when is that stupid housing bubble going to pop already?

Question

There's no way I could afford to ever buy a house in this insane world.

Answer 1

Ah yes, the Realtors are telling us there is no bubble and that now is a great time to buy. Funny how you never hear a salesperson tell you it's a bad time to buy.

To all the people who think there is no bubble, that things are "in balance" after increasing 100% or more then declining less than 10%, I refer you to some the excellent data analysis performed at the links below for the southern california market. This site not only provides convincing data showning the enormity of the bubble, but also shows the logical fallacies that so many housing bulls fall prey to.

If you don't want to take the time to go to the site, just use some common sense.

-How do people buy houses? With money from their jobs, of course. So housing cannot outrun inflation over the long-term, because house prices are interlinked with incomes (which dictate inflation). Research clearly shows that houses, over the long haul, appreciate barely above inflation (do a Google search for the study in Amsterdam that compared housing prices and inflation over about 400 years of record).

-There's no such thing as a free lunch. Nuf said. Money can't just "appear" out of nowhere, but that is what it has done TEMPORARILY for homeowners. They are in denial if they think the day they have to give back that money they didn't earn isn't around the corner.

Answer 2

OH the bubble, that is the million dollar question. As a long time real estate agent there are a few points I would like to make. Now is the time to buy, not later. The market has taken a 6% decrease from july 06 to now. And it is starting to level off now. But the upcoming buying season is coming up. If you plan to purchase do it now or wait until after the summer. Most homes are purchased during this period. After the summer is over the builders will check their inventory and should be coming up with incenctives to move the product. The incentives will not be coming out now because they are planning to have a normal summer sales season. Also the people who have to sell this summer and don't will be desperate come September. Buyers are a premium right now so remember that. I read a few other answers and by no means should you play the mortgage game and get an interest only loan or arm. Doing an 80-20 loan would be a much better idea. The bank will make you 2 loans the 80% loan will be a normal rate but the 20% loan will be 3-4 points higher than that. The advantage is you don't pay PMI which is not tax deductable. The payment will be almost the same though. The mortgage person will tell you about the law just passed that says you can deduct PMI from your taxes, the catch is that it is only for the tax year 07. They are going to try and make it perminate, we will see. Mortgage people are commissioned so remember that and shop around. The people who did all the crazy mortgages are starting to default now, so check your foreclosure's in your area. There is no way you can afford not to buy a house in this insane world. Because you already have, just for somebody else. The landlord is getting the equity, not you so you can't afford to do that forever or you will never get ahead of the game. You need to put yourself on the property ladder. Your first home will not be exactly what you want by any means. But the sweat equity you will build in that home will help you purchase the one you really want in 3 years. Everyone starts out the same way so comprimise a little and become a home owner. I wish you luck on your home adventure, Pat

Answer 3

This world is not that bad where are you located? What type of house are you looking for? There are mortgages to fit the needs of every person. If you want the lowest possible payment for 10 years interest only or pick a payment. you never know what is out there. The bubble will not pop soon if ever. People need there house to be worth something. If not then the only investment that separates people for others no long holds true to its conception. a car can only mod to a certain level a house can be chopped down and re built still be the same house just a different feel.

Answer 4

There is no bubble that is going to pop. Do you really think housing prices are going to drop some ridiculous amount like 100k? The market has cooled, but it will never go back top where it was, and the people waiting for it are foolish. Now is a great time to buy. It is a buyers market, and you should be able to negotiate yourself a good purchase price. If you keep waiting you will be a renter forever. You have about as much of a chance as gas going back to 98 cents a gal. Notice gas went high, but only came down a little. Home prices will be the same way.
I wish you luck.
RE Agent,
Remax

Answer 5

Your not the only one. Hang in there.

I could easily see prices declining for the next two years in most major cities.

The fact is that the prices will not last so long as people do not go into over-inflated mortgages. Those that do will put themselves into default very quickly. Statistics are very clear in telling us that the majority of the population that lives in southern CA for example, can not afford a median payment based on the current sale prices. Current salaries simply do not meet those required to make those high housing payments.

Then you have the boomers, who are going to start selling soon so they can leave behind the empty nest and retire to warmer weather.

Within the next 3-5 years, housing prices will stabilize back to norms. They will not crash, however. There are companies funding accounts right now to buy low if the market starts to crash. That will stabilize a portion of the market.

Answer 6

What bubble? Where? What are you talking about.
House prices are stabilizing and if you are waiting for a decrease dramatically then don't hold your breath. Too much has been invested and you should either buy now before they climb again or just be happy renting and making someone else rich.

Answer 7

Hopefully it won't. A lot of people have invested their lives savings in real estate due to the simply fact that no one is making any more of it.

Housing never goes down in value it just keeps going up. I purchased a home almost 3-years ago and it has gone up almost 50% in value since then.

Answer 8

It's coming, dude. Check out this article: http://www.thestreet.com/_tsccom/newsanalysis/investing/10337747.html

Remember though, that housing markets are regional, and also local, so not everwhere will pop, just like not everywhere has bubbled.

Answer 9

well, you must be in my neck of the woods where prices seem unreasonably high, but I'm sorry for you (happy for me as a homeowner) that it's not going to pop in my professional opinion. You will see fluctuations in the market, but as far as a drop--you've just seen it...after more than 100% increase in the past few years, we had a dip of about 10%, and it's climbing again. That being said, you'd be surprised what you can do to afford a house, if it's important enough to you...and there are homes outside of the major cities where homes are actually still affordable...The 15 acres next to my parents farm in Minnesota just sold with a house attached for 40K...(house wasn't great, but is still standing)

Over time, history bears out that clean-title, non-marsh real estate has basically ALWAYS been a good investment--even when the market seems high...over time it will still go higher (maybe over a long time, but always...) The thing is...land is one thing there just not building a lot more of these days--it's a limited commodity.

Good luck to you...check out alternative loan programs...20% down isn't the rule anymore...

ADDED: I sometimes laugh (sometimes want to cry) when I see real estate specialists give mortgage advice, because so often it's wrong...and spoken with such authority. Interest only loans are not the enemy...using them to buy a home out of your price range is the enemy, likewise alternative loan programs like option arms and other arms are in SOME cases the very best thing you can do.

As my realtor friend below stated, mortgage people are almost all paid on commission (much lower commissions than the real estate side of things, by the way-I usually make less than 1.5% total of the loan amount (not purchase price, loan amount on my loan transactions)...it does make sense that you should shop for the most trustworthy, best educated loan officer/broker you can find for a reasonable rate--as well you should look for the best realtor you can find (make us earn our percentage points...we are there to represent you.) But get your financial advice from financial experts...and check what your mortgage broker/loan officer has to say with your financial advisor or tax preparer (if you have one of those two--sometimes there's a method to our madness that not all real estate agents will understand unless they specialize in the financial markets as well.

One thing I wish first time homebuyers would grasp...your first home does NOT have to be your dream home, just a way into the market.

OK, now to what my other (colleague?) said below...it's true that the median priced home is outside of the price range for most first time homebuyers in CA...but the fact is if that's the median price home, there are lower priced homes--and there are people who are making it work with homebuyer assistance programs, co-owners, 2nd jobs, givng up their Starbucks, etc. (Think about NY where people rent out rooms and basements like crazy...it can be done, and a lot of garages have tenants in them in California. People say that years ago the housing values crept up like this and then crashed down in California, and they're waiting for that to happen again, however the economic picture of California has changed since then. We don't have single-employer areas the way we did in the 1980s with the airline industry...the economy is much broader, the jobs are more diverse. The only thing in my opinion that would really bring a major crash is if our government really did work to remove the illegal immigrant population, which would then leave us with a surplus of housing...but as of right now, that doesn't look very hopeful, and with a possible amnesty program in the works, there's another group of potential homeowners lining up who are not ashamed to with 3 families in a single familiy house to get themselves into the housing market... So I guess if you think that deportations are right around the corner, hold off on the purchase...

Our friend is right, money doesn't appear from nowhere, but it does get funneled into the things that people consider important. I've seen apartment dwellers driving Beamers...while this homeowner drives a paid off 1999 corolla CE...(not a glamour car, but my gas mileage is good, and it's soooo reliable). I've seen "poor" people eating out at the restaurants my husband and I drive past to our kitchen. I've seen people who "can't afford" to get into housing purchasing the newest iPods, mortorcycles, vacations, designer clothing, cable TV, and all other types of like "necessities"...

Look, real estate is a big purchase, and you do have to plan for it...but people do make it work...and if you can't make it work in your area, look in another area...but sit with some financial specialists and have them take the time to evaluate your full situation before you either build up or give up hope.