Housing Bubble

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rocklinux

New Member
There are several topics I'd want to put out there in Southern Maryland and figured now was the time.

This is a very sore subject here as everyone expects housing to continue to go up until we all live in 3 million dollar homes by next year...(lol).

We are in a big bubble in several places in the US. Maryland is one of the leaders in the bubble race. I figured I'd be one of the first major people to fight this down here as its about time to burst. I'll give my reasons in another post...

But here are some links about this.

http://www.time.com/time/archive/preview/0,10987,1069097,00.html (buy the magazine or pay online to read it)

http://moneycentral.msn.com/content/P119372.asp

http://online.wsj.com/public/article/0,,SB111852361571957151,00.html?mod=sunday_journal_primary_hs
http://calculatedrisk.blogspot.com/2005/06/when-bubble-will-burst.html

These are all recent from very familiar magazines and experts all saying its about to come to and end. How bad, and ugly depends on the author but many say its the start to stock and housing deflation like what happened in Japan in the early 90's and still affecting them today.
 
ceo_pte

ceo_pte

New Member
rocklinux said:
There are several topics I'd want to put out there in Southern Maryland and figured now was the time.

This is a very sore subject here as everyone expects housing to continue to go up until we all live in 3 million dollar homes by next year...(lol).

We are in a big bubble in several places in the US. Maryland is one of the leaders in the bubble race. I figured I'd be one of the first major people to fight this down here as its about time to burst. I'll give my reasons in another post...

But here are some links about this.

http://www.time.com/time/archive/preview/0,10987,1069097,00.html (buy the magazine or pay online to read it)

http://moneycentral.msn.com/content/P119372.asp

http://online.wsj.com/public/article/0,,SB111852361571957151,00.html?mod=sunday_journal_primary_hs
http://calculatedrisk.blogspot.com/2005/06/when-bubble-will-burst.html

These are all recent from very familiar magazines and experts all saying its about to come to and end. How bad, and ugly depends on the author but many say its the start to stock and housing deflation like what happened in Japan in the early 90's and still affecting them today.
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AGREE... It's still hot now, but I've read several articles by the Big Dogs of banking and they are worried. The problem being easy approval for interest only mortgages. I read one article that suggested way too many people are getting approved for mortgages that equal to 50% or more of their inccome. The number use to be 30%. The only thing I wonder about is the trickle effect. A bust in the housing market is going to way heavily on all other areas of the economy.
 
sleuth

sleuth

Livin' Like Thanksgivin'
rocklinux said:
There are several topics I'd want to put out there in Southern Maryland and figured now was the time.

This is a very sore subject here as everyone expects housing to continue to go up until we all live in 3 million dollar homes by next year...(lol).

We are in a big bubble in several places in the US. Maryland is one of the leaders in the bubble race. I figured I'd be one of the first major people to fight this down here as its about time to burst. I'll give my reasons in another post...

But here are some links about this.

http://www.time.com/time/archive/preview/0,10987,1069097,00.html (buy the magazine or pay online to read it)

http://moneycentral.msn.com/content/P119372.asp

http://online.wsj.com/public/article/0,,SB111852361571957151,00.html?mod=sunday_journal_primary_hs
http://calculatedrisk.blogspot.com/2005/06/when-bubble-will-burst.html

These are all recent from very familiar magazines and experts all saying its about to come to and end. How bad, and ugly depends on the author but many say its the start to stock and housing deflation like what happened in Japan in the early 90's and still affecting them today.
Click to expand...
I tend to believe in the "bubblet" theory that certain parts of the country will experience a bubble burst. However, considering the results of BRAC, I don't think the bubble will burst in southern Maryland anytime soon.

I think it will plateau. However, demand is still higher than supply in this area.
 
ylexot

ylexot

Super Genius
Ok, so let's assume the bubble is going to burst. I didn't see anything regarding what you should/shouldn't do to insulate yourself or possibly even take advantage of a potential bubble burst. I'm guessing this means I shouldn't get a home equity loan to do some home improvement/addition type stuff?
 
N

newtosomd

Guest
ylexot said:
Ok, so let's assume the bubble is going to burst. I didn't see anything regarding what you should/shouldn't do to insulate yourself or possibly even take advantage of a potential bubble burst. I'm guessing this means I shouldn't get a home equity loan to do some home improvement/addition type stuff?
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That would most likely depend on your current equity situation, with regards to your home.
 
sleuth

sleuth

Livin' Like Thanksgivin'
ylexot said:
Ok, so let's assume the bubble is going to burst. I didn't see anything regarding what you should/shouldn't do to insulate yourself or possibly even take advantage of a potential bubble burst. I'm guessing this means I shouldn't get a home equity loan to do some home improvement/addition type stuff?
Click to expand...
Even if the bubble bursts here... I find it hard to believe that prices will drop all the way back to 2003 prices.
 
N

newtosomd

Guest
sleuth said:
Even if the bubble bursts here... I find it hard to believe that prices will drop all the way back to 2003 prices.
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I doubt it, but you really don't know until things start happening. If it's a big burst, then it could actually impact the job market as well. I have heard numbers like 10-20 percent drop in value, probably max.
 
Ponytail

Ponytail

New Member
newtosomd said:
I doubt it, but you really don't know until things start happening. If it's a big burst, then it could actually impact the job market as well. I have heard numbers like 10-20 percent drop in value, probably max.
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10-20% is a drop in the bucket compared the 100% increase that houses have seen here in 5 years.

My neighbor bought his house in 2000 for $98,000. He put it on the market a week ago and has 4 offers, ranging from $230,000-$235,000. Not a bad investment. Now, are the folks moving in going to see a 10-20% drop in value over the next couple of years? I doubt it. Really. Again, the growth of this area in population is exceeding the number of homes being built. More folks, in fact all of the folks that are even looking at my neighbors house are from DC. They're tired of the city. Even at $230,000, I'll bet they're still paying half than what they're house is worth in the DC area for the same size house.

The market does have to stop though. But I know of two new programs, BIG programs, coming to base by 2007. I'm sure there are more. But the programs that are here, aren't going anywhere by then, hence the groundbreaking for both those two new programs. All of those people to support those programs are going to need housing.

I gotta believe that investing in your own home in this area is still a good bet. I'm doing it, the dude up the street from me just put on a nice addition to his house. Granted, I'm not going to see the 100% profit that my neighbor is seeing, but I'm definitely not going to lose any money either.

You just have to be smart about your money, and just because the bank will let you take a loan for more than your house is worth, doesn't mean that you should.
 
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R

rocklinux

New Member
housing drop off

I believe that housing prices can drop off faster and lower than they've been seen for a long time. If you read the article in the Washington Monthly by Ben Wallace that I submitted earlier he says the drop off can be 50% or more in the bubble states.

In Japan, housing is still lower now than it was in the late 80's before there drop off. Same goes for Hong Kong. They've yet to recover in 15 years.

I like what I read under someones signature.

What some folks call impossible, is just stuff they haven't seen before.
-Robin Williams (What Dreams May Come)

If the bubble burst there are several senarios on what could happen. The worst being we drop into a depression.
 
truby20

truby20

Fighting like a girl
rocklinux said:
BRAC doesn't bring any new people to Southern Maryland. There are always rumors of it going around here but the data shows like an addition of a nominal amount of work. Howewver, this is besides the point. There are several things that forces a bubble to pop besides supply & demand.

Read this from start to finish and you'll see my point.

http://www.washingtonmonthly.com/features/2004/0404.wallace-wells.html
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I read it, and it's interesting that the article was written over a year ago..

Folks over at Fat Wallet have been talking about housing bubbles since 2003, nearly 1800 posts to the one message thread.

http://www.fatwallet.com/t/52/244405/

To me the activity of the last two years reminds me a lot of what it was like in the late 90's during the stock market boom. Back then EVERYONE was talking about stocks, daytrading, becoming millionaries from pets.com...crazy. Now it seems everyone either is in real estate or wants to get in, the herd mentality is whats keeping the market hot. The smart money left a long time ago...
 
R

rocklinux

New Member
different view

Another way to think about how far housing can drop off is...

If someone told you in 1999 that housing was going to triple from 120,000 to over 350,000 in the next five years would have you believed them?

THis hasn't happened at anytime in the US history to have housing triple in such a small time period.

Why not have it drop off the same way. Yes, I have seen property declines too. I bought a house near a bubble, employment was a factor, (stock market bubble), and sold it for much less than it was worth. I bought it for 150k, it "appraised" at one point up to 180k, and I sold it for 157k with finishing the basement, full yard and sprinklers...meaning I lost a lot of money!

I'm predicting a much harder fall here than this though as the bubble where I lived was tiny compared to here.
 
R

rocklinux

New Member
article's old

truby20 said:
I read it, and it's interesting that the article was written over a year ago..

Folks over at Fat Wallet have been talking about housing bubbles since 2003, nearly 1800 posts to the one message thread.

http://www.fatwallet.com/t/52/244405/

To me the activity of the last two years reminds me a lot of what it was like in the late 90's during the stock market boom. Back then EVERYONE was talking about stocks, daytrading, becoming millionaries from pets.com...crazy. Now it seems everyone either is in real estate or wants to get in, the herd mentality is whats keeping the market hot. The smart money left a long time ago...
Click to expand...


Yeah, its an old article I agree. I just like his wording.

Here's a bunch more updated ones.

http://www.stern.nyu.edu/globalmacro/80
http://www.economist.com/agenda/displaystory.cfm?story_id=3886356&fsrc=nwl
http://calculatedrisk.blogspot.com/2005/05/buffett-on-real-estate-bubble-and.html

Even Warren Buffet believes we are in a housing bubble. (#2 richest man in the world).
 
ylexot

ylexot

Super Genius
I should probably look into refinancing again and taking out some equity while rates are still low. I bought in 2000 well before the prices shot up, so even if houses lose quite a bit of value, I'll still probably have equity to spare...just need to keep myself from taking out too much.
 
M

marianne

New Member
ylexot said:
Ok, so let's assume the bubble is going to burst. I didn't see anything regarding what you should/shouldn't do to insulate yourself or possibly even take advantage of a potential bubble burst. I'm guessing this means I shouldn't get a home equity loan to do some home improvement/addition type stuff?
Click to expand...

If it's your primary residence it's easy - don't sell if/when the market is low and you don't lose any "real" money. That mentality is also helping keeping the home values high: people can't afford to move, so their homes don't go on the market, causing a supply shortage, causing demand and home prices to be high.

If you believe strongly enough that the bubble will burst and you're a RE Investor, don't buy now. If you are convinced the bubble will burst, sell now.

The decision to take home equity loans should be linked to what you'll use the $ for. If the equity loan is for improvement/addition AND you plan on staying in your home a long time, go ahead and do it. If it's for improvement/addition but you don't plan on staying in your home more than a few years, look at the return on investment for those improvements additions (kitchens, bathrooms, basements, decks are generally good values while sunrooms and pools are generally not) and then decide if it's worth it. If the equity loan is not for home improvements, I would think very carefully about taking it out regardless of perceived home values.

I found this thread most interesting looking at the statistics of interest-only mortgages: over 30% in the DC area! I couldn't figure out how folks were paying so much for houses. Now I know. If interest-only morgages go up in payment after 2-10 years, there's a good chance there's going to be an awful lot (one out of three!) of homes on the market in 2-10 years. That would lead to decreased demand and home prices. Eesh. While I imagined home prices would level off, looking at that information does have me concerned.
 
R

rocklinux

New Member
jobs?

aps45819 said:
:yeahthat:


Unless you cout the 5,000 jobs that have moved to PAX from other bases.
Click to expand...

Brac has brought jobs in the past to Southern Maryland but the future BRAC doesn't bring any additional jobs at all. Which will attribute to a slowdown.
 
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R

rocklinux

New Member
fully agree here

marianne said:
If it's your primary residence it's easy - don't sell if/when the market is low and you don't lose any "real" money. That mentality is also helping keeping the home values high: people can't afford to move, so their homes don't go on the market, causing a supply shortage, causing demand and home prices to be high.

If you believe strongly enough that the bubble will burst and you're a RE Investor, don't buy now. If you are convinced the bubble will burst, sell now.

The decision to take home equity loans should be linked to what you'll use the $ for. If the equity loan is for improvement/addition AND you plan on staying in your home a long time, go ahead and do it. If it's for improvement/addition but you don't plan on staying in your home more than a few years, look at the return on investment for those improvements additions (kitchens, bathrooms, basements, decks are generally good values while sunrooms and pools are generally not) and then decide if it's worth it. If the equity loan is not for home improvements, I would think very carefully about taking it out regardless of perceived home values.

I found this thread most interesting looking at the statistics of interest-only mortgages: over 30% in the DC area! I couldn't figure out how folks were paying so much for houses. Now I know. If interest-only morgages go up in payment after 2-10 years, there's a good chance there's going to be an awful lot (one out of three!) of homes on the market in 2-10 years. That would lead to decreased demand and home prices. Eesh. While I imagined home prices would level off, looking at that information does have me concerned.
Click to expand...

I fully agree with everything said here. Hopefully, there won't be a job impact that forces you to sell. :-(
 
huntr1

huntr1

.
rocklinux said:
Do you have documentation to proove this? The BRAC listings I've read make to reference to thist at all. All the jobs are going to Aberdeen, and Ft. Belvoir.
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Drive around the Park. See all the def. contractors? They moved here when PAX got the new programs after the last BRAC (i.e. NavAir). You can't count only the Govt. jobs on base, you have to look at the support businesses to find the true growth numbers.
 
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