Housing Bubble: Why it may be worse than previously thought
Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes
Housing Bubble: Why it may be worse than previously thought
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesNot everyone gets to own a home.. so the median rents.. those that rise above the median buy homes. and a lot of folks are in the move up mode.. LOTS of cash to put down driving down the need for massive incomes.
I know when I look at my sales of new construction here on the west coast last 5 years and its a small sampling I think we have built and sold about 100 homes.. I would say 10 to 15% were sold for cash.. Oh and price ranges 300 to a million is were we deal.. and I will lump Charleston SC in there since we have been quite active and that is a expensive market relative to local median income.. Any way back to sales data... gone is the day were Everyone put nothing to minimum down.. So don't see the median income affecting the new home prices as much as one might think..
If I think back to my pre 08 days were we were flipping 75 plus homes a year as a retail flipper.. 97% sold for minimum down and I can't really recall a cash sale I am sure we had one but it would be an outlier.. But now its totally flip flopped at least from my little slice of the world. Lots of cash sales.. MOST sales are 10 to 30% down and small sampling is FHA or VA.
WE will bend over backwards for VA ( lot of folks won't deal with it because of time lines and such but we feel its our duty to help our Vets get into our homes)..
199 Replies
- Investor · Airmont, NY · Member since 2017 · 30 posts · 7 votes9y
there might be a bubble. but, I was listening this week to an old biggerpockets podcast from 2015 and josh dorking was talking about how we are on top of the cycle, and you can feel it in the air like pre 2008.
that was over 2 years ago, now what if there was someone who decided not to buy anything then and stayed on the sidelines waiting for the crash, and lost out 2 years of cash flow.
just a thought.
- Dublin, CA · Member since 2017 · 40 posts · 14 votes9y
@Account Closeds a lot of this sounds like the Bay Area as well. Do you think that the Bay Area has a housing bubble worse than LA ?
- Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes9y
Originally posted by @Account Closed:
A housing bubble is a run-up in housing prices fueled by demand, speculation and exuberance. ... Speculators enter the market, further driving demand. At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices — and the bubble bursts.
If this is the definition of a housing bubble according to investopedia.... LA may be heading into some serious trouble.
Median LA housing price = $685,000 (zillow avg. of median home value & median listing price)
Income required to qualify = $125,000 (0% down, 4.5% mortgage)
Income required to qualify = $118,000 (5% down, 4.5% mortgage)
Median LA household income = $54,000 (argue accuracy of data with census bureau)
How much home can a household buy with $54,000 = $260,000
Primary factor driving LA prices = Speculation (may also argue demand)
I don't think you understand that the word median means...half the households have an income above that. If there was no demand, housing prices there wouldn't be rising.
You posted nothing but conjecture, then try to conclude that the primary factor driving LA prices is speculation (or demand). Yet you presented no actual evidence of speculation, though you did inadvertently provide proof of demand given limited supply: high housing prices..
- Investor · Tarzana CA and Houston, TX · Member since 2015 · 326 posts · 130 votes9y
Originally posted by @Matt K.:
wealth, wages, inventory, home prices.
matt dont waste your time with this mike guy hes a troll... no need to feed him more... let him stay in nyc and act smart. i showed him the median income in the majority of where the population in LA is being well above 50k and he replied with photos of football coaches... a pure waste of time to talk to . for all we know he is peddling this nonsense just to get a rise. block him and move on.
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes9y
Originally posted by @Account Closed:
Originally posted by @Matt K.:
I'd wager you could find the appropriate meaning seeing how badly you want this to stay on topic...
I have been told there is a general culture of renting out SFR units as an apartment as an alternative to get property to cash flow... this of course ties right in to the affordability issue.
In the Bay Area, yes.... but you have 800k illegal duplex in the ghetto.. that rents for almost 7k mo combined
Not so much in LA - Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Shashank R.:
@Account Closeds a lot of this sounds like the Bay Area as well. Do you think that the Bay Area has a housing bubble worse than LA ?
I only have looked at Los Angeles... I am sure I wouldnt want to ask Steph Curry what he thinks of Walnut Creek.
- Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes9y
Originally posted by @Michael Kalisch:
there might be a bubble. but, I was listening this week to an old biggerpockets podcast from 2015 and josh dorking was talking about how we are on top of the cycle, and you can feel it in the air like pre 2008.
that was over 2 years ago, now what if there was someone who decided not to buy anything then and stayed on the sidelines waiting for the crash, and lost out 2 years of cash flow.
just a thought.
I've seen a lot of people on here who have zero college education in microeconomics state that we are at the top of the market because cab drivers, barbers, and construction laborers are all buying houses. When you try to educate them with some micro-economic facts, they lash out and deflect. You can present all the empirical data you want, but people are generally don't want to change their poorly thought out position, they defend it to the death.
You really have to be careful who's advice you take. On several forums like these I've found guys who pound their chest but when you look through their posting history they are making $15 an hour, living in an apartment and paying 6.8% interest on a used car loan.
I had a guy on another forum touting himself as an IT expert who went to a top 25 school. I told him based on his incorrect posts he seemed like he was entry level, fresh out of college, whereas I've been an IT professional for decades, and make well into the six figures. I pay more in taxes than he makes gross in a year...
Turns out I was right, he was making $15 an hour at 23, one year out of college as a junior tester. Four years later I still run across his posts and he's making 50K a year. It's amazing what you learn when you look through peoples posting history...He had several posts with opinions about programming languages in the work place, touting his expert opinion based on 10 years of experience in corporate. At the time of the post he was 23, so apparently he was Mark Zuckerberg and working as a programmer at 13, yet somehow only makes 50K a year 14 years later after going to a top 25 school....Think critically, and be careful who you take advice from...
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Jack B.:
Originally posted by @Account Closed:
A housing bubble is a run-up in housing prices fueled by demand, speculation and exuberance. ... Speculators enter the market, further driving demand. At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices — and the bubble bursts.
If this is the definition of a housing bubble according to investopedia.... LA may be heading into some serious trouble.
Median LA housing price = $685,000 (zillow avg. of median home value & median listing price)
Income required to qualify = $125,000 (0% down, 4.5% mortgage)
Income required to qualify = $118,000 (5% down, 4.5% mortgage)
Median LA household income = $54,000 (argue accuracy of data with census bureau)
How much home can a household buy with $54,000 = $260,000
Primary factor driving LA prices = Speculation (may also argue demand)
I don't think you understand that the word median means...half the households have an income above that. If there was no demand, housing prices there wouldn't be rising.
You posted nothing but conjecture, then try to conclude that the primary factor driving LA prices is speculation (or demand). Yet you presented no actual evidence of speculation, though you did inadvertently provide proof of demand given limited supply: high housing prices..
You need to understand this and at some point also understand that this is not about feelings. $100,000 doesnt necessarily qualify you for a $700,000 house based on what you put down but only 23% of the population earn in excess of that. In excess of 75% of "households" earn below qualifying income.
Total households LA (City) 1342761 100.00% Less than $10,000 107910 8.04% $10,000 to $14,999 93278 6.95% $15,000 to $24,999 159005 11.84% $25,000 to $34,999 138927 10.35% $35,000 to $49,999 169744 12.64% $50,000 to $74,999 213162 15.87% $75,000 to $99,999 139986 10.43% $100,000 to $149,999 158513 11.81% $150,000 to $199,999 68749 5.12% $200,000 or more 93487 6.96% Median household income (2015) $50205 % Earning $100K or More 23.89% % Earning less than $100K 76.11% - Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes9y
Originally posted by @Account Closed:
Originally posted by @Shashank R.:
@Account Closeds a lot of this sounds like the Bay Area as well. Do you think that the Bay Area has a housing bubble worse than LA ?
I only have looked at Los Angeles... I am sure I wouldnt want to ask Steph Curry what he thinks of Walnut Creek.
you think he even noticed that loss lol, did you miss the contract he just signed.
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Matt K.:
Originally posted by @Account Closed:
Originally posted by @Shashank R.:
@Account Closeds a lot of this sounds like the Bay Area as well. Do you think that the Bay Area has a housing bubble worse than LA ?
I only have looked at Los Angeles... I am sure I wouldnt want to ask Steph Curry what he thinks of Walnut Creek.
you think he even noticed that loss lol, did you miss the contract he just signed.
Thats beside the point, our concern is what the market is doing.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes9y
Originally posted by @Jack B.:
Originally posted by @Michael Kalisch:
there might be a bubble. but, I was listening this week to an old biggerpockets podcast from 2015 and josh dorking was talking about how we are on top of the cycle, and you can feel it in the air like pre 2008.
that was over 2 years ago, now what if there was someone who decided not to buy anything then and stayed on the sidelines waiting for the crash, and lost out 2 years of cash flow.
just a thought.
I've seen a lot of people on here who have zero college education in microeconomics state that we are at the top of the market because cab drivers, barbers, and construction laborers are all buying houses. When you try to educate them with some micro-economic facts, they lash out and deflect. You can present all the empirical data you want, but people are generally don't want to change their poorly thought out position, they defend it to the death.
You really have to be careful who's advice you take. On several forums like these I've found guys who pound their chest but when you look through their posting history they are making $15 an hour, living in an apartment and paying 6.8% interest on a used car loan.
I had a guy on another forum touting himself as an IT expert who went to a top 25 school. I told him based on his incorrect posts he seemed like he was entry level, fresh out of college, whereas I've been an IT professional for decades, and make well into the six figures. I pay more in taxes than he makes gross in a year...
Turns out I was right, he was making $15 an hour at 23, one year out of college as a junior tester. Four years later I still run across his posts and he's making 50K a year. It's amazing what you learn when you look through peoples posting history...He had several posts with opinions about programming languages in the work place, touting his expert opinion based on 10 years of experience in corporate. At the time of the post he was 23, so apparently he was Mark Zuckerberg and working as a programmer at 13, yet somehow only makes 50K a year 14 years later after going to a top 25 school....Think critically, and be careful who you take advice from...
Here, here. I wish I could vote for this post twice! Except I think you're probably mistaken on the used car loan - it's probably 16.8% :D
Skyline Properties - Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Matt K.:
I think 23% of nearly 4 million people can handle the inventory of median priced homes in LA....
oh boy! you dont have 4 million households in LA, its about 1.3 million households. Exaggerations of this sort just about describe most investor behavior in LA... its like the reality of the situation haven't hit you yet.
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes9y
- Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes9y
Originally posted by @JD Martin:
Originally posted by @Jack B.:
Originally posted by @Michael Kalisch:
there might be a bubble. but, I was listening this week to an old biggerpockets podcast from 2015 and josh dorking was talking about how we are on top of the cycle, and you can feel it in the air like pre 2008.
that was over 2 years ago, now what if there was someone who decided not to buy anything then and stayed on the sidelines waiting for the crash, and lost out 2 years of cash flow.
just a thought.
I've seen a lot of people on here who have zero college education in microeconomics state that we are at the top of the market because cab drivers, barbers, and construction laborers are all buying houses. When you try to educate them with some micro-economic facts, they lash out and deflect. You can present all the empirical data you want, but people are generally don't want to change their poorly thought out position, they defend it to the death.
You really have to be careful who's advice you take. On several forums like these I've found guys who pound their chest but when you look through their posting history they are making $15 an hour, living in an apartment and paying 6.8% interest on a used car loan.
I had a guy on another forum touting himself as an IT expert who went to a top 25 school. I told him based on his incorrect posts he seemed like he was entry level, fresh out of college, whereas I've been an IT professional for decades, and make well into the six figures. I pay more in taxes than he makes gross in a year...
Turns out I was right, he was making $15 an hour at 23, one year out of college as a junior tester. Four years later I still run across his posts and he's making 50K a year. It's amazing what you learn when you look through peoples posting history...He had several posts with opinions about programming languages in the work place, touting his expert opinion based on 10 years of experience in corporate. At the time of the post he was 23, so apparently he was Mark Zuckerberg and working as a programmer at 13, yet somehow only makes 50K a year 14 years later after going to a top 25 school....Think critically, and be careful who you take advice from...
Here, here. I wish I could vote for this post twice! Except I think you're probably mistaken on the used car loan - it's probably 16.8% :D
You're probably right, he probably did mix up the numbers. Another one of the guys posts he had a dispute with his landlord over move out date, etc. He immediately jumped to I'm going to sue him in small claims court and win, I have tons of evidence, etc. Everyone (and I mean everyone) pointed out to him that he doesn't seem to understand basic reasoning skills, he is actually in the wrong and that he would lose. He never replied back...
- Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes9y
Originally posted by @Matt K.:
Forget it, he has no clue what he is talking about, and has presented evidence that disproves what he is trying to prove. He also doesn't factor in that nearly 1 out of 4 buyers in LA is a cash buyer, never mind the fact that he doesn't seem to understand what median is. It doesn't match his preconceived notion of a housing bubble based on his subjective opinion.
http://www.realtytrac.com/news/home-prices-and-sales/q1-2016-cash-buyer-institutional-investor-housing-report/
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Jack B.:
Originally posted by @JD Martin:
Originally posted by @Jack B.:
Originally posted by @Michael Kalisch:
there might be a bubble. but, I was listening this week to an old biggerpockets podcast from 2015 and josh dorking was talking about how we are on top of the cycle, and you can feel it in the air like pre 2008.
that was over 2 years ago, now what if there was someone who decided not to buy anything then and stayed on the sidelines waiting for the crash, and lost out 2 years of cash flow.
just a thought.
I've seen a lot of people on here who have zero college education in microeconomics state that we are at the top of the market because cab drivers, barbers, and construction laborers are all buying houses. When you try to educate them with some micro-economic facts, they lash out and deflect. You can present all the empirical data you want, but people are generally don't want to change their poorly thought out position, they defend it to the death.
You really have to be careful who's advice you take. On several forums like these I've found guys who pound their chest but when you look through their posting history they are making $15 an hour, living in an apartment and paying 6.8% interest on a used car loan.
I had a guy on another forum touting himself as an IT expert who went to a top 25 school. I told him based on his incorrect posts he seemed like he was entry level, fresh out of college, whereas I've been an IT professional for decades, and make well into the six figures. I pay more in taxes than he makes gross in a year...
Turns out I was right, he was making $15 an hour at 23, one year out of college as a junior tester. Four years later I still run across his posts and he's making 50K a year. It's amazing what you learn when you look through peoples posting history...He had several posts with opinions about programming languages in the work place, touting his expert opinion based on 10 years of experience in corporate. At the time of the post he was 23, so apparently he was Mark Zuckerberg and working as a programmer at 13, yet somehow only makes 50K a year 14 years later after going to a top 25 school....Think critically, and be careful who you take advice from...
Here, here. I wish I could vote for this post twice! Except I think you're probably mistaken on the used car loan - it's probably 16.8% :D
You're probably right, he probably did mix up the numbers. Another one of the guys posts he had a dispute with his landlord over move out date, etc. He immediately jumped to I'm going to sue him in small claims court and win, I have tons of evidence, etc. Everyone (and I mean everyone) pointed out to him that he doesn't seem to understand basic reasoning skills, he is actually in the wrong and that he would lose. He never replied back...
You are making a deliberate false accusation and defamatory statements and even by BPs standard a violation of its policy... it is clear your sole purpose is to lurk around and jump into just about every discussion and try to disrupt and engage in all sorts of beligerent behavior. Where is the link to the conversation you are talking about? You need to immediately remove that.
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Matt K.:
If we are talking about LA why include Long Beach and Glendale just to skew the data?
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Michael Kalisch:
there might be a bubble. but, I was listening this week to an old biggerpockets podcast from 2015 and josh dorking was talking about how we are on top of the cycle, and you can feel it in the air like pre 2008.
that was over 2 years ago, now what if there was someone who decided not to buy anything then and stayed on the sidelines waiting for the crash, and lost out 2 years of cash flow.
just a thought.
Are you talking about Los Angeles specifically?
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes9y
Originally posted by @Account Closed:
Originally posted by @Matt K.:
If we are talking about LA why include Long Beach and Glendale just to skew the data?
because the census said it was ok
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Jack B.:
Maybe you should try understanding an article and keep the beligerence to a minimum
- Investor · Airmont, NY · Member since 2017 · 30 posts · 7 votes9y
Originally posted by @Account Closed:
Originally posted by @Michael Kalisch:
there might be a bubble. but, I was listening this week to an old biggerpockets podcast from 2015 and josh dorking was talking about how we are on top of the cycle, and you can feel it in the air like pre 2008.
that was over 2 years ago, now what if there was someone who decided not to buy anything then and stayed on the sidelines waiting for the crash, and lost out 2 years of cash flow.
just a thought.
Are you talking about Los Angeles specifically?
No, the country in general.