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Real Estate bubble in your neck of the woods?

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Re: Real Estate bubble in your neck of the woods?

Unread postby Newfie » Fri 30 May 2014, 18:49:29

I too wonder how long the trend will continue. Philly seems to be less reactive to housing boom/bust cycle, lower highs and higher lows. Don't have a clue bout San Diego area. My sense is that the trendy housing price will be a pretty good bet, especially if you are in one of the more established gentrified areas. In philly some " up and coming" have been hit hard, several times. The first housing bust I remember was in '69 or '70.

The risk is urban civil discord, which could trash the place in a heartbeat. Maybe we should look again at our homeowners insurance?
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Re: Real Estate bubble in your neck of the woods?

Unread postby copious.abundance » Fri 30 May 2014, 21:20:47

Philly is getting spillover from the New York area.

The entire northeast coast and California are rapidly becoming über-expensive areas only affordable to the upper-middle class and rich. Imagine Monte Carlo writ large, or something like that. It's also starting to spill over into previously moribund cities like Newark and Paterson. I'm awaiting the day when even Camden starts gentrifying with high-rise condos, like Philly's version of Jersey City. When the average rent in Bed-Stuy is $2000/month (for a studio!) and the average rent in Manhattan is $4000/month, you know something's going on.

I have no idea where the poor will live, aside from certain housing projects. Maybe all those rich people will have to get their burgers flipped by robots, and the poor people who used to live there will move to Kentucky. Or something.

If you think it's a bubble, wait until the average home price in San Diego starts pushing a million dollars. Maybe at some point it'll get so expensive they'll run out of rich people to sell them to. Only then will it finally run out of steam.
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: Real Estate bubble in your neck of the woods?

Unread postby Pops » Sat 31 May 2014, 08:58:48

I think the suburban and exurban migrations were leftovers from the rural past and those properties will be a liability at some point. We are becoming divorced by generations from the farm and those properties are just little romantic vignettes designed to fool ourselves into thinking we still have a connection to the land. Im pretty sure the younger folks have gotten over that. Screens are way too entertaining and tending yards is way too tedious. Add in the increasing cost of commuting and I think financiers and engineers and merchants looking for somewhere to put their money will keep the big postindustrial city centers occupied for a long while.

Of course everything is relative. If you own outright and can keep the taxes paid you'll be good if the property is top notch - it doesn't matter what the nominal cash flow is as long as there is a profit and it provides an income. Like PJ said, a nominal $30k net today may equal a nominal $3k net tomorrow but that might be a good income then. The best thing about high end RE in the city is your tenant pool will have some income, it may not be the same income as today but it will be something, can't say the same for everyone.
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Re: Real Estate bubble in your neck of the woods?

Unread postby copious.abundance » Sat 31 May 2014, 14:32:38

I had never owned any real estate and had no money in any markets prior to 2010. Sorry to disappoint you.
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: Real Estate bubble in your neck of the woods?

Unread postby collapsenik » Sat 31 May 2014, 16:29:21

copious.abundance wrote:I had never owned any real estate and had no money in any markets prior to 2010. Sorry to disappoint you.


How unfortunate. There was quite the real estate and market opportunity available after the last big "scare the sheeple out of the way" episode.
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Re: Real Estate bubble in your neck of the woods?

Unread postby dorlomin » Sat 31 May 2014, 17:48:26

AgentR11 wrote:There was a similar article in the FT about UK housing, turns out, if you look at the country as a whole, housing has been getting more affordable over the past decade or so... *BUT* in the heart of London, trendy-central, prices are through the roof.

No the much of the South East of England is booming, commuter town to London. Even areas that were regarded as "working class" 5 years ago, like Walthamstow and Bow are seeing huge surge in demand. Part of the drive is that the population of London fell from about 8million at the end to WWII to about 6 million in the early 90s as the slums were cleared and the people moved to the new towns, but the boom in the financial industry and immigration has seen London approach 8 million again, but a strict building code was put in place around the city called the "green belt" aimed at stopping the surging growth outward of the 20s-50s. This worked as popultations skipped the green belt and moved to the commuter new towns, but now there has been a big stall in house building and a surge in demand this is pushing up prices. The general change in balance of wealth towards the top has created a large group who can use their wealth to buy houses then rent them, preventing poorer younger people from buying and forcing them to rent for more, elongating the time they have to save before they can afford a deposit.

The issue with central\west London is a bit different with people from many unstable countries like Greece and Russia buying property in London as if it was gold or bonds. Some of this has been the exclusive £20 million plus markets but others have been pushing up the prices of well off but not crazy rich areas to buy houses, pushing the people who used to buy there to less well off areas pushing up the prices. Mate of mine sold her house in Brixton of £220k about two years ago, it is now worth £300k. West Brixton is now trendy, prices have exploded.

The government has guarenteed housing loans for first time buyers where the mortgage issuer asks for 5% deposit, so this has been abused by buy to let buyers and others to help push up prices and create demand to boost the ailing UK economy.

I have suspicions the London comercial market is being saturated as huge new developments are arriving (The Shard, the Walkie Talkie) and not finding customers. Also allegedly the top end ultra costly new build appartments are struggling to sell. Who knows.

As for the rest of the UK, different markets in different cities. Regionally the more Southerly and Easterly you are the more money around. Glasgow, Liverpool and Newcastle are not booming, Bristol, Reading and Cambridge are.
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Re: Real Estate bubble in your neck of the woods?

Unread postby Phil » Sat 31 May 2014, 18:36:19

I feel like it's become trite to say, but it's still true: every asset and commodity has been in an ever-expanding bubble for many decades, since the creation of the Fed. I believe it's going to pop soon - perhaps after a period of hyperinflation (for example with the repatriation of petro-dollars), perhaps not. Maybe that repatriation is happening now, albeit quietly. Maybe part of what's keeping real estate prices high is foreign nationals buying houses and land with some of that money.

Still, I think it's going to pop in spectacular fashion; and real estate prices will fall on the order of 95%, along with everything else. "Impossible!", you say? Well, we'll see...

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10575292/Coming-oil-glut-may-push-global-economy-into-deflation.html#source=refresh
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Re: Real Estate bubble in your neck of the woods?

Unread postby Pops » Sun 01 Jun 2014, 08:39:10

Yeah Phil, the oil glut ruining the economy is at the top of my list. LOL

He points out that oil is still high but all other commodities are falling - well yea! He talks about PO but seems to say oil is just another commodity while in fact oil fuels the consumption and so the value of all commodities - and everything down the line. If there is deflation, it is because oil is too expensive so the cost of consuming all other commodities is higher - so their demand and their price is lower.

That is the PO problem in a nutshell.

Your link says US imports will fall because of increased production, I'd argue they are falling because we can't afford them.

Image

Image http://ourfiniteworld.com/2013/01/31/wh ... e-mileage/

It's pretty obvious that the amount of oil we desire has been greater than the amount we have the ability to buy. I agree that there is oil off the market and that LTO hasn't quite ended it's run. But I'd say just eyeballing the gap between our increasingly unmet desire and our decreasing ability to pay, that the US alone could easily suck up all that shut-in oil if the price fell very far. And it's reasonable to assume the rest O the world has pent up desire as well.
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Re: Real Estate bubble in your neck of the woods?

Unread postby Newfie » Sun 01 Jun 2014, 09:05:09

So far we are just trimming the fat from our oil budget. Europe has had more expensive oil for a long time. As oil gets ever more expensive the gap will widen into the bone.

In the meantime urban real estate is likely a good investment because walkers are less reliant on oil. Therefore they we be willing to pay more for a walkable neighborhood, off setting the high cost of gas.

That works until the food riots start.
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Re: Real Estate bubble in your neck of the woods?

Unread postby DejahThoris » Mon 02 Jun 2014, 06:40:48

Plenty of livable houses available here in Pennsylvania's coal region for twenty thousand Fifty K buys a nice house No bubble here But then there's no work either
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Re: Real Estate bubble in your neck of the woods?

Unread postby collapsenik » Mon 02 Jun 2014, 16:54:37

DejahThoris wrote:Plenty of livable houses available here in Pennsylvania's coal region for twenty thousand Fifty K buys a nice house No bubble here But then there's no work either


Coal mining all gone?

My mother decided to sell in a college town, $130K or so, and nice house. Not all places are crazy, but it does beg the question that c.a. mentioned earlier, when you run out of folks interesting in big show off houses, then what? Where DO the poor people live, certainly they aren't commuting from central PA down to Washington DC where the jobs are.
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Re: Real Estate bubble in your neck of the woods?

Unread postby Newfie » Mon 02 Jun 2014, 21:13:07

Well, actually, there are a surprising number that make that or a similar commute.

DC is about straight south of Harrisburg. Quite a few folk live in NE PA and commute to NYC and environs.

Each morning Amtrak hauls a few carloads worth of commuters to Penn Station. I've commuted to DC and NYC from Philly. I know of more than one person who lives in the Philly burbs, but drives to a SEPTA Commuter station, then to 30th Street in Philly and Amtrak to NYC, then a subway trip. Daily, for years. Nuts.

Then there are the Mega Bus deals that haul many more.
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Re: Real Estate bubble in your neck of the woods?

Unread postby dinopello » Tue 03 Jun 2014, 21:54:45

The bubble is so hot here, they are turning the prisons into luxury housing! :razz:

The Fairfax County Board of Supervisors on Tuesday began clearing the way for a $188 million overhaul of the former Lorton Prison site that, when finished, will house residents and new businesses inside refurbished cellblocks, guard towers and prison dorms.

“This is the project. This is the time to embrace recycling within the county,” said Clark, a vice president of the South County Federation group of homeowners.


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Re: Real Estate bubble in your neck of the woods?

Unread postby copious.abundance » Tue 03 Jun 2014, 22:05:51

^
Wow, what a great marketing opportunity! They should keep the name "Lorton Prison" for the real estate development, so that people who live there can impress their friends by telling them, "I live in Lorton Prison!"
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: Real Estate bubble in your neck of the woods?

Unread postby DejahThoris » Wed 04 Jun 2014, 06:31:16

Newfie is right Quite a number of neighbors with the means commute to NY Harrisburg or Philly They are the wealth elite in this county and it doesn't take much money to put you in that category here because the poverty is so extreme However these little former coal towns have ever so many vacant houses If you don't mind a fixer upper ten thousand or so will buy you one The plus is we're surrounded by abundant forest and low crime The minus is that small time officials tend to be easily bought as well I think a disproportionate number of folks who settle here are on SS or on Disability because of the affordability We also have a class of desperate working poor who don't have the means skill or connections to hook up to NY or Harrisburg jobs You need a certain amount of capital to do that; a decent working order car for a minimum Also in many cases front teeth are required for those sort of jobs Very little in the way of dental benefits provided by these low wage jobs or Medical Assistance I do know a cleaning crew guy who works at the NYSE who bought a gorgeous historic house in the next small town for next to nothing He commutes to NY; got the best of both worlds
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Re: Real Estate bubble in your neck of the woods?

Unread postby Keith_McClary » Sun 13 Jul 2014, 01:31:43

Foreign Buyers Splurge On US Homes, Drive Up Prices
by Wolf Richter • July 11, 2014
There’s magic in the housing market. Especially at the upper end, and especially in California’s coastal areas, such as San Francisco and Silicon Valley, where prices have become ludicrous.

We already understand that the median price of single family homes has been pushed up by private equity firms, REITS, and other institutional investors in the US that have within the last couple of years scooped up 386,000 vacant homes across the country specifically in order to drive up prices, and secondarily to rent them out.

According to my source at one of the GSEs (Government Sponsored Enterprise), they did it by constantly laddering their purchases in certain markets. In Las Vegas, for example, they achieved price increases of 100%. These price increases on 386,000 homes impacted the prices of 23 million homes via the “multiplier effect” [for more on this, read... How Wall Street Manipulates The Buy-to-Rent Housing Racket].

And what about foreign buyers?

And I’ve been asked countless times to what extent soaring prices, especially at the upper end of the market, are attributable to foreign buyers. In California, anecdotal evidence has pointed at organized arrivals of well-heeled Chinese buyers desperate to get their money out of harms’ way in their own country, while they still can. We see it everywhere. But what are the numbers?

Turns out, anecdotal evidence was correct, according to the National Association of Realtors. During the 12-month period ending in March 2014, foreign buyers plowed 35% more into US homes than during the prior 12-month period. In total: $92.2 billion. Both volume and prices-paid rose. And 60% of them paid cash – versus a third of domestic home buyers, which includes investors.

The Chinese were the most prolific buyers, at $22 billion. That’s up 72% from a year earlier! They’re desperate! They accounted for 24% of all foreign purchases. Back in 2010, they accounted for just 8%. Of the top 10 countries as origin of international clients, only China saw any significant share increase over the last four years.

The Chinese weren’t buying the cheap stuff.

Buyers from China paid a median price of $523k. That’s 160% more than strung-out American buyers could afford (median price of $200k for all Existing Home Sales over the same period).

And 76% of the deals were all-cash. Anecdotal evidence was correct: 35% of their purchases were in California alone. Other favorite spots were Washington and New York. They were serious about leaving their country: 52% intended to use their newly acquired homes for more than 6 months out of the year, and 39% considered them their primary residence. Bailing out of China while they still can.

Canadians were buying the cheap stuff.

At least compared to the Chinese, though they still plunked down more than Americans, with a median price of $212k. In dollar terms, they came in at a distant second place with $13.8 billion in purchases. But they reigned supreme in terms of volume, going after homes in lower-priced markets, such as Florida where 34% of the foreign buyers were from Canada, and in Arizona where 74% were from Canada. Unlike the Chinese, these folks don’t really want to live in the US; they’re going south for vacation and to survive the winter: 86% of the homes they bought were for vacation and residential rental.

In third place were buyers from India, at $5.8 billion. Like the Chinese, they went for the expensive stuff, paying a median price of $342K. They were apparently less worried about finding a place for their cash: only 23% of the deals were all-cash. And even more so than the Chinese, they wanted to live here: 80% considered it their primary residence and 96% intended to spend over 6 months per year in their new abode.

Buyers from the UK were in fourth place, with $5.8 billion in purchases. Buyers from Mexico were in fifth place, with $4.5 billion in purchases. These five countries combined accounted for 54% of all purchases by international clients.

So to what extent can the soaring home prices be attributed to foreign buyers? They sank $92.2 billion into the US housing market, or about 7% of the $1.2 trillion in Existing Homes Sales during the period. On the surface, it seems they wouldn’t have a lot of influence on price. But as my source at the GSEs pointed out, each sale impacts the price of 60 homes nearby via the multiplier effect. And in this manner, the price pressures of the 232,000 homes that foreigners bought would impact 14 million homes.

Their impact on the market pales compared to the highly targeted impact of domestic investors whose goal was to jack up prices. But they impacted different ends of the market: domestic investors focused on homes below the median price, foreign buyers on homes above it.

The Fed’s devaluation of the dollar had a lot to do with it.

It made US homes cheaper for buyers with foreign currency that has been gaining against the dollar, like the Chinese yuan. The devalued dollar gave Chinese buyers an additional incentive to buy in the US, and a big advantage over American buyers. So 44% of the realtors reported that the value of the dollar had “a moderate effect” on home purchases by international clients, and 31% reported that it had a “very significant effect.” That’s a total of 75% who finger the persistent destruction of the dollar for the flood of foreign buyers.

While foreign buyers benefit from the Fed’s destruction of the dollar, domestic PE firms and other Wall Street creatures benefit from the Fed’s flood of nearly free money, to which they have nearly unlimited access. Foreign buyers goose prices above the median, Wall Street buyers push up prices below the median. And American buyers, caught in between, are simply getting squeezed out in many markets.

Observations that the Fed’s policies are once again inflating a housing bubble have finally transitioned from bloggers throwing around reeking party-pooper data to conservative mortgage bankers. And lenders see consumers returning to “reckless borrowing.” Read…..Mortgage Bankers: ‘Unsustainable Housing Bubble Is Inflating’
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Re: Real Estate bubble in your neck of the woods?

Unread postby Pops » Sun 13 Jul 2014, 07:01:54

Keith_McClary wrote:While foreign buyers benefit from the Fed’s destruction of the dollar, domestic PE firms and other Wall Street creatures benefit from the Fed’s flood of nearly free money, to which they have nearly unlimited access. Foreign buyers goose prices above the median, Wall Street buyers push up prices below the median. And American buyers, caught in between, are simply getting squeezed out in many markets.

Just crazy.
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