Sign Of Real Estate Market Top?

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Jun 22, 2005 8:53 pm

Forget flippin' condos, man! That's old school. The in-crowd is makin' the green with these "investments". Read on, my brother:


"This week, CB Richard Ellis is expected to announce the formation of a joint venture that will tap into the fledgling property derivatives market. The venture between CB Richard Ellis and Manhattan-based securities inter-dealer broker GFI will reportedly sell derivatives contracts to investors."


The Link: http://nreionline.com/news/Brokerage-Giant/


Jun 23, 2005 10:33 am

In certain markets there is a bubble but in the vast majority of the
country - there isn't.  Low interest rates are the prime cause
because anyone can afford to buy a $150k rental property and with the
rent make the minimum payment. 



As interest rates increase, we'll see slightly negative to zero growth
in the vast majority of the country, we'll see a 10-15% collapse in a
small region and a 25% drop in a VERY limited area.

Jun 23, 2005 10:42 am

"In certain markets there is a bubble but in the vast majority of the country - there isn't."


Where I live- San Diego- the housing market is ridiculous. Forget the palatial mansions in La Jolla , Rancho Santa Fe, or on Coronado Island, its the "average" homes that are still spiraling upwards out of control. The average price of condos in this area have DOUBLED in less than 4 years.... Interest only mortgages now account for about 70-72% of all new mortgages in the past 2 years or so.... People are setting themselves up for a rude awakening IF rates increase even marginally.... I dont know about a 25% decline around here, but looking for modest growth of about 5-10%....

Jun 23, 2005 2:41 pm

Real estate prices are insane!  Even back in 1998 I thought there
was a bubble.  I have a friend who got his first house in
1995.  It was on the market for 6 months and he got it for
$65k.  He sold it three years later for $85k--it sold in a few
days.  Today it is appraised at close to $200k.



Yes, the value of a little house went from $65k to $200k in 10
years.  There is absolutely no way possible such price increases
can be sustained.



It's a "dumb money" issue, I think.  Many people foolishly believe
that housing prices can never go down.  They are wrong.  So
they over-extend themselves and as a market bid up the prices of real
estate to astronomical levels.



I recently heard on the news that over 60% of California mortgages in
the past few years have been interest only mortgages.  A LOT of
people are going to lose their houses.



Part of the problem is immigration, too.  Fly into many cities and
you'll see that most of the available land is built up.  You can't
have illegals, and legals even, flooding into a market that is already
built up.  It just makes housing more expensive for
everyone.  More people means a lower quality of life in my opinion.



The question is what impact is this going to have on the market.  Any hypotheses???  I've got a few.  :)

Jun 24, 2005 5:43 am

IF rates go up?  IF?!?!



blarmston:

People are setting themselves up for a rude awakening IF rates increase even marginally.... I dont know about a 25% decline around here, but looking for modest growth of about 5-10%....

Jun 24, 2005 5:48 am

Well, if you keep looking for a bubble, rentie, eventually one will appear.


Don't hate just because you didn't act years ago.



inquisitive:

Real estate prices are insane!  Even back in 1998 I thought there was a bubble.  I have a friend who got his first house in 1995.  It was on the market for 6 months and he got it for $65k.  He sold it three years later for $85k--it sold in a few days.  Today it is appraised at close to $200k.

Yes, the value of a little house went from $65k to $200k in 10 years.  There is absolutely no way possible such price increases can be sustained.

It's a "dumb money" issue, I think.  Many people foolishly believe that housing prices can never go down.  They are wrong.  So they over-extend themselves and as a market bid up the prices of real estate to astronomical levels.

I recently heard on the news that over 60% of California mortgages in the past few years have been interest only mortgages.  A LOT of people are going to lose their houses.

Part of the problem is immigration, too.  Fly into many cities and you'll see that most of the available land is built up.  You can't have illegals, and legals even, flooding into a market that is already built up.  It just makes housing more expensive for everyone.  More people means a lower quality of life in my opinion.

The question is what impact is this going to have on the market.  Any hypotheses???  I've got a few.  :)

Jun 24, 2005 10:20 am

A guy I work with was arguing in 1992 that the stockmarket was in a
bubble phase.  In 2001 he announced he was right all along and the
drop proved it.  You'll be right eventually if you keeping saying
we are in a bubble.



Home prices have gone up because of interest rates and the ability to pay more for the same payment.



If you figure an 8% mortgage and a $200k house has a $1,467 payment over 30 years....

At 5% mortgage that payment buys a $273k house.  Nothing has
changed for the buyer except the value of the loan and tax rates.



People buying with adjustable mortgages are in for a rude awakening
eventually - it may take a few years but eventually we'll see higher
rates again. 




Jun 24, 2005 2:40 pm

In <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Sacramento where I am from there has been an increase in demand for other reasons than just investors.  Things such as inflation, immigrants, and bay area folks who don’t want to pay the price of living in the bay.  But most of all it is the "Robert Kawasaki"(I know I butchered the name) group.  I think this book has changed the investment style in the U.S. towards real estate.  Soon the bubble will not bust but gradually get lower.  10 years from now the housing market will at best be at its mean again.  Many people will have lost money.  In my opinion when someone losses money someone has to gain.  Then when people start to see room for growth they will invest again.  IT’S CICLYCALE BABY!!<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Jun 24, 2005 2:53 pm

Robert Kiyosaki is also talking bubble now.


See excellent article:


http://www.wcrt.org/phpBB2/viewtopic.php?t=832 

Jun 24, 2005 2:55 pm

Want to talk about crazy housing prices?.... Come to Las Vegas.

Jun 24, 2005 3:37 pm

I will be in Vegas next weekend but it isnt to research real estate prices.... Catch me poolside at the Hard Rock for Rehab  !!! I hope I dont end up with a toetag after that weekend.....

Jun 25, 2005 2:15 pm

As a wholesaler, I get contacted as much as the next guy by headhunters. In the past two years, I've lost count of the number of start-up REIT distributors that are trying to build a wholesaling team, in an effort to bring their programs to the marketplace. I have as much appreciation for a solid REIT story as anyone, but this cycle has been a little long in the tooth for some time now.

Jun 26, 2005 11:49 am

Robert is trying to push book sales. There is no global bubble. He is
full of crap. I suggest everyone read the whole article. He is merely
pushing his book. I heard he is not even that rich. If he is he
probably got that way from selling his crappy books.

Jun 26, 2005 11:50 am

By the way, I live in Ga, there is no bubble here. In Fla, yes and I'm sure in Cali., but there is not one here. 

Jun 26, 2005 1:18 pm

For a counterpoint on that fraud Kiyosaki, check this link:



http://www.johntreed.com/Kiyosaki.html



I also note that Kiyosucky's followers are usually poor.


Jun 26, 2005 4:46 pm

By the way, I live in Ga, there is no bubble here. In Fla, yes and I'm sure in Cali., but there is not one here.  - riley44


---------------------------------------------------


I also live in Georgia; however, I believe that there's a "double-bubble" in the state: Atlanta and the coastal areas. I just came from St. Simons Island a few weeks ago and the valuations were outrageous. Of course, resort property has always been pricey, but being regular visitor to the "Golden Isles" for the last 15 years, I've been able to view the absurd increase of home prices, firsthand.


Jun 26, 2005 5:15 pm

I live in GA as well. My father bought a place in the panhandle on the bay 6 years ago for $110,000 today a unit sold for $475,000. Incredible!

Jun 27, 2005 12:44 pm
blarmston:

I will be in Vegas next weekend but it isnt to research real estate prices.... Catch me poolside at the Hard Rock for Rehab  !!! I hope I dont end up with a toetag after that weekend.....


Oh yea, Rehab is a good time! 

Jun 28, 2005 10:15 am

It's a new paradigm, and everybody who doesn't buy real estate now will be priced out of the market forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.


Renters, and anybody born in a future generation, will not be able to afford a $10,000,000 starter home in 15 years. They will live in tent cities and Hondas.


This asset bubble is different from all of the others in human history -- it will never slow down or pop. The gains are permanent.

Jun 28, 2005 12:48 pm
PantsGoBrown:

It's a new paradigm, and everybody who doesn't buy real estate now will be priced out of the market forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.


Renters, and anybody born in a future generation, will not be able to afford a $10,000,000 starter home in 15 years. They will live in tent cities and Hondas.


This asset bubble is different from all of the others in human history -- it will never slow down or pop. The gains are permanent.




I got a really good laugh out of that.