I was asked yesterday about the chances of the bubble bursting.
My answer was, “No chance”.
But these things run in cycles, and eventually won’t the market will cool off?
Yes…..some day…..and when it happens, our market will stagnate, rather than see prices decline. Sellers would need to be desperate to sell for less, and there are too many other alternatives and stop-gaps in place now to prevent desperation.
A. Reverse mortgages – The H.U.D. backed down the loan-to-value last week, but for anyone who is 62 or older, the reverse mortgage will be a viable – though costly – alternative to selling and moving. The average borrower at current interest rates will be able to borrow roughly 58% of the value of their home, down from 64%, and allows them to take the equity out of the house through lump-sum withdrawals, regular payments, or a line of credit. The loan does not need to be paid off until the borrower dies, sells the house, or moves.
What about the younger, working folks who don’t qualify for a reverse mortgage and could be impacted by the next recession?
B. The foreclosure rules have changed, and the banks would rather let you slide, than kick you to the curb. Don’t feel like making your payments for months or years? No problem, just send in what you can, and they will kick around your loan-mod application until things get better.
Want to sell quick?
C. Discount your price 20% to 30%, and a flipper will cash you out in a week. But that doesn’t tank prices, because the flipper will apply some lipstick and sell it for retail in the next 2-3 months, keeping the neighborhood values afloat. Could flippers get stuck with some dogs? Yes, but they are flush and full of ego – how many do you see already who just keep re-freshing their listing at the same price, and holding out for those six-figure gains? Plenty.
Don’t want to discount?
D. There are thousands of realtors who will take your listing at any price and hope for the best. This is how the market will go stagnant – and Rancho Santa Fe is the example, where today there are 213 houses for sale. They just wait for someone to come around and pay the seller’s price.
The best reason of all for why our housing market won’t burst are the high rents. If the next recession hits hard, and distressed homeowners think about cashing out, they need to leave town to make it worth it. If they want to stay in the same neighborhood, the rents are so high that it makes more sense to stay put. Remember how the layoffs at Qualcomm caused a big concern around Carmel Valley? Yet prices haven’t tanked – and the 92130 has 85 active listings and 61 pendings today.
Everyone who financed a purchase in the last few years had to qualify through strict guidelines, and, as a result, the affluent have ruled the market. They won’t get the jitters if the ride gets bumpy; no, they are in for the long haul.
Stagnant City is the worst that will happen.
And only chance to stagnate (temporarily) is that we have a recession, which might be due soon, based on past history.
But other than that, housing price will go vertical up.
And I didn’t even need to mention that if things did get rough, the government will back-stop the whole package again. Can you say 2.99% fixed-rate mortgages?
What about a 7.0 or 8.0 earthquake?
The volunteer effort going on in Houston is very impressive, and with our weather, we could all live outside for months if we had to.
The buildings that would fall down will be re-built better and with higher density – solving multiple problems!
If there’s no chance of it bursting, then I’d say it’s not a bubble! (Which is a thing I say anyway 🙂
7.0 or 8.0 in San Diego is unlikely. LA or Riverside might be, but not SD.
If there’s no chance of it bursting, then I’d say it’s not a bubble!
Agreed, but it feels like a bubble to those who have seen this before, and believe that we are (over)due for a correction.
Besides, a blog-post title of There is No Bubble isn’t quite as sexy! 😆
Just put up another rental. I was slightly nervous because we were the high end in our area.
Over 30 applicants in 4 flippin’ days! Out of them, we had around 8 good ones. Looks like we’ll be signing a lease today. Our rents are still rising to all time highs, and renters ain’t blinking.
That is scorching hot, what sort of property what part of town?
Waiting for Trump to nix mortgage interest deduction that helps the middle class and at the same time allow for offshore repatriation of money so corporations can pay dividends and have stock buybacks. Waiting to see what sort effect of any that will have to housing, probably not so much in socal. Parts of the midwest are still stuck in 2008 prices, so I would imagine that might derail any sort of real estate recovery there.
If 2007 was a bubble and today’s prices have exceeded 2007 levels, how can we not be a in bubble.
If 2007 was a bubble and today’s prices have exceeded 2007 levels, how can we not be a in bubble.
Answer here: http://www.voiceofsandiego.org/topics/economy/theres-still-no-san-diego-housing-bubble-yet/
Thanks Rich!
I can second on rental…no advertising putting sign up..bingo! rented. The demand whether from legal or non-legal or out of state and even out of country will not create a crash…the longer you wait..the more dollars its gonna cost you. Even if prices decline way 10%, the interest rates by that time will be at a higher level…it’s not the price when making a buying consideration 100%..its the overall cost of sustainng the property over time. If the payment is the same then you are back to square one.
I don’t see government fee’s going down, maybe some red-tape but not the fees, along with the cost of labor and building. The trade off on a new house built today with the current codes gives you a better built, energy efficient property with low repair costs down the road, If you can find new housing without mello fees more power too you. Very few new developments have that, I know that on the upper end of new home buying, Cielo in RSF is one place you can buy a new house with a view for no-mello fees and a small 3 house development in cardiff is coming…row houses type, there are no mello’s on those.
If you don’t want to pay the mello’s then its buying a house already built..and again, more people are crowding in because the word is out…via the world web that san diego is a great place to live.