Fortune Mag's Article on the "Real Estate Bubble"

[RiverOtter]

Did anyone read it? I read the whole thing. I know there are lots of real estate peeps here. What do y'all think?

[FREIND OF AA AND TA]

Can someone post it, I missed it.

[Essex502]

The so-called "experts" disagree that there is or isn't a bubble. My personal opinion is that there will be some correct, though minor unless a catastrophic economic event, a la 9/11, happens again. The bubble bursting in the early 80's in California was mainly due, again in my opinion, to the aerospace collapse.
If you're worried...sell your property now and lock in your profits!
Over the longer term, real estate shouldn't decrease in value. Just like the stock market, over the long haul prices will go up.

[MagicMtnDan]

This subject almost needs a bag of popcorn.
Prices are softening but unless a "major event" takes place there isn't going to be a bubble and here are some reasons why:
* There ain't making any more land (supply down)
* There sure are a lot more people (demand up) - the population is booming here in SoCal. Why do people live inland? Because it's where they can afford to buy homes. "Inland" keeps moving further and further inland :notam:

[Mandelon]

It depends on the area. Real estate typically runs in cycles and we in So Cal would seem to be reaching the top of the cycle. It can't keep going up indefinitely unless wages catch up.
I expect to see a flattening in price increases, and a few years of not much growth. If Kerry wins, things might drop.....a little. There are more houses on the market now in SD than in the past. EVeryone is trying to cash in at the top and market times are increasing.
No more multiple offers and bidding wars. But over the long term, like Dan said, they ain't making any more land. You can't fail.
People have been overpaying for apartments. I would expect that to end shortly after the interest rates go back up and the stock market increases. Even a small return on real estate is better than a loss in the stock market.
RB

[Dr. Eagle]

This subject almost needs a bag of popcorn.
Prices are softening but unless a "major event" takes place there isn't going to be a bubble and here are some reasons why:
* There ain't making any more land (supply down)
* There sure are a lot more people (demand up) - the population is booming here in SoCal. Why do people live inland? Because it's where they can afford to buy homes. "Inland" keeps moving further and further inland :notam:
MMD, your points about supply and demand are valid, however if interest rates took a large spike upward over the next few years, nobody could afford a home. Remember interest rates of 16% for mortgages? IMHO if rates climb toward or perhaps beyond 8% there will be significant downward pressure on home prices... but what the hell do I know???? :eek: :wink:

[gramps]

"If you're worried...sell your property now and lock in your profits!" I'm not "worried" right now BUT I did sell two properties this week, sometimes you just don't want to get too greedy. I do think that So Cal is in for an "adjustment" soon. Things have gotted too damm crazy down there.

[Up 4 River]

In no way am I going to pretend to be an expert on this, but from what I've seen lately and the 3rd consectutive rise of interest rates the housing market is going to slow down. I don't think we'll see a falling out in the market by any means, but the incomes people are making are to far streatched due to the increase in homes over the past few years. People that bought homes before the rise in prices over the past few years do not have as much to worry about as the people who bought recently on variable or interest only loans. The prices will drop, and those who have cash on hand are going to be able to get some nice investment properties or a permanent residence. Everything goes in cycles and the thing to make sure of is that you are not over leveraged on your home and the equity you have in it. I met with a real estate client of mine who covers a particular area in Orange County and he said the homes listed for sale are double the number as they normally are in the area he covers in south county. If that holds true then the demand is eventually going to go down with the supply number up. Just my 2 cents from what I've seen goin on.

[Dr. Eagle]

"If you're worried...sell your property now and lock in your profits!" I'm not "worried" right now BUT I did sell two properties this week, sometimes you just don't want to get too greedy. I do think that So Cal is in for an "adjustment" soon. Things have gotted too damm crazy down there.
I'm not worried about it, I don't think it is a "bubble" in the classic sense, and I still think RE is the best investment going, but if the interest rates go up significantly... I think there will be downward pressure on the overall market. I don't know how much, but it with the inflation of the prices everywhere... a large spike might cause a hiccup... but there is no reason to think interest rates will "Spike".

[MagicMtnDan]

Doc, the kind of interest rate "spike" you're talking about would have an impact on the housing market, the US economy and the world economy. I can't imagine that we'll see those kind of rates for years. The interest rate is inching up (which can be seen as a good sign for our economy) and it's funny how people react to the rate increases. They act like the interest rate ZOOMED up. It's still way better than rates have been for a long time. Until they jump up a lot more it's a GOOD TIME TO BUY. :cool:

[throwerb]

It's showing no sign of slowing down here in Pasadena, went to an open house sat. 1342 sqft home 3bd 1bth asking 495 bid up to 522 same day. I'm selling mine now paid 195 four years ago, one across the street just sold for just over 600, but I also believe it is going to go flat by end of year.

[Essex502]

Home mortgage rates are based on the Prime rate which is what has been raised recently. Actually, in the last few weeks the mortgage rates have actually dropped.
I think a lot of the activity in buying and selling houses was people cashing in (out?) of their high equity and moving up. The relative change between their old mortgage payment and the new may not be all that much. Buyers entering the home market are the ones being squeezed the most. When the pundits cite an affordability index I doubt they're taking into consideration the present equity - but only the median price of a home in a particular area and the median income.

[RiverOtter]

Can someone post it, I missed it.
It was faxed to me and it's 5-6 pages. I'd probably be banned if I tried to post it. :D