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
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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
- Orlando, FL · Member since 2016 · 43 posts · 12 votes9y
Throughout history our monetary policy has change approximately every 30-40 years and it has now been 46 years since Nixon has taken us off of the gold standard. With that said, do you think a new monetary policy could be the cause of the next market crash? Why or Why not?
- Rental Property Investor · Cincinnati, OH · Member since 2013 · 292 posts · 280 votes9y
Originally posted by @Jon Q.:
Originally posted by @Account Closed:
Originally posted by @Jon Q.:
Since you've not responded to my question about your real estate investment experience, I'm going to assume that you have none.
I'll no longer take this posting seriously.
I wish you the best.
Mr Mike Fletcher is a Troll.
I wish that @Will Barnard would chime in on this thread.
Los Angeles/Orange is a different animal. Always has been. Always will be.
Median income, median income, median income blah blah blah.
Median income means NOTHING in SoCal.
Would everyone agree that policemen and firemen are pretty "average" in income?
Q: Anyone have an idea what percentage of policemen/firemen in Los Angeles/Orange/Riverside/SanDiego Counties own a home????
A: 100%.
(Without exception, other than single guys who are LIVING THE LIFE, 4 to a house at the beach or in the Hollywood Hills, renting for $6k to $8k per month because they CHOOSE to. ask me how i know....)
FACT: LOSERS LIKE ME, CHICKEN OUT AND RUN FOR CASH FLOW STATES (in my case Ohio), BECAUSE WE ARE NOT SMART ENOUGH OR WILLING TO DO THE WORK, NECESSARY TO INVEST IN CALIFORNIA.
Personally, I am praying for a collapse in the California SFR real estate market so that I can buy a second home in coastal San Diego County, Monterey, CA or maybe Paso Robles, CA. But it ain't gonna happen.
DL
p.s. I bought a 4 plex in Socal in 2000. In 2015 I sold it and 1031 exchanged (almost straight across, dollar for dollar) for a 39 unit in suburban Cincinnati, Ohio.
I also sold 3 SoCal SFR's that I bought, lived in, rented out and then sold when I retired in 2015. (This is in addition to the 5018 sq ft. + 921 sq ft garage custom home that my wife General Contracted in 2008-2009 and that we lived in until we sold in 2015.) Even during the "Bubble Melt Down' of 2008-2009, we made $200k when we sold the house in late 2015. I was pissed that we didn't make $400k because we were paying property taxes, year in and year out, on a property that should have netted us $400k when we sold).
But the BP Trolls know it all....
California "appreciation" sucks
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes9y
Originally posted by @DL Martin:
Originally posted by @Jon Q.:
Originally posted by @Account Closed:
Originally posted by @Jon Q.:
Since you've not responded to my question about your real estate investment experience, I'm going to assume that you have none.
I'll no longer take this posting seriously.
I wish you the best.
Mr Mike Fletcher is a Troll.
I wish that @Will Barnard would chime in on this thread.
Los Angeles/Orange is a different animal. Always has been. Always will be.
Median income, median income, median income blah blah blah.
Median income means NOTHING in SoCal.
Would everyone agree that policemen and firemen are pretty "average" in income?
Q: Anyone have an idea what percentage of policemen/firemen in Los Angeles/Orange/Riverside/SanDiego Counties own a home????
A: 100%.
(Without exception, other than single guys who are LIVING THE LIFE, 4 to a house at the beach or in the Hollywood Hills, renting for $6k to $8k per month because they CHOOSE to. ask me how i know....)
FACT: LOSERS LIKE ME, CHICKEN OUT AND RUN FOR CASH FLOW STATES (in my case Ohio), BECAUSE WE ARE NOT SMART ENOUGH OR WILLING TO DO THE WORK, NECESSARY TO INVEST IN CALIFORNIA.
Personally, I am praying for a collapse in the California SFR real estate market so that I can buy a second home in coastal San Diego County, Monterey, CA or maybe Paso Robles, CA. But it ain't gonna happen.
DL
p.s. I bought a 4 plex in Socal in 2000. In 2015 I sold it and 1031 exchanged (almost straight across, dollar for dollar) for a 39 unit in suburban Cincinnati, Ohio.
I also sold 3 SoCal SFR's that I bought, lived in, rented out and then sold when I retired in 2015. (This is in addition to the 5018 sq ft. + 921 sq ft garage custom home that my wife General Contracted in 2008-2009 and that we lived in until we sold in 2015.) Even during the "Bubble Melt Down' of 2008-2009, we made $200k when we sold the house in late 2015. I was pissed that we didn't make $400k because we were paying property taxes, year in and year out, on a property that should have netted us $400k when we sold).
But the BP Trolls know it all....
California "appreciation" sucks
I cannot see the posts from OP (blocked) but have thus far enjoyed the discussion.
Interesting to note, the most profitable 3 housing markets for landlords since 2000 = All in CA. That is going back 18 years. Most profitable in recent past, 5-10 years = All in CA. Most profitable this year = CA, 5 out of Top 7 = CA.
https://www.usatoday.com/story/money/personalfinan...
So many folks just on this forum achieved 7-figure wealth investing in California, Seattle, NY, and HI. Where are the self-made millionaires investing (not running a Turnkey business - not the same thing) in Tennessee? Baltimore? Atlanta? Indiana? Kansas City? $100-200/month in cash flow tends to lend itself in becoming a millionaire in 200+ years.
- Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes9y
Originally posted by @David Song:
To buy or not to buy, that is the question.
I am buying.
ABB... Always Be Buying, so long as you can execute your investment strategy.
- Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes9y
Originally posted by @Tobias Falzone:
I cringe when I hear people talk about how median income levels can't support home values. That should not surprise anyone. in LA, homeownership percentages are somewhere around 47% now. Using that number, median person doesn't own a house! It would be better to use a number closer to 75th percentile of income to describe the median homeowner, not the median person. That number in LA is close to 100k, and guess what, the median home values aren't completely out of whack with the median income of homeowners.
Compare that to San Francisco :-)
But there's still no bubble. It's called lack of supply, cost of building is high, and availability of land where you can build.
- Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes9y
Mike is likely a bit frustrated. If I were him, I would be as well. Notice that he lives in New York City and New York is no longer experiencing the population an job growth it once did. Over the next 30 years, it will be significantly surpassed by LA, San Francisco, and many western and southern cities when it comes to population growth, job growth and therefore appreciation. Everyone makes mistakes once in a while, but not everybody learns from them.
I have always thought that wherever I choose to live/spend my time is an investment. And I'm fortunate to live in a market that's experiencing an unprecedented amount of growth and opportunity. There are many other markers also that are growing faster than the U.S. average...ex. LA, Seattle, Las Vegas, Reno, Austin, Dallas, San Antonio, Houston, Denver, Phoenix, Atlanta, Charlotte, Raleigh-Durham, Nashville, just to name a few... and I'm invested in must of them. All of these markets are forecasted to beat all northeast markets as far as population and job growth...and therefore likely appreciation.
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes9y
Originally posted by @Jon Q.:
Originally posted by @Tobias Falzone:
I cringe when I hear people talk about how median income levels can't support home values. That should not surprise anyone. in LA, homeownership percentages are somewhere around 47% now. Using that number, median person doesn't own a house! It would be better to use a number closer to 75th percentile of income to describe the median homeowner, not the median person. That number in LA is close to 100k, and guess what, the median home values aren't completely out of whack with the median income of homeowners.
Compare that to San Francisco :-)
But there's still no bubble. It's called lack of supply, cost of building is high, and availability of land where you can build.
I already told him to do this... Median home price is almost double yet median income only 15k more...
But he refuses to explain how median income is important to the SF/LA housing market.
- Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes9y
Originally posted by @DL Martin:
Mr Mike Fletcher is a Troll.
More like just fishing for free SEO for the cheapo website in his profile. Replies to these threads that agree with him are responded to with more questionable statistics or off topic nonsense, and those that are against are again responded to with more off-topic stats. I usually like to read the "Trending Discussions", but this nonsense of Mike talking to himself for 10+ pages across various threads is getting old.
Very little substance on an otherwise great topic.
- Investor · West Los Angeles, CA · Member since 2014 · 230 posts · 239 votes9y
I knew he is trying to sell something. I question if he even owns any property. People on this and other threads have asked him for proof of his holdings and he keeps dodging the question. I don't know if he's trying to sell property in Maryland, his website or what. But yeah he's a troll.
- Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes9y
Originally posted by @Account Closed:
I knew he is trying to sell something. I question if he even owns any property. People on this and other threads have asked him for proof of his holdings and he keeps dodging the question. I don't know if he's trying to sell property in Maryland, his website or what. But yeah he's a troll.
His website says something about trying to raise capital for non-profits, but there's no content. I don't see how he thinks his posts are help him with anything, even with SEO. Seems to me he's just trying to waste everyones' time.
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Account Closed:
I knew he is trying to sell something. I question if he even owns any property. People on this and other threads have asked him for proof of his holdings and he keeps dodging the question. I don't know if he's trying to sell property in Maryland, his website or what. But yeah he's a troll.
Why is it that with every post I make, I find the same few crawl out of whatever cave theyve been in to spread hatred and bitterness? This is worse than stalking. Here is a suggestion. Get a life!
- Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes9y
Originally posted by @Account Closed:
Originally posted by @Account Closed:
I knew he is trying to sell something. I question if he even owns any property. People on this and other threads have asked him for proof of his holdings and he keeps dodging the question. I don't know if he's trying to sell property in Maryland, his website or what. But yeah he's a troll.
Why is it that with every post I make, I find the same few crawl out of whatever cave theyve been in to spread hatred and bitterness? This is worse than stalking. Here is a suggestion. Get a life!
Ok, I'll take the bait. What is the discussion you are trying to provoke? What are you trying to gain from this? People agree with you, and you find some way to respond rather obtusely with obscure stats as if you are against them, and people disagree with you, and you tell them they aren't on topic or you ignore their reasonable sources and years of experience and throw out more garbage. That's the value here, folk's individual experiences. You aren't looking for info or help, you are just badgering the same garbage to garner SEO rankings for your crap fundraising site.
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Vivek Khoche:
@Account Closed- Personally I do agree with you. I have seen two down turns and strongly believe there will be more down turns, next one certainly will not be last one. Today the folks writing about the strong market would write thesis on bubble bursts. International and wealthy CA investors have dumped money wherever they can, we will see how long they can keep the properties vacant.
My commercial lender from one of the market I operate reduced my LOC to 68% from 80% of value as they strongly believe the prices are not realistic. He further told me that he stopped responding to CA investors for fresh loans.
It does not matter to me if bubble continues, if it does not I will be keeping fingers crossed.
Good Luck
Vivek
lol :-) maybe he stopped responding to CA investors because the deal wasn't cash flowing? :-)
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Jimmy Moncrief:
In most markets there is a supply shortgage. I don't know how there can be a bubble when there is a supply shortage and increasing demand.
You have to focus on what a bubble really is and its characteristics? Asset value gets overinflated... the market price of the asset deviates drastically from its intrinsic value... a supply shortgage can actually trigger or significantly increase the formation of bubbles.
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Matt R.:
I think the guys from UCLA are not your typical government worker types. These guys are actually recruited worldwide for their research skills and known track records.
That'll do it. I need to own a sports team in California. It seems like people there are so emotional about anything California they often just get completely numb to the facts.
Now you claim that UCLA is not a typical governemnt entity and that somehow, they recruit top notch economist and researchers who just so happen to know a thing or two about economics that economist and researchers at the federal reserve dont. Seriously?
You are talking about people at the federal reserve in charge of managing the economy and formulating montary policy with far reaching global scope and consequence.
Last time I checked, state of CA can hardly look past state of CA. Do you see the bias of your arguements?
That is what is happening here... you guys get too emotional and start rambling all over the place.
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Victor Gutierrez:
People let just be cautious and think twice at the moment of make investment, but I can tell there is something going on when I see people over paying for a lot of crapy houses
There is some truth to this... not just overpaying. In many cases you have no credible way of ascertaining the value of the asset using standard industry valuation techniques. In LA, they'll want exemption from any and everything... 1% rule for instance, doesnt apply there, rental, were never meant to cash flow they'll tell ya. You know there is a problem when you buy a rental asset but when trying to value the asset, all you have ia a string of negative cash flows almost throught the entire holding period... banking solely on appreciation. I stopped counting the rules that dont aply to LA.
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Matthew Olszak:
Originally posted by @Account Closed:
Originally posted by @Account Closed:
I knew he is trying to sell something. I question if he even owns any property. People on this and other threads have asked him for proof of his holdings and he keeps dodging the question. I don't know if he's trying to sell property in Maryland, his website or what. But yeah he's a troll.
Why is it that with every post I make, I find the same few crawl out of whatever cave theyve been in to spread hatred and bitterness? This is worse than stalking. Here is a suggestion. Get a life!
Ok, I'll take the bait. What is the discussion you are trying to provoke? What are you trying to gain from this? People agree with you, and you find some way to respond rather obtusely with obscure stats as if you are against them, and people disagree with you, and you tell them they aren't on topic or you ignore their reasonable sources and years of experience and throw out more garbage. That's the value here, folk's individual experiences. You aren't looking for info or help, you are just badgering the same garbage to garner SEO rankings for your crap fundraising site.
I think you must be one of them too... not sure who is paying you guys to follow me around, I mean stalk me, stirring up all these negativity or what you feel threatened by.... I would strongly suggest you find an alternate line of work... or find someone else to bother.
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Tobias Falzone:
I cringe when I hear people talk about how median income levels can't support home values. That should not surprise anyone. in LA, homeownership percentages are somewhere around 47% now. Using that number, median person doesn't own a house! It would be better to use a number closer to 75th percentile of income to describe the median homeowner, not the median person. That number in LA is close to 100k, and guess what, the median home values aren't completely out of whack with the median income of homeowners.
What exactly is close to $100,000? And what are you saying about median home values and median income?
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Matthew Olszak:
Originally posted by @DL Martin:
Mr Mike Fletcher is a Troll.
More like just fishing for free SEO for the cheapo website in his profile. Replies to these threads that agree with him are responded to with more questionable statistics or off topic nonsense, and those that are against are again responded to with more off-topic stats. I usually like to read the "Trending Discussions", but this nonsense of Mike talking to himself for 10+ pages across various threads is getting old.
Very little substance on an otherwise great topic.
It sounds more like you just like following Mike Fletcher around ... looking for your girl again? Wait, let me check... she aint here!
- Fairfield, CA · Member since 2017 · 98 posts · 84 votes9y
@Account Closed did you even read the article you linked? Well, at least I did... Let me help you with what you missed.
In C.A.R.’s newest market indicator of future price appreciation, Market Velocity – home sales relative to the number of new listings coming on line each month to replenish that sold inventory – continued its upward momentum in May, suggesting that home prices should grow further in the upcoming months. Solid demand motivated by low interest rates, coupled with tight supply, put upward pressure on prices in the last few months as the home buying season remained competitive. The statewide median price should remain near its recent high until late summer or early fall. Market Velocity is strongly correlated with increases/decreases in price growth with a roughly three- to six-month lag time.Sales are down because inventory is down. Supply is tight. Doesn't look like a bubble but prices are going higher. We should expect construction to pick up with prices this high.
In the last bubble, we were building houses everywhere you looked. There was an over supply during the last bubble, but that wasn't evident because we turned renters into owners by giving them loans they couldn't afford. If you talk to mortgage brokers today, most will tell you buyers today are well qualified. Have you tried getting loans lately? Not as easy as 2005.
If this is a bubble, where's the irrational exuberance? - Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Joseph Hennis:
@Account Closed did you even read the article you linked? Well, at least I did... Let me help you with what
If this is a bubble, where's the irrational exuberance?
Just about every LA investor I talk to 'feels' there is money everywhere in LA -- literally flowing in the streets. I show you labor department data showing median family income in LA to be in the $50,000 range and 2 times or more, less than the qualifying income for a median property in LA and you have the very same people try to tell me, well, "their parents can afford to buy the house for them" or that tech sector represent all of LA. What does that have to do with what we are talking about? They 'feel' a majority of residents in LA earn way in excess of $100,000. Are absolutely unbothered by negative cashflowing properties and cap rates approaching 1% territory in some areas. Feel that to value properties in LA, traditional standard valuation techniques and methodologies do not apply (evidence of a bubble and overinflated prices by the way - euphoria). 'Feel' is it irrational to expect properties to cash flow, rely excessively on appreciation as the primary play in LA. I even had someone had the nerve to tell me that in order to value a rental property in LA, you had to use rental growth rate of 10% or more. Get a grip! Price controls is not in place because regulators are just bored and feel like exercising.
- Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes9y
Originally posted by @Joseph Hennis:
@Account Closed did you even read the article you linked? Well, at least I did... Let me help you with what you missed.
If this is a bubble, where's the irrational exuberance?And when next you are on the CARs website, they also publish data on qualifying income for mortgages based on the amount of the mortgage. Look up qualifying income data while on there.
This is an example of what an Accountant makes in LA based on survey of some 700+ salaries by indeed. Now you tell me, what a salary of $58,000 can buy you in LA. Heres a hint, something in the $284,000 range.
Median LA home prices is in the $700,000 range. Thats average, sketchy suspect neighborhoods. See below what the qualifying income would have to be for a "median" property in LA.
So you have an accountant not able to afford a home in LA yet you guys keep claiming to be in awe that someone would suggest there is an affordability crises.
- Rental Property Investor · Ashburn, VA · Member since 2016 · 239 posts · 119 votes9yThere is definitely a bubble. If your a builder you're only going to build luxury models that will sell to sweet sweet tech money. No affordable housing. Even in Baltimore. Workers have no ability to increase their wages without sweet sweet tech skills.
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes9y
Originally posted by @Account Closed:
Originally posted by @Matt R.:
I think the guys from UCLA are not your typical government worker types. These guys are actually recruited worldwide for their research skills and known track records.
That'll do it. I need to own a sports team in California. It seems like people there are so emotional about anything California they often just get completely numb to the facts.
Now you claim that UCLA is not a typical governemnt entity and that somehow, they recruit top notch economist and researchers who just so happen to know a thing or two about economics that economist and researchers at the federal reserve dont. Seriously?
You are talking about people at the federal reserve in charge of managing the economy and formulating montary policy with far reaching global scope and consequence.
Last time I checked, state of CA can hardly look past state of CA. Do you see the bias of your arguements?
That is what is happening here... you guys get too emotional and start rambling all over the place.
Idk how closely the feds track LA real estate and my guess is they don't spend much time forecasting LA RE.
However this guy and others at UCLA do full time. This example is actually from Hong Kong I think.
William Yu
ECONOMIST, UCLA ANDERSON FORECAST
UCLA Anderson School of Management
110 Westwood Plaza, Entrepreneurs Hall, C506
Los Angeles, CA 90095-1481William Yu joined the UCLA Anderson Forecast in 2011 as an economist. At Forecast he focuses on the economic modeling and forecasting of Los Angeles economy. He also conducts research and forecast on China’s economy, and its impacts on the US economy. His research interests include a wide range of economic and financial issues, such as time series econometrics, stock, bond, real estate, and commodity price dynamics, human capital, and innovation. He has published over a dozen research articles in Journal of Forecasting, International Journal of Forecasting, Journal of International Money and Finance, etc. He also published op-ed articles in Los Angeles Times and other newspapers. He developed the City Human Capital Index and the Los Angeles City Employment Estimate and has been cited in the local, national and overseas media frequently including Wall Street Journal, Los Angeles Times, Washington Post, Time, Bloomberg, CBS Money Watch, Al Jazeera, U-T San Diego, LA Daily News, LA Daily Breeze, Straits Times, NBC, ABC, CNBC, CNN, and NPR, as well as various Chinese and Korean media.