse of housing industry -> dramatic reduction of cash in the economy -> knock-on domino effects on other industries (fewer paying customers, fewer investors) -> generalised crisis in the economy -> job losses as industries cut costs -> jobless home owners cannot afford to pay debts. Even if home owner sells his house, it won't cover his outstanding liability with bank due to depressed home prices -> collapse of mortgage inflows into banks -> collapse of banking/credit system. Banks control their losses by dramatically reducing credit outflow -> economic recession -> now everyone is screwed, including business owners -> even more defaults on bank loans -> economic depression -> everyone with a loan is bank-raped as banks desperately try to stay solvent
 
Harvey Specter said:
el mechanico said:
I've been kicking around the idea of building a new house on some vacant land I have and this concerns me.

I talked to a friend yesterday who's a real estate attorney and he seems to think a bubble is coming and real estate is going to be down to cash money prices after the government stops backing Fannie/Freddy and it will happen. Banks will bump their interest up and require 50% down (as he thinks) to hold the notes themselves..

So, being curious I went on Zillo and noticed in my area houses have gone up..A lot in the last year and so has rents...

As for my house idea I'm going to the sky on huge stilts to get a waterview. If anyone has cool ideas about that post them.
No chance this happens. If US govt doesn't back fnma & flmc they will subsidize another way. That would absolutely wreck the economy and be worst then the depression. No houses would sell, rents would go through the roof, it would be pure anarchy.

As far as the CRE crash, we are supposed to be in the middle of it. Half of all mtgs maturing this year are underwater. You don't hear shit about it, banks extend terms, unless they are real bad then they sell to investors and file for bankruptcy, but banks don't want to show the losses so they extend loans/refiance anyways. So all this doom and gloom just isn't happening it will stay just like it is for the foreseeable future. Go ahead and build.
Yep. Commercial RE's comeuppance was supposed to be a 2012-2014 problem as a lot of shitty 7 year mortgage and mezz financing contracts pushed just pre-crash came due. Hasn't really played out.
 

Pacesetter20

Kingfisher
Gold Member
Thomas the Rhymer said:
paninaro said:
King Solomon said:
anyone who is in debt when shit hits the fan s going to wipe out hard

build it, or dont

but don't take on debt doing it
Why would people with loans get hit? I'm thinking people with 30-year fixed rate loans. As long as they are making the monthly payments, what is the bank going to do?
collapse of housing market -> collapse of housing industry -> dramatic reduction of cash in the economy -> knock-on domino effects on other industries (fewer paying customers, fewer investors) -> generalised crisis in the economy -> job losses as industries cut costs -> jobless home owners cannot afford to pay debts. Even if home owner sells his house, it won't cover his outstanding liability with bank due to depressed home prices -> collapse of mortgage inflows into banks -> collapse of banking/credit system. Banks control their losses by dramatically reducing credit outflow -> economic recession -> now everyone is screwed, including business owners -> even more defaults on bank loans -> economic depression -> everyone with a loan is bank-raped as banks desperately try to stay solvent
This is exactly what the big banks want you to believe, so the government will give them free bailouts from U.S. taxpayer, while savers and the responsible get screwed yet again.

Granted it would be really painful (short term), but in the long run America would come out much stronger and the greedy, parasitic Goldman Sacks of the world would finally get what is coming to them.
 

BostonBMW

Kingfisher
I think there are localized bubbles forming in markets like SF, BOS. The South, Midwest seem to be much more stable in terms of housing values.

The old rule of thumb is to take your annual income and 3-3.5X it -> That is how much house you can afford. I'm amazed to see people getting into bidding wars over 2 bed condos going for $500K+ in parts of Boston/Cambridge. I do see the justification for these types of valuations. If Boston is bad, then NYC is on another stratosphere of unaffordable.

I'm talking from an investors perspective: My deal flow/analysis has led me to make only lowball offers in Boston.
 

aphelion

Ostrich
Gold Member
I recently sold my home after living there for just over 2 years for about a 50% profit after expenses. I still own a rental property and I'm thinking about cashing it out as well if the tenants leave, although I'm not sure what the return on that one would be.

Something seems fishy about the prices right now. I'd literally just refinanced my place and had it appraised at $150k, and 4 months later I've got someone beating down my door to throw $220k at me plus expenses. That's not rational.
 

el mechanico

Owl
Gold Member
Something seems fishy about the prices right now
That's exactly what I'm thinking and don't know why. Literally in two or three months all the cheap houses in my area are gone, people are asking double for their empty lots and the houses seem like 50k over value..

I don't get it.

I also know what people make here..
 
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