Real Estate - Housing Market Bubble 2005 Crash? FDIC Hopes Not.

Comments (88)

I had read a few books a few days ago about the trend in real estate market (2007 copyright) and it says that based on historical analysis the market will start going up again in 2008. Also, the real estate bubble that people are talking about is regional, not nationwide. So as the saying goes location, location, location. The one thing all potential homeowners need to do right now is to keep saving and improve your credit score. As long as you do your homework, you find the loan that is appropriate to your situtation, you should be able to make an informed decision. You must not view it so much as an investment but as a need. That's why I say when you got all your finances straightened out and you found the right house for you then buy a house no matter what market you get in. The market is levelling off it has to happen at some point, that's normal. I feel that the California housing market specifically will continue to be stable due to desirability.

Above Posted By: Lezelle | Tue, 10 Jul 2007 22:30:22 EST

Wow, looking back at all the posts in 2005 and how right some of you were on here. In SW Florida real estate market, we had a bubble, and now it has gone down approximately 20%. The worst may be over, but tell that to the people who bought last year with 100% financing, and their adjustable rate loan is adjusting to unaffordable payments for them.

Above Posted By: Brett Ellis | Mon, 18 Dec 2006 22:34:07 EST

What needs to be examined is stagnant wages as compared to housing prices. In order for a home to be worth a price there must be some one willing and able to pay it. If you compare inflation and other factors you will see that wages are decreasing every year. Couple that with outrageously higher prices due to record low interest rates we see that both rising interest rates and decreasing disposable income can only lead to decreases in housing prices.

Above Posted By: Issy | Thu, 7 Sep 2006 16:37:38 EST

I just moved to Tucson...the market has slowed here but it's still pretty pricey. I can afford to buy a home but should I? Should I wait 6 months and see what happens? This area is growing...there is no doubt about that. However, the builders/investors built too fast so now things have to catch up. Does that mean a price decrease or does that more mean things will stay pretty much the same until it all evens out in a few years? I am not sure what to do...

Above Posted By: Erin | Mon, 28 Aug 2006 11:54:30 EST

To be able to predict the future of the Real Estate market one has to look at the macroeconomic trends. All you hear know that low interest rates gave way to the huge increase in prices that we have seen since 2002. As interest rates have gone up recently the market has began to slow, as people are more hesitant to commit to mortgages under those high interest rates.

Above Posted By: Sebastian | Wed, 12 Jul 2006 14:36:31 EST

I am nineteen years old. I live in gilbert arizona. I have about $25000 in the bank, and i make $48,000 a year. I have no rent payment and only have to pay for a truck and insurance. I am definatly ready to buy a house, but I am scared to jump into one right know. should I just keep living with my parents and saving money? When is the right time to buy in arizona? How will I know? If the bubble busts, can I miss it by not acting fast? I would appreciate any advise you have to give.

Above Posted By: jason | Tue, 11 Jul 2006 19:52:14 EST

The reason people got those loans in the first place is because they couldn't afford a 30 year fixed loan at what 5%. Now how are they going to afford the same loan at 6.5% or higher? Sorry, its foreclosure time for alot of people. Why do you think they changed the bankruptcy laws, the banks and government saw this coming years ago and protected themselves. For those who think there is no bubble, take all your equity out of your house and keep buying. Good luck in the next 10 years.

Above Posted By: MIKE | Fri, 7 Jul 2006 14:05:10 EST

Its only a matter of time until all of this free money that people thought they were getting, will have to be paid back. Just think back 5-7 years ago people were stressing about buying a house for $250,000, and now they are jumping into a home for $600,000 and not even blinking an eye. When all these ARM loans and interest only loans come to term and people have to either refinance or continue with the higher interest rate then you know what is going to hit the fan.

Above Posted By: MIKE | Fri, 7 Jul 2006 14:03:24 EST

Housing prices have been going up here in the Phoenix area mostly because of INVESTORS! They are the ones to blame for the seriously out of touch prices here! And, mostly investors from California - they came here in droves, driving up prices to a point that most people have been priced out of a home. A lot of them are now paying for it, because they can't sell their investment and are forced to rent them out. And this helps lower rents!

New home constuction, especially spec homes, has been way overdone here in the Phoenix area. The market is now flooded with homes but no buyers. Values will soon decrease drastically AND presenting a buying opportunity. Anyone who bought at the peak of these home prices is a fool and will soon be paying for it!

Above Posted By: Scotto | Mon, 8 May 2006 22:23:57 EST

Steve, that is a statistic kept by realtors and on the little ads you see at the super market stands. I believe there is a website but I have not been able to find it lately.

Above Posted By: Gary Anderson | Mon, 3 Apr 2006 22:39:15 EST

Housing prices will keep going up, as long as we agree to pay the ridiculous amounts that the Lending and Real-Estate industry want us to pay. I keep reading about the prices being ruled by the demand on housing. Could it be that in the last 8 years we have had such an increase in population that all of a sudden, there is not enough houses to go around?.

Above Posted By: Daniel | Sun, 19 Mar 2006 19:55:06 EST

I see quite a few people speculating that housing values are over-inflated based on the fact that it's cheaper to rent than to own right now, and based on average salaries. I see quite a few people in a panic that values are going to drop. What puzzles me is that I have yet to see anyone say that they're in a panic that rents might inflate dramatically, which is far more likely. You renters out there need to wise-up! Capitalism usually zigs just when everyone is zagging.

Above Posted By: Anonymous Investor w a slight attidute | Tue, 7 Mar 2006 18:48:45 EST

When is the real estate market is going to crash?

Above Posted By: annymos | Fri, 24 Feb 2006 15:23:25 EST

I retired in the 80's at 28 years old, on other peoples misfortune. Could have sold property in Northern California 1 year ago for $350,000 more than I could list for today. I speculate on property in Western Canada, Nevada, California, Florida and the Bahamas. My business friends and myself just shake our heads. All we see is people with no money down, buying houses, and or refinancing for toys. I think it will take a long long long time to recover, if it crashes. A whole new generation of rich poor.

Above Posted By: nervous | Sat, 11 Feb 2006 08:51:52 EST

To answer your question there is a way to short the real estate market. You can short the REIT stocks or the home builder stocks. A great one im looking to short it the symbol 'bhs'.

Above Posted By: real estate mogal | Tue, 31 Jan 2006 05:43:38 EST

Rentersteve I am living in Reno, I wonder where you got the numbers about the Reno, NV housing market.

Above Posted By: Leo | Mon, 16 Jan 2006 19:54:59 EST

November housing in West down 22 percent from sales in October of this same year. A disaster is brewing even as more new homes are being built! Reno, NV had 500 houses on the market in Oct 2004 and has 3500 houses on the market in Oct 2005. The giant pyramid that has ended with negative amortized loans and interest only loans will leave the recent purchasers and speculators holding the bag. Don't buy for three years and there will be big time bargains and foreclosures.

Above Posted By: Gary | Fri, 23 Dec 2005 12:14:16 EST

BTW, I have seen sooo many stressed marriages due to mortgage & tax payments that are outrageous. People who bought more house then they could or afford or deserved wanted to pretend they were rich and now ALL, yes, ALL their earnings go to the house payments. If they get laid off they are done.

Once more thing, I have a friend that bought land in upstate NY after saving for 7 years. He built his own home mortgage free that is the American dream is it not?

Above Posted By: RENTERSTEVE | Thu, 22 Dec 2005 15:25:04 EST

How can you make money on the bubble bursting? Any other ways besides buying a forclosed home at the bottom? Are there related stocks that might go up when housing prices go down? Is there a way to "short" the realestate market.

Above Posted By: RENTERSTEVE | Thu, 22 Dec 2005 15:24:15 EST

How much can house prices fall after a boom? Japan who had the same housing boom roughly 10 years ago fell a whopping 80%. Not very many people do their homework. It's all about balance.

Above Posted By: Marco | Sun, 18 Dec 2005 02:44:13 EST

JD: How am I dreaming? The apartments were listed in AFR magazine. Does it seem high? Yeah, but there it is.

You can always find apartments, houses, etc. for rent below market. But when the owner decides to sell (and eventually she will) your SOL. ps: My mrg tax payments are under $3000 mo (fixed), and deduction is worth app. $1000 a month. My payments are affordable & constant and less than yours. Thanks for the investment advice, but I'm doing fine, thank you.

Above Posted By: Sean P | Fri, 9 Dec 2005 19:12:10 EST

Sean P., You are dreaming. Fullerton townhomes do not rent for $2800month. Noone will rent it for that much. Market price is $2100month. Check craigslist or FirstTeam if you don't believe.

Second, coming off of historically low interest rates with the risk of inflation peeking, rates are sure to go higher. No pause seen yet, and already built into the bond market.

Third, you forget that you'll be paying over $800 a month in taxes. There goes your tax benefit...

Fourth. HOA dues? Another $200 a month

Fifth. Have you forgotten maintenance?

I rent 4 bedroom home in Aliso Viejo for $2500month (neighbor is long-term renter and pays $2300) Neighborhood house recently sold for $750K (a 3 bd). Find a break-even point on that one. You forget that trade-ups require a greater fool to buy the property.

There are articles about the dangerous imbalances between rents/buying amounts. You should really check them out.

Above Posted By: John Doe | Tue, 6 Dec 2005 13:38:26 EST

Does anyone know about the Northern Virginia market? I am waiting for the housing bubble to burst. For 5-7 year arms, with the interest rate being its lowest in 2004, I would thing about 2009 I will see housing go into forclosure in the masses.

Above Posted By: Anonymous | Thu, 1 Dec 2005 20:25:53 EST

Currently there is a house selling nearby for $650,000 w the same # of bedrooms and same square footage, but with a backyard & a little space between you & the neighbors. Assuming you have $200,000 handy (& if you're trading up, you probably will), and you can qualify for a 6.5% fixed rate mortgage, your housing will be about $2800 a month. And, don't forget, the interest on that $2800 payment is tax deductible, so the actual payment is much less.

Above Posted By: Sean P | Tue, 29 Nov 2005 20:50:46 EST

Re: Soundstage's comments.

Actually, the man has a point, depending on the area. I live in North Orange County and can testify firsthand that its not just the housing prices that are through the roof. The rent on a 3 bedroom, 1500 square foot townhome in a fairly new complex in downtown Fullerton will set you back about $2800 per month (fyi, Fullerton is in the less expensive northern area of the county & about 20 miles from the ocean)..

Above Posted By: Sean P | Tue, 29 Nov 2005 20:41:41 EST

When the housing bubble does pop, percentage wise about how much can we expect home prices to fall?

Above Posted By: kevin | Tue, 29 Nov 2005 18:52:41 EST

I was thinking about taken out a loan on my equity. What happends if the bubble burst and I want to sell my home?Would I have to pay the difference and full amount of loan or will it get transfered when I sell the house?

Above Posted By: Paulette | Wed, 9 Nov 2005 05:52:00 EST

Jonas - Just curious where you are investing your money in the mean time if you think renting right now is better than purchasing. Nick - I'm not sure what the point was in stating the average income in Las Vegas - the average income in LA is only about $3K more a year and they don't blink twice to pay $450K for a condo. Of course the Las Vegas market is going to slow down, 40% Increase a year is not realistic. A bubble though? Not anytime soon.

Above Posted By: Lynn | Mon, 7 Nov 2005 22:44:23 EST

In Chandler (AZ) the monthly cost of buying a house is much higher then renting one. We live in a 5 bedroom,4 bath.,3 car garage, 3,700 square foot home with swimming pool in backyard and pay $1,725.50 for rent. For us to buy the same type house would cost over $5,000 a month(no down payment). In last two weeks six new houses in our neighborhood are on the market for sale. Owners,most of the time real estate agents are very "nervous" if you mention real estate bubble.

Above Posted By: Anonymous | Wed, 2 Nov 2005 02:40:08 EST

What seems logical is that the Southern California market may slow its appreciation while income catches up - but you will never lose money if you don't sell when it's low... Overall, housing prices are always higher than they were 10 to 20 years ago. And you have to consider what interest rates were back in the early 80's etc. The mortgage payment isn't THAT much different...

Above Posted By: Dani | Sat, 22 Oct 2005 16:38:29 EST

Good for anyone who believes there is a bubble! I finally sold my home in Southern California this summer, took a HUGE profit and put it all in CD's. We are renting now. As the interest rates rise over the next couple of years, the market will be flooded with foreclosures. I am still shocked at how many people still think there is no bubble and that the homes will continue to appreciate?? When it happens you can blame it on the lying realtors and Greenspan.

Above Posted By: anonymous | Wed, 19 Oct 2005 15:27:02 EST

Right now a lot of sellers are trying to hold out for their price, but noone is offering it! It will take a while for them to realize that their only way out is to sell for less! In the comming months you will see the interest rates rise and those who have ARM's will see their payments skyrocket!

Soon there will be foreclosures everywhere which will push prices well below what they are now...and all those greedy sellers that hold out for their price will end up getting significantly less then they would have if they lowered their price at an earlier time or they may end up not being able to sell at all!

Above Posted By: reality | Mon, 10 Oct 2005 23:25:31 EST

All those who have recently bought houses anywhere along the coasts, you are going to be bankrupt. My advice is that you sell right now, no matter how low you have to bring your price! Cut your loses while you can! Anyone thinking about buying in these areas should go get there heads checked!

Look around the neighborhood, for sale signs are growing out of the ground like weeds! Houses that you see sold are sold for less than the asking price. It will take a while for prices to really start falling, but you'll see that happening very soon. Continued --->

Above Posted By: reality | Mon, 10 Oct 2005 23:24:55 EST

I keep hearing people blame lenders for the housing bubble because they provide interest only &or arm mortgages, but the reason these loans are being provided is because they are in demand. Everyone wants to jump onto the appreciation bandwagon and since people can't save 15-50k per year, why not grab it in something they already have to pay for-housing.

And since the average income doesn't support purchasing the average home (depending on where you are, of course) on a fully amoratized 30 yr fixed, the only way people can get into a home is interest only arms. How can lenders be blamed for providing a means for what people want?

And aren't real estate agents to be blamed as well for contributing to these ridiculously high priced listings, or does the fact that they charge 6% (21k to sell the average 350k home) to list and sell a home not come in to play? The buyers tend to pick up the tab on that one in higher home prices.

Above Posted By: Violet | Sat, 27 Aug 2005 00:33:41 EST

Bay Area, CA, we looked into buying a house and found that we would have to pay 2x our current rent, not such a good school district and much further away from work (interest only loan, where we were told to state the income we needed to secure the loan). So now I feel very happy about renting. Buying now is not worth it, even if we do miss out on a tax deduction. I certainly enjoy the fact that any repair work to the house is not our problem.

Above Posted By: Claire | Thu, 18 Aug 2005 02:19:39 EST

The end of the 80s saw a dramatic collapse although this was mainly attributed to interest rates moving up towards 15pct , this left many people with negative equity and many bankruptcys followed. Since then what with immigration and lower interest rates 4.75 here now the demand for housing has been spectacular again but this is again running out of steam.

Above Posted By: shaggly | Tue, 2 Aug 2005 06:25:36 EST

This is very interesting to me as i am currently planning to buy a condo in florida on clearwater beach but am beginning to have second thoughts about parting with 800k for one right now. I live in the UK and we have been through the boom bust cycle for years.

Above Posted By: shaggly | Tue, 2 Aug 2005 06:24:34 EST

The mortgage industry got too greedy. Plain and simple. Poor suckers who did Interest Only Loans in Southern Ca. Orange County (1 Bedroom 360K, 2 Bedroom 425K gimme a break!). These prices are insane. I would rather rent here and own something inexpensive out of state to build equity than buy a tiny little condo and get cabin fever paying all the while through the nose.

Above Posted By: Orange County, CA | Thu, 28 Jul 2005 19:57:31 EST

What about DC area, North Virginia and Alexandria? 2 bdrm condos going for $375K?? Anyone know when this one will burst? Should I buy or wait?

Above Posted By: Anonymous | Mon, 25 Jul 2005 20:19:33 EST

Continued....

We will be able to own basically any home we want next time with our savings and home equity gain. Now is the time to sell if you want to be safe. The increases are lucrative enough to not be too greedy and you will also be investing in financial security. I feel our plan is better than any 30 year bank mortgage plan can offer- living well below what we are worth each month and taking a relatively short time to get to where we want to be- forget waiting for 30 years! How about 5-8?

Above Posted By: Jennifer | Mon, 25 Jul 2005 09:05:16 EST

We bought a lot in a presitgious San Antonio neighborhood after 9-11. The developers were eager to sell it for 10K less than its neighbor because people were scared to do anything with their money at that time. We held on to the lot until we paid it off and then took a chance with an up and coming builder who built a beautiful home for about 30 dollars less a square foot than the big builders in the neighborhood.

Long story short we are selling it now for 220K more than what we have in it. It feels crazy the type of money we can make. We will sell the house, live in a less custom neighborhood for a while, wait for the outrageous lot pricing to go down yet again and do it all over. Except this time the 220K that we make on this home we will pay off our next house and we will pay the money back to ourselves that we have basically been giving the bank and government ($3.500 monthly mortgage w/taxes)

Above Posted By: Jennifer | Mon, 25 Jul 2005 09:00:54 EST

Someone said real estate is a local market. Why then are we seeing housing cost escalate in New Zealand and other parts of the world? This is a global bubble fueled by cheap and easy money. Think the last recession was bad???? Guess again.

Above Posted By: Anonymous | Tue, 19 Jul 2005 18:15:50 EST

Interest rates caused this housing crisis (thanks Greenspan) ... and theyll eventually fix it, all be it in a very painful way. I live in San Diego. 80% of the loans being issued in the county are ARMs or interest only. Interest rates go up, and things start looking ugly on a monthly basis.

Above Posted By: Anonymous | Tue, 19 Jul 2005 18:15:19 EST

If you follow the market youll see prices of homes in Northern California CA (Bay Area) reduced to sell in the past few weeks.

Above Posted By: GP | Thu, 14 Jul 2005 22:56:59 EST

My husband wants to wait because he thinks that the housing price will go down. Although its been few years and it hasnt gone down yet. Also Im not sure about Florida..my aunt believes that the housing prices will continue to go up in Florida as well as all the states in the US. Does anyone live in Florida? Regarding California, theres always a debate on whether the bubble will actually pop vs slowing appreciation like what some people believe. What does everyone think? Angie

Above Posted By: angie | Thu, 14 Jul 2005 22:40:25 EST

For pmpn8ez: You sound like you are trying to convince yourself that it is better to rent than to own. For one thing at the end of the year when you add up all of your rent checks and realize you will NEVER see that money again, Ill be looking at my net worth rise knowing that every dime I pay on my house is mine and when I sell my house I will get every dime back plus interest. Even after the hardwood floor expense.

Above Posted By: Jonas | Thu, 14 Jul 2005 21:57:01 EST

for jonas: i am sure your landlord would let you paint the house bright orange if you wanted to, the condition being you paint it back to white before you leave. This is something you would have to do even in your own house (who wants to live in bright orange???) Hardwood floors goes without asking, im sure he wouldnt mind :) ..and regarding taxes, say you rent for 500$ less a month then it would cost to rent (very reasonable). 12*500 is what you would save in tax writeoffs :�

Above Posted By: pmpn8ez | Thu, 14 Jul 2005 00:01:59 EST

First, there are many factors why there is a housing boom in Caliofrnia and in the country. People are living longer -- 5 to 6 years longer, which has increased the population. Moreover, there is a huge influx of legal and illegal immigrants; these people have enhanced the supply and demand. The baby bommers are retiring, and they have an ample amount of money. The stock market has been to violatile for the average investor. Then we have the historically low interest rates.

Above Posted By: steve | Mon, 11 Jul 2005 03:41:09 EST

The most amazing thing about comments by those who seem to think that there is no bubble is that their comments support the argument that there is a bubble. Some of these people point to continuing price appreciation as an indication that there is no bubble... when in fact that is an indication that there is a bubble... it just hasnt popped yet. The inidious thing about bubbles is that they always last much longer than anyone thinks possible... but they always pop eventually.

Above Posted By: John in San Dibubble, CA | Thu, 7 Jul 2005 22:04:18 EST

The reasons to own it are plenty. First, you can get a tax write off for all of the interest paid. If you do not make a significant amount of money than this is not as importaint. Second, you dont have to ask someone if you want to paint the house, a room, or add hardwood floors. Third you dont have to worry about someone selling the roof over your kids heads.

Above Posted By: Jonas | Thu, 7 Jul 2005 20:55:55 EST

Why are some of you people eager to buy and own a house?? I do not understand it! Here in AZ you can rent a nice new 3bd/2bath house for cheaper than if you were to buy it, so my question then is, why bother buying it?? Whats the difference? You feel like a big man when you say you own it? You see, you dont really own it, you will maybe in 30yrs from now. You are just renting/leasing it from the government.

Above Posted By: pmpn8ez | Tue, 5 Jul 2005 13:15:07 EST

Your gut is right!!! I now live in Houston but will be moving back to Cali in about 5 years. I am a REALTOR as well. If you ask a REALTOR in Cali if they are in a bubble the answer will be no! Why would they shoot themselves in the foot? The write off will not be there in an apt, but with what you will save in buying an inflated house, it wont matter! Patience.

Above Posted By: Jonas | Mon, 27 Jun 2005 20:12:35 EST

I have been in the business of aquiring commerical & residential real estate for 6-years. My advise is too sell now, before you regret it. You can then save your profits, and wait for the bubble to burst (on the sidelines). Then of course buy when there is Blood on the streets, after the bubble bursts. Its pretty obvious. Buy low sell high. Based on the formulas I use every day, nothing supports these prices.

Above Posted By: Greg | Mon, 27 Jun 2005 19:15:35 EST

I live in So. Cal and am still renting. Im sitting tight on buying a home because it just seems the real estate market is so unreal these days. Right now we are just saving our money in the hopes of buying a home for a better (more sensible) price. My wife and I are in our early 40s. Will we have to wait till were closing in on fifty before this happens? The temptation is great to give in and buy now but my gut tells me to wait.

Above Posted By: Oscar | Mon, 27 Jun 2005 11:29:08 EST

I was born and raised in Cali. I feel really sorry for anyone who has purchased a house within the last 2 years. Within the next 5 to 7 years the prices WILL go down to normal. Anyone who thinks Cali home prices have just risin to a justified 8:1 ratio to incomes, is more stupid than someone who has taken the $100K out of their house to buy a new car. To answer a previous post....NO, now is not a good time to buy a house in Cali!!!

Above Posted By: Jonas | Sun, 26 Jun 2005 23:21:36 EST

Anybody --- can you advise what the average residential real estate value trend in % increase has been in Texas and Arizona, over the past 5-10 years? Thanks, SRB

Above Posted By: SRB | Wed, 22 Jun 2005 13:53:05 EST

I dont expect to see the kind of appreciation we have been experiencing in so. ca (+20%/yr), but I do expect to see an appreciation of +3-6% a year for years to come. Barring a monumental catastrophy, I dont forsee any great loss of housing price (a drop of more than 10%?).

Above Posted By: Robert | Mon, 20 Jun 2005 15:22:28 EST

I have been reading about the so called housing bubble for about four years now. We sold our house in 2000 (big mistake). I kept reading and listening to others speak about the looming bubble in So. Ca., so we waited to purchase a house. I expected the prices to fall in 2001, 2002, 2003 and finally after seeing that was not to be the case, we purchased a four bedroom house in Simi Valley in 2004 (for 385K). The house across the street from us just sold for 515k.

Above Posted By: Robert | Mon, 20 Jun 2005 15:17:35 EST

Las Vegas! Talk about housing bubble. My neighborhood had a 40% appreciation in 2 years. New housing developments are in the mid-200s and 2 years ago-the mid-100s in the working class areas. Median household income in Vegas is only 44,000. Minimum mortgage now (in a cheap area) 1600-1800 month-you can rent these houses 1000-1100. It is unfortunate-middle class families can not afford these houses! Any advice on how it will end? Many families in Vegas need to know!

Above Posted By: Uniqleeme | Fri, 17 Jun 2005 21:44:52 EST

Heres a good one, check out foreclosure.com for Broward County Florida (Ft Lauderdale) 6000+ already in preforclosure minimum, another 20~50 added per day, another 10,000+ for sale at realtor.com and growing, and another 36,000 new condos being completed as we speak.

Above Posted By: Nick | Fri, 17 Jun 2005 17:08:28 EST

Mr. Buffet said he plans to make a killing when the bubble bursts and he is able to purchase homes for hugely soundstage (Continued), discounted prices, he is not called the oracle for nothing�.people who are taking out ARMs and interest only loans will be the ones who are the biggest victims of the bursting bubble, they have gotten caught up in a psychological frenzy that is going to cost them their financial future. It�s not a matter of if, it�s a matter of when.

Above Posted By: SacTown | Thu, 16 Jun 2005 12:02:24 EST

Soundstage, (Continued) Every indicator points to a severe housing bubble in California and its simply a matter of time before we see a price adjustment. The housing market in California is not based on fundamentals, it�s based on speculation. Warren Buffet, the most successful financier in U.S. history, and the 2nd richest man in America, has even chimed in and acknowledged the housing bubble in California.

Above Posted By: SacTown | Thu, 16 Jun 2005 12:01:26 EST

Soundstage, I am not sure what part of California you live in, but in Sacramento the monthly cost of purchasing a house is much much higher then renting one. I live in a 4 bedroom, 2,400 square foot home, and pay $1,600.00 for rent. For me to purchase the same type house in the same neighborhood would cost over $3,000 a month to buy, and that is with a $100,000.00 down payment.

Above Posted By: SacTown | Thu, 16 Jun 2005 12:00:14 EST

ARM 5/1 or 7/1 allows you to pay less so you can afford it and you can pass the hard time of real estate depreciation for a few years. Real estate is not like the stock market. Real estate is a bunch of local markets. Its base on desirable place to live. If real estate bubble burst in Texas does it mean its going to burst in California. If it rises in California does it mean its going to rise in New Mexico.

Above Posted By: SeriousSam | Sat, 11 Jun 2005 05:33:58 EST

Right now the median housing price is $681,000 in Silicon Valley. There is a cycle that real estate goes through but if youre smart enough to put yourself into a loan that will help you in 5 or 10 yrs you will be better off and you can make the payment. Why would you want to refi every 5 yrs and keep putting yourself on a 30 yrs fixed.

Above Posted By: SeriousSam | Sat, 11 Jun 2005 05:33:51 EST

Average family refinance in California every 3-5 yrs with real estate bubble burst or not. Ask yourself how many times have you refinance in the last 10-15 years? Most people start out with a 30 yrs fixed loan. Thats why you loss in purchase if real estate falls. Example, dot com crash and alot of people sold there homes in the early 2000 (median price $400,000 in 2000). They feared real estate bubble burst, because of the dot com rise, which increase real estate prices.

Above Posted By: SeriousSam | Sat, 11 Jun 2005 05:32:45 EST

Soundstage... rent here in Santa Maria CA is not more or equal to a mortgage payment.. mortgage payments are around the 3k mark piti...and going higher.. rents are right around $1500 for average 3br home.. boarding house situations are popping up even in the nicer neighborhoods.. lots of buyers signing for owner occupied but not living in the house... im hearing talk in the industry of a coming foreclosure market

Above Posted By: Suzanne | Sat, 11 Jun 2005 01:33:04 EST

I sign loans every day in escrow in Santa Maria CA ... most applicants blue collar labor or in retail getting stated income loans...strawberry pickers making $5,000 per month...department clerks in retail stores making $7,000 per month.. its crazy what we see!! escrow people are shaking their heads!! whats up with the lenders and underwriters? its going to come back to haunt them big time.. and the occupants of these homes.. boarding house anyone?

Above Posted By: Suzanne | Sat, 11 Jun 2005 01:23:14 EST

I live in the downtown denver area and my condo price has risen ~ 13% over the last two years. To me that doesnt sound that much but there seems to be several articles stating Denvers market is in a boom and could bust. I have a 80/20 loan...with the 20 being an interest only loan. I set the loan up this way so I could to 0 down and I would not have to pay mortgage insurance. Should I be worried??

Above Posted By: MileHighInDenver | Tue, 7 Jun 2005 14:58:15 EST

As far as California, you have to remember that rent for a decent apt/house are as much, if not more than a mortgage payment, with no tax benefit. Suppy and demand... plus the Hispanic community is coming into its own and buying homes in a big way. Are we still going to see 20% appreciation a year? No way.. but 5% or so is realistic. The earlier post about a 20-40% drop is crazy. No way.

Above Posted By: soundstage | Tue, 7 Jun 2005 11:12:13 EST

Interest only loans get an unfair bad rap. Principal payments can always be sent in with the interest only payments. 0 Down loans are bad (for the banks) because it makes it too easy for buyers to walk away in the event of a downturn. I believe interest only loans with reasonable down payments are very smart loans. The average person stays in a home around 5 years. So, there is little equity obtained through principal reduction payments. Nearly all equity comes from appreciation.

Above Posted By: bellairs | Sat, 4 Jun 2005 00:57:17 EST

However, the demand is so high now, that you have to be on a LOTTERY drawing if you want to build a new home here in the valley. Translation: You may or may not get drawn. That creates a demographic picture to builders and developes that somehow says we need more and theyre willing to pay it!!

That to me is what causes a bubble to burst scenario when more people start realizing they dont want to pay the high prices these developers are DEMANDING. Its a lose-lose situation in my mind. For what its worth.....

Above Posted By: NatureLoverinAZ | Wed, 1 Jun 2005 22:39:25 EST

Basically, what we are experiencing in the CA and AZ markets is what we all learned in school: Supply VS Demand theory! As more and more Californians moved away from their high priced homes that they sold, and moved to AZ or other booming markets, the SUPPLY of available money began a DEMAND for more building. We do NOT have a great economy in AZ.

We dont have high paying jobs in AZ. So, it doesnt make since why more and more people are moving here. Except for the fact that they believe they can find cheaper housing. What we DID have was cheap land and developers came in and seized this opportunity. I have lived in AZ for 5 years and Ive seen us take our beautiful, unspoiled and natural habitats into sub-division after sub-division and people are snatching them up like wildfire.

Above Posted By: NatureLoverinAZ | Wed, 1 Jun 2005 22:37:01 EST

So when is this bubble going to end? We have watched the So. Cal market steadily rise for the past 2 years and all our friends have jumped in. We are left waiting and renting, everyone says 6 more months-that was 1 year ago???

Above Posted By: Puzzled | Mon, 30 May 2005 04:11:09 EST

SAM, you are crazy if you think your mortgage doesnt charge interest for the first seven years. What you more likely are talking about is an interest ONLY loan for the first seven years. Lending standards are so incredibly low these days, lenders arent even making sure you understand the loan they are sellling you. As long as that monthly payment looks good, right?

Above Posted By: Sean | Wed, 18 May 2005 14:19:17 EST

Lots of things have changed since the last crash- the quality of the loans has gotten much worse. Interest only, no money down, sub-prime leanding are the kinds of terms that spell disaster. The hundreds of billions of dollars of equity that have been pulled from home equity lines of credit and cash out refinancing have helped delay a recession. Calling real estate/building the only bright spot int he economy is like calling a new credit card a bright spot in your personal finances.

Above Posted By: Jay | Wed, 18 May 2005 12:16:30 EST

I dont think Sam knows much about his loan. As far as I know there is no such thing as a no interest loan. He probably has an interest only loan. So it is actually all interest for the first seven years with no principal reduction.

Above Posted By: Anonymous | Wed, 18 May 2005 00:25:55 EST

It looks like the housing bubble in Vegas is bursting. I see a bunch of places sitting empty. I had a couple from San Diego offer to rent me their second/retirement home for hundreds less per month than their mortgage payment. I also have a co-worker who hasnt sold her house in almost two months. I see a lot of houses and apartments sitting empty with more going up all the time. Ive quit looking at houses and am renting and waiting for the chaos, sitting on my down payment money.

Above Posted By: Anonymous | Tue, 17 May 2005 23:20:56 EST

To JasonP: The housing bubble is the idea that your house can depreciate in value compared to what it is worth now. The consequences: if you owe more money in liens on the house than the house is worth you become upside down. You can protect yourself by staying in the house, keeping your job and keep making your mortgage payment. Everything will fix itself later when the cycle repeats itself and house values appreciate again.

Above Posted By: Joshua | Tue, 17 May 2005 18:06:09 EST

I am looking for PMI charts and historical data to determine if this is a good time to buy a home in California. Anyone has any good sites / suggestions?

Above Posted By: Anonymous | Tue, 17 May 2005 17:59:49 EST

JasonP (Continued) If you happen to be on a negative amortization, adjustable rate or interest only loan and are paying close to the most you can afford or feel your income is not very secure, I suggest you contact a qualified financial advisor immediately. You may be in a situation that can bankrupt you.

Above Posted By: Don | Tue, 17 May 2005 16:54:46 EST

JasonP (Continued) I also expect that you will not be able to refinance in any way to lower your monthly payments (vs what you can get right now, if youre still on a loan from > 2 years ago you may want to refinance now). Theres basically nothing you can do to prevent the price drop that other than to sell earlier rather than later. As long as you have a low debt to income ratio to carry you through the downturn you should be ok, as long as your income is secure.

Above Posted By: Don | Tue, 17 May 2005 16:54:37 EST

JasonP A housing bubble is when the price of housing exceeds its intrinsic value. The intrinsic value of housing is generally computed using the ratio of price to rents or the ratio of price to incomes. By both of those measures, housing prices are far, far too high. As for what it will do for your house in California, I would expect that the price you can get for your house will decline by 20-40 percent over the next 5 years. It may decline more than that depending on location.

Above Posted By: Don | Tue, 17 May 2005 16:54:03 EST

Jason P, If you want to protect your home price, sell it as fast as you can and high tail it out of California as quickly as possible. TheGuru

Above Posted By: TheGuru | Tue, 17 May 2005 16:43:37 EST

Also look it up, Banks have something like 60% of total assets in residential housing lending. Historically I think that this is rather unusual.

Above Posted By: Loren | Tue, 17 May 2005 16:34:33 EST

I love the quote by SAM which reads: No bubble here in Texas, no money down loans with no interest for the first seven years. Life is good!! I cant think of a better sign of the bubble than this. Interest rates are rising, home prices are rising, and real wages are dropping. That guarantees two things: future decreases in house prices, and future increases mortgage payments. Hardly a recipe for good investments.

Above Posted By: John | Tue, 17 May 2005 15:37:30 EST

No bubble here in Texas, no money down loans with no interest for the first seven years. Life is good!!

Above Posted By: SAM | Tue, 17 May 2005 12:53:27 EST

I dont know much about this. I live in California. What is a housing bubble? What is a real estate bubble? Is this housing bubble going to hurt my home price in California? What can I do to protect myself? Thanks for any advice.

Above Posted By: JasonP | Tue, 17 May 2005 12:22:35 EST

Housing Bubble To Bust? FDIC Certainly Hopes Not

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