<p>Next to education, there seems to be more real estate people on this site than any other profession. So, since I like real estate, I would like to know what real estate professionals think (And I guess everyone else), is there a bubble brewing in your community.</p>
<p>I live north of San Francisco in Marin County. </p>
<p>Housing prices have exploded for everything under $1.5 million. I would say we are in the midst of a bubble except for one thing, there isn’t any inventory of housing for sale.</p>
<p>In Berkeley, I was thinking of buying a 1300 sq. foot house listed for $549,000. The house was in great condition and in a great neighborhood, not far from Chez Panisse Restaurant. I called the listing agent and she told me don’t bother unless I was interested in paying $100,000 over the list price. I said thanks for giving me the heads up, but no thanks. The house sold for close to $200,000 over the list price with 10 bidders.
Is there a bubble in Berkeley? Again, no inventory for sale.</p>
<p>Offices: I can’t understand why prices haven’t collapsed. I drove through the Smith Ranch Road area of San Rafael a week ago and it seemed that every building had a vacancy. I know interest rates are low, but vacant buildings bring in zero rent.</p>
<p>Prices keep going up here in San Diego County as well - median price for a single family home hit 580,000 last month. Doesn’t look like prices are going down any time soon, however several real estate agents that I know on a personal basis have mentioned that the time to sale seems to be slowing down a bit right now.</p>
<p>Dstark, you nailed it: supply and demand…and supply, while up from a year ago, is still very low. I wouldn’t be surprised if there is a market “correction” at some point…one of my indicators is the percentage of loans made on a variable rate has risen substantially.
However, I don’t expect anything like the early 1990’s again…maybe a 10 percent drop and fairly short lived at that.</p>
<p>If interest rates go up a lot of people who are over-extended and have adjustables may decide to sell if their mortgage payments go up too much.</p>
<p>BTW, there is never a lot of inventory at the top of a market. My area is tight too though the inventory in higher price ranges is up. </p>
<p>People are still buying like crazy. I see many move-up buyers. The big issue for them is interest rates, as they are buying and selling in the same market, but to move up they are increasing their loan amount.</p>
<p>I wouldn’t be surprised if there is a correction…</p>
<p>Same bubble that existed in the Bay area in 1980. I remember looking at apartments in San Francisco - nothing affordable, so we expanded our search to Berkeley, still nothing affordable. Finally we started looking in Oakland and found a great house off Grand Avenue near Lake Merrit. Bought the house from 3 former Berkeley students, 1 of whom was a lineman with Bufallo Bills. (Sherman White) We were constantly asked, “Oh you live in Oakland? In the hills?” and we would reply, “No, in the flats”… Oakland = bad neighborhood in most minds. Back then mortgages were 15% so a lot of it has to do with monthly payments. </p>
<p>12 years later we officially left the area and sold the house at a decent profit… sold it to some musician named Jerry Garcia. (true story - he bought it for his daughter)</p>
<p>dstark - I am a “real estate lady” here in New England and was one in Silicon Valley. Also lived in Berkeley several years and still have many friends there. Could add ad nauseam to your amazing Bay Area real estate price stories.</p>
<p>Re a “bubble:” imho, there is not a burstable bubble in noCal/Bay Area real estate. As you said, no inventory. Add to that no land so no future development. Here in northern NE, the bubble burst in 1990 and took YEARS to come back. Every price drop I have seen (since 1970) in Bay Area has been merely a temporary blip in a wildly upward trend.</p>
<p>When we left Bay Area, sold our house for $465. Same house sold 2 yrs ago for $1.298M! We came to small town NE and bought for $500. Sold that house 2 yrs ago for $670. If you own Bay Area real estate, I’d say “Not to worry.” (Wish that could be a money-back guarantee ;)).</p>
<p>As to a more general discussion of whether there is a bubble, you can always find “experts” on both sides of that prognostication game, just as there are bulls and bears facing off on CNBC day after day.</p>
<p>p.s. 10 bidders is on the low-average side for Bay Area houses. In Silicon Valley, they are now serving hors d’oeuvres to the 13-20 agents who must sit in the anteroom waiting to present their offers. Of course, this is only on the “low-end” houses (defined as under $1.3m :eek:</p>
<p>jmmom, This price rise we are having now is world wide and the largest ever in history. However, interest rates are really low and the stock market isn’t as inviting as it used to be. So, I am curious to see what people across America think.</p>
<p>The Bay Area does have fantastic weather, a beautiful locale and bright people. But like you said, there are no money back guarantees.</p>
<p>I wonder what happens if interest rates ever do go up.
There are a lot of people here with adjustable rate mortgages and interest only loans (I hate those).</p>
<p>Another signal: In my area it is now a better financial deal to rent than to buy unless you assume that major appreciation will continue.</p>
<p>When I bought my house in a low market, my mortgage was slightly cheaper than renting, once tax advantages were figured in. Now in my area you’d pay nearly 3x the price to own a home as you would to rent the same home. You have to believe in some MIGHTY appreciation to justify doing this…</p>
<p>SBMom, you don’t sound too optimistic to me.
The appreciation of home prices was huge in Santa Barbara last year, wasn’t it?
A friend of mine visited Southern California (She lives in Northern California). She said prices have caught up with Northern California.</p>
<p>Why are the buyers paying so much more now than a couple of years ago?</p>
<p>jmmom, I have a crystal ball. It’s somewhere in the house, I can’t remember where I put it. A lot of good it is going to do me when I don’t know where it is. (I’m not kidding. I do have a crystal ball).</p>
<p>I would like to know three things. Are the people buying homes really able to afford them? If they can afford them, then they won’t have to sell if things turn bad.
Are people now buying third and fourth homes?
Are people expecting to sell their homes at retirement age and use the proceeds to live on? That scares me. That’s all the housing market needs, millions of baby boomers trying to sell out at the same time.</p>
<p>It seems to me that retirement communities are going to be hot for the next 30-40 years.</p>
<p>SBmom, we have lived through the diamond bubble (I remember hearing prices will never go down. Prices went up for 80 years in a row), the gold and silver bubble, the stock market bubble, and now maybe, the real estate bubble. I hope we aren’t really having one because that would be the worst bubble of all.</p>
<p>Well one good part is that because the vast majority of people <em>live in</em> their RE investment, it isn’t as easy & quick to sell as a stock in your Schwab account would be. RE moves more slowly.</p>
<p>What scares me are the young couples with neg am or similar adjustable mortgages. If one of the couple loses a job, if the woman gets pregnant, if,if-- the whole thing can go south very easily. Many of these buyers do stated income loans and many are on the edge of not being able to afford their loans from the outset. Appreciation has been so excellent that lenders & buyers are both willing to do this, but it makes me nervous.</p>
<p>I prefer to work in the upper end market because there, my clients can afford to hang on through a set back or can afford to lose money without it changing their life.</p>
<p>I bought in 1989, so I know great markets can tumble. That is partly why I am so conservative financially. When interest rates plunged and 90% of buyers were choosing adjustables, I refinanced to a 15 year fixed loan.</p>
<p>The one thing that is different about RE from diamonds, gold and even stocks to an extent is that people need a place to live–all the other stuff is optional–who needs a diamond that is price inflated by a cartel anyway?? Most desirable high value markets are that way due to impediments to new construction. Just try to build in most of Cal or Boston or NYC. So long as we continue with reasonable levels of immigration/pop growth and affordable financing prices will stay high. These factors do not apply to places like the rural midwest and some of the worst large cities but apply to 90% of the country to some extent. While some boomers will move on in retirement most will stay within shouting distance of the old home–they just might get a smaller house or a condo instead. Also foreign buyers will keep the glamour areas higher.
I just closed a re-fi today and I am looking for another house to buy for rental purposes. But not in Cali–the price of poker is just too high even though you might make more there in the longrun–I don’t want negative cash flow for 10 years.</p>
<p>I wish I’d bought in northern fla. on the coast when we first moved here 6 years ago…could kick myself for the missed real estate opportunity!..Prices have gone way up…</p>
<p>Barrons, I would like to buy a retirement house, but I can never pull the trigger. I definitely don’t want negative cash flow either.</p>
<p>Dke, I heard that parts of the coast of Fla have appreciated more than practically anywhere else in the US.
A friend of a friend was offered 7 million for a house on the Gulf Coast of Fla. The guy paid around $700,000, I think around 12 years ago.</p>
<p>The buyer said he couldn’t pay more because it was a tear down.</p>
<p>Thedad, is Beaumont a pit? I see retirement homes for sale from Del Webb there. I never heard of Beaumont.</p>
SBMom - I see now why your and my takes on the bubble are somewhat different. Here, yankee thrift is very ingrained and most of my clients, in all income and demographic strata, buy way under what the bank is willing to lend. When I was in RE in Ca, now over 15 years ago, it was more like you say. Much more worrisome. Buyers there do continue to presume that the sky is the limit for appreciation. Long history supports them, but dstark’s missing crystal ball appears to work in reverse as well and reminds her that other bubbles have burst. If I were a betting woman, I would bet that in Bay Area and similar parts of Ca, their $$ will be safe in real estate. Other parts of the country …???</p>
<p>dstark - I see a few folks buying more than 1st and 2nd homes - for investment. (Leaving out Oprah and the others who can have a home in Paris, Montana, Mississippi, NYC etc. etc. etc.), these additional properties are for investment not consumption - ie, an alternative to parking $$ in the stock, bond, art or other market.</p>
<p>Re selling to fund retirement, I definitely know more than a few who consider their primary home as their primary source of retirement funds. That is one of the reasons I am happy to be on the front of the baby boom, not the rear. Legitimate concern, imho, for later-down-the-line boomers.</p>
Bought the house from 3 former Berkeley students, 1 of whom was a lineman with Bufallo Bills. (Sherman White) We were constantly asked, “Oh you live in Oakland? In the hills?” and we would reply, “No, in the flats”… Oakland = bad neighborhood in most minds. Back then mortgages were 15% so a lot of it has to do with monthly payments. </p>