Is this a housing bubble?

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pondering
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Is this a housing bubble?

Post by pondering » Sun Mar 04, 2018 2:10 am

I saw this news report: https://www.mercurynews.com/2018/03/02/ ... price-tag/

and wondered if people think this is a housing bubble or just the normal market?
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denovo
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Re: Is this a housing bubble?

Post by denovo » Sun Mar 04, 2018 2:14 am

Ya, since the 1980's.
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Re: Is this a housing bubble?

Post by aspirit » Sun Mar 04, 2018 2:32 am

pondering wrote:
Sun Mar 04, 2018 2:10 am
I saw this news report: https://www.mercurynews.com/2018/03/02/ ... price-tag/
and wondered if people think this is a housing bubble or just the normal market?
Looking at that suggests a typical off the shelf modest housing development unit that was upgraded w/a porch or (breezeway) & garage. :shock: 2M..Wow.
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visualguy
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Re: Is this a housing bubble?

Post by visualguy » Sun Mar 04, 2018 3:29 am

It's a bit higher than expected, but not by a large amount. That area is now very expensive, and there's price compression where the more "affordable" houses have appreciated more than the nicer houses, and, believe it or not, that house is relatively "affordable" for that area.

Mudpuppy
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Re: Is this a housing bubble?

Post by Mudpuppy » Sun Mar 04, 2018 5:29 pm

This topic has come up a couple of times recently. Bay Area real estate suffers under more intense dynamics than real estate in other areas due to the constrained space and high demand. Whether or not that means it's a bubble or just a constrained market (low supply, high demand) remains to be seen. It's sort of the real estate equivalent of market timing.

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Re: Is this a housing bubble?

Post by jminv » Sun Mar 04, 2018 5:50 pm

Since many purchasers in these markets must submit all cash bids to even have a chance of winning, I believe it will be a problem when those purchasers have difficulty 'cashing out' after moving in. Although many people have the cash for these bids, many others are borrowing it short term from elsewhere (relatives, etc) and securing financing post-sale to pay back their short term lenders. Once they can't secure the cash to make the deal, then the price appreciation in these super competitive markets will moderate or temporarily reverse from the decreased demand. It's a strong regional market from the cluster effect, though, and I expect we will continue to hear these stories until a new cluster center that seriously threatens this one emerges.

Edit: I was thinking about this some more and wanted to expand on the difficulty for people purchasing in cash to repay their short term borrowers and refinance with long term mortgage. The issue will be when the mandatory bank appraisals for these loans come up far short of what was paid. A little bit can be ‘excused’ since in a frothy market people will expect the market to ‘catch up’ and that overpayment is probably their own cash contribution. Once they can’t pay back their short term funding source for their cash purchase due to very low appraisals, though, there will be real problems.
Last edited by jminv on Sun Mar 04, 2018 10:07 pm, edited 1 time in total.

anoop
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Re: Is this a housing bubble?

Post by anoop » Sun Mar 04, 2018 6:11 pm

It's a bubble only in as much as tech is in a bubble. Each time a company goes IPO you have a 100 people or more loaded with funny money looking for houses to buy with cash.

CR say two things need to be present in a bubble -- overvaluation and speculation. There is no speculation in real estate, hence his take is no bubble even though there is overvaluation.
http://www.calculatedriskblog.com/2017/ ... ubble.html

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Re: Is this a housing bubble?

Post by John88 » Sun Mar 04, 2018 6:28 pm

It's only around 900 SF so likely a tear down..if so 2 mil is for the 6000 SF lot

Valuethinker
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Re: Is this a housing bubble?

Post by Valuethinker » Mon Mar 05, 2018 5:55 am

anoop wrote:
Sun Mar 04, 2018 6:11 pm
It's a bubble only in as much as tech is in a bubble. Each time a company goes IPO you have a 100 people or more loaded with funny money looking for houses to buy with cash.

CR say two things need to be present in a bubble -- overvaluation and speculation. There is no speculation in real estate, hence his take is no bubble even though there is overvaluation.
http://www.calculatedriskblog.com/2017/ ... ubble.html
How do we know there is no speculation? In the SF/ Bay Area market that is.

Generally I don't think the US is in a bubble. Some local markets for homes may well be. Canada (Toronto and Vancouver) definitely are.

SF I agree it's the strength of the tech sector, VC funding etc. So if it's a bubble, it's a bubble in tech stocks.

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Re: Is this a housing bubble?

Post by cherijoh » Mon Mar 05, 2018 7:05 am

jminv wrote:
Sun Mar 04, 2018 5:50 pm
Edit: I was thinking about this some more and wanted to expand on the difficulty for people purchasing in cash to repay their short term borrowers and refinance with long term mortgage. The issue will be when the mandatory bank appraisals for these loans come up far short of what was paid. A little bit can be ‘excused’ since in a frothy market people will expect the market to ‘catch up’ and that overpayment is probably their own cash contribution. Once they can’t pay back their short term funding source for their cash purchase due to very low appraisals, though, there will be real problems.
You raise a good point. I think it comes as a surprise to some people (especially first time home buyers) that even if you are pre-approved for a mortgage of $X, the lender can reduce the amount of mortgage they offer you based on the home appraisal. (And since the housing crisis lenders have tightened down a lot on appraisals). This problem would be exacerbated if you get into a frenzied bidding war or even more so if you buy first and then look for financing later.

Even in calmer markets, low appraisals can throw a spanner in the works. You might be offered the full mortgage amount but at a different interest rate because they no longer consider you to be making a down payment of xx%. If the appraisal comes in low, the loan to value (LTV) will be higher because the lender is using the appraised value NOT the sales price as the denominator in the calculation. You might also get the unexpected surprise that you will be subject to mortgage insurance (PMI) even if your down payment is 20% of the purchase price. :shock:

Years ago when I purchased my modest new-construction home, one of the neighboring houses under contract was upgraded significantly - all brick exterior, upgraded kitchen and bathrooms, etc. Unfortunately for the prospective buyers, the appraisal came in the same as the other houses on the block and they couldn't get a big enough mortgage to make it work. They didn't realize that their down payment would need to be enough to cover a down payment on the basic house plus 100% of the extras.

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Re: Is this a housing bubble?

Post by Pajamas » Mon Mar 05, 2018 8:39 am

This is not exactly a sign of a housing bubble, but it is a sign of the unaffordability of housing in certain areas--dorms for middle class workers in San Francisco:

https://www.nytimes.com/2018/03/04/tech ... cisco.html

In NYC it would be called an S.R.O. and would be for people on the edge of homelessness. It also reminds me of dorms for factory workers in China except that they are not an employee benefit.

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market timer
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Re: Is this a housing bubble?

Post by market timer » Mon Mar 05, 2018 8:46 am

I'm seeing a lot of stories lately about people moving from the Bay Area due to high house prices. If I had to bet, I'd guess house prices in the Bay Area won't keep up with inflation over the next 10 years.

Here is the inflation-adjusted Case-Shiller house price index for San Francisco:

Image

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Cycle
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Re: Is this a housing bubble?

Post by Cycle » Mon Mar 05, 2018 8:48 am

How does one bid $550k over market without the real estate agents disclosing other bids? Wish housing was like eBay...

cherijoh
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Re: Is this a housing bubble?

Post by cherijoh » Mon Mar 05, 2018 9:03 am

anoop wrote:
Sun Mar 04, 2018 6:11 pm
It's a bubble only in as much as tech is in a bubble. Each time a company goes IPO you have a 100 people or more loaded with funny money looking for houses to buy with cash.

CR say two things need to be present in a bubble -- overvaluation and speculation. There is no speculation in real estate, hence his take is no bubble even though there is overvaluation.
http://www.calculatedriskblog.com/2017/ ... ubble.html
You can't make that determination based on aggregate data! :oops: Housing markets are local. The author should have done these calculations based on individual MSA markets before drawing any conclusions. It wouldn't surprise me to find that some individual markets are currently in bubble territory, while others are not.

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Re: Is this a housing bubble?

Post by cherijoh » Mon Mar 05, 2018 9:06 am

Cycle wrote:
Mon Mar 05, 2018 8:48 am
How does one bid $550k over market without the real estate agents disclosing other bids? Wish housing was like eBay...
I assume the owner requested "best and final offers" by a specific date and time. I understand that people who really want a house might bid "$X above best offer up to $Y - sort of an auto bid option.

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Re: Is this a housing bubble?

Post by Valuethinker » Mon Mar 05, 2018 11:12 am

cherijoh wrote:
Mon Mar 05, 2018 9:03 am
anoop wrote:
Sun Mar 04, 2018 6:11 pm
It's a bubble only in as much as tech is in a bubble. Each time a company goes IPO you have a 100 people or more loaded with funny money looking for houses to buy with cash.

CR say two things need to be present in a bubble -- overvaluation and speculation. There is no speculation in real estate, hence his take is no bubble even though there is overvaluation.
http://www.calculatedriskblog.com/2017/ ... ubble.html
You can't make that determination based on aggregate data! :oops: Housing markets are local. The author should have done these calculations based on individual MSA markets before drawing any conclusions. It wouldn't surprise me to find that some individual markets are currently in bubble territory, while others are not.
Bill McBride knows this and he's very clear that he is talking about the US in aggregate, not specific markets.

2006 was perhaps the first time the US market as a whole was a bubble, at least since the 1920s.

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Re: Is this a housing bubble?

Post by madmartigan » Mon Mar 05, 2018 12:31 pm

Cycle wrote:
Mon Mar 05, 2018 8:48 am
How does one bid $550k over market without the real estate agents disclosing other bids? Wish housing was like eBay...
My thought is this person knew exactly what they wanted, was aggressive, and didn't want no for an answer. The $500k over asking is unusual, so much that it short circuited the normal bidding process and guarantee the sale; no one else was going to compete with that.

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Re: Is this a housing bubble?

Post by madmartigan » Mon Mar 05, 2018 12:33 pm

A few things to keep in mind:

1) Inventory is extremely limited. I believe in December 2017 there was approximately 12 days of inventory available. There really are no homes on the market. Because of that, you need to be prepared to buy immediately, with no contingencies. Average time on the market is measured in days.
2) No home goes for asking price. The bay area has the largest percentage of homes going over asking price, with the largest amount going over asking, in the nation.
3) 20% down likely will not complete. Given the high demand, there are numerous cash buyers who will outbid you. You will find a home eventually, but probably after losing many (we missed out on several before giving up). It is a huge drain emotionally.

These are the realities of the bay area. My personal speculation is that the housing prices will continue to go up, as I see no significant increase in supply, nor lack of high tech jobs available in the market.

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Re: Is this a housing bubble?

Post by Valuethinker » Mon Mar 05, 2018 12:45 pm

market timer wrote:
Mon Mar 05, 2018 8:46 am
I'm seeing a lot of stories lately about people moving from the Bay Area due to high house prices. If I had to bet, I'd guess house prices in the Bay Area won't keep up with inflation over the next 10 years.

Here is the inflation-adjusted Case-Shiller house price index for San Francisco:

Image
Interestingly the chart argues that it will - still not back to its pre Crash high. Yet the tech industry is much stronger.

I have underlined the words "Bay Area" in the above. Your hypothesis is of a fall in demand leading to lower prices.

Suppose we changed that to "New York"? What would be your forecast, then? Prices in NYC falling because people moving out of NYC because of the cost of housing?

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Re: Is this a housing bubble?

Post by Valuethinker » Mon Mar 05, 2018 12:46 pm

madmartigan wrote:
Mon Mar 05, 2018 12:33 pm


These are the realities of the bay area. My personal speculation is that the housing prices will continue to go up, as I see no significant increase in supply, nor lack of high tech jobs available in the market.
The big tech companies are starting to build housing for their employees, it's becoming such a problem.

I agree that as long as the tech sector keeps bubbling, there's no sign housing prices will stop rising. At some point this tech cycle will end, but there's so much unmet demand, and so many people sitting with large cash balances arising from cashed in equity, that it is hard to see it dropping by a lot, even then.

The tech cos can, presumably, relocate operations. Perhaps Google will move to Salt Lake City, and Apple to Houston or Atlanta. Housing prices are much more reasonable relative to income in those cities :happy

I did actually think there were good reasons for Amazon to consider St. Louis (center of the country, low cost of living etc.) although Pittsburgh was probably the logical place in "flyover" country (or Columbus OH) having low COL, central location but also excellent universities and culture.

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Re: Is this a housing bubble?

Post by Valuethinker » Mon Mar 05, 2018 12:52 pm

John88 wrote:
Sun Mar 04, 2018 6:28 pm
It's only around 900 SF so likely a tear down..if so 2 mil is for the 6000 SF lot
The notes in the article below suggest that. The structure is irrelevant to the price. Would probably cost you around $200-270k to build a house that size? ($200-300 psf). But no one will. Presumably they will build a 3,000 square foot place for another 750k-1m.

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Re: Is this a housing bubble?

Post by Cycle » Mon Mar 05, 2018 1:04 pm

madmartigan wrote:
Mon Mar 05, 2018 12:33 pm
A few things to keep in mind:

1) Inventory is extremely limited. I believe in December 2017 there was approximately 12 days of inventory available. There really are no homes on the market. Because of that, you need to be prepared to buy immediately, with no contingencies. Average time on the market is measured in days.
2) No home goes for asking price. The bay area has the largest percentage of homes going over asking price, with the largest amount going over asking, in the nation.
3) 20% down likely will not complete. Given the high demand, there are numerous cash buyers who will outbid you. You will find a home eventually, but probably after losing many (we missed out on several before giving up). It is a huge drain emotionally.

These are the realities of the bay area. My personal speculation is that the housing prices will continue to go up, as I see no significant increase in supply, nor lack of high tech jobs available in the market.
The money will stay in the Bay area but the jobs won't. Augmented reality will negate the benefit of co-location for work and the only things attractive about the bay area will be the non-job related attributes.

This is still probably 10 years out, as WebEx still doesn't allow for one to reliably dial into a conference call.

I could be wrong.

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Re: Is this a housing bubble?

Post by Valuethinker » Mon Mar 05, 2018 1:09 pm

Cycle wrote:
Mon Mar 05, 2018 1:04 pm
madmartigan wrote:
Mon Mar 05, 2018 12:33 pm
A few things to keep in mind:

1) Inventory is extremely limited. I believe in December 2017 there was approximately 12 days of inventory available. There really are no homes on the market. Because of that, you need to be prepared to buy immediately, with no contingencies. Average time on the market is measured in days.
2) No home goes for asking price. The bay area has the largest percentage of homes going over asking price, with the largest amount going over asking, in the nation.
3) 20% down likely will not complete. Given the high demand, there are numerous cash buyers who will outbid you. You will find a home eventually, but probably after losing many (we missed out on several before giving up). It is a huge drain emotionally.

These are the realities of the bay area. My personal speculation is that the housing prices will continue to go up, as I see no significant increase in supply, nor lack of high tech jobs available in the market.
The money will stay in the Bay area but the jobs won't. Augmented reality will negate the benefit of co-location for work and the only things attractive about the bay area will be the non-job related attributes.

This is still probably 10 years out, as WebEx still doesn't allow for one to reliably dial into a conference call.

I could be wrong.
Actually you are wrong. Autonomous Vehicles will eliminate much of the time cost of commuting-- one will be able to work, read or rest whilst commuting. Thus commuter distances and times will grow even larger, in the way they have in major Asian cities like Bangkok (Moscow is decently horrible, too). We will jump in our Tesla AV at 530 am, catch some shut eye, and arrive fully rested for work at 830 ;-).

I, of course, could be wrong ;-). :sharebeer

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Watty
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Re: Is this a housing bubble?

Post by Watty » Mon Mar 05, 2018 1:15 pm

One of the hallmarks of a bubble is that they go on for longer and higher than a rational person would think possible.

The dot com bubble and the 2007 housing bubble was pretty obvious maybe two years or more before they peaked. For example the famous "irrational exuberance" quote was over three years before the dot com bubble burst.

It is also important to also remember that even though "cash offers" may be common in that area that does not mean that people actually pay cash. In 2017 about 72% of homes in Santa Clara County had mortages

See figure 25 here.

http://www.towncharts.com/California/Ho ... -data.html

If nothing else higher interest rates will cause problems with Bay Area house if(when) they go up.

Cheap money is a major factor in almost all bubbles.

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Re: Is this a housing bubble?

Post by Valuethinker » Mon Mar 05, 2018 1:29 pm

Watty wrote:
Mon Mar 05, 2018 1:15 pm
One of the hallmarks of a bubble is that they go on for longer and higher than a rational person would think possible.

The dot com bubble and the 2007 housing bubble was pretty obvious maybe two years or more before they peaked. For example the famous "irrational exuberance" quote was over three years before the dot com bubble burst.

It is also important to also remember that even though "cash offers" may be common in that area that does not mean that people actually pay cash. In 2017 about 72% of homes in Santa Clara County had mortages

See figure 25 here.

http://www.towncharts.com/California/Ho ... -data.html

If nothing else higher interest rates will cause problems with Bay Area house if(when) they go up.

Cheap money is a major factor in almost all bubbles.
All good reminders.

I suspect though that the bubble here is not the real estate in the Bay Area. That's a rational reaction to supply and demand.

The bubble is in the tech industry which is feeding the demand for houses. Where that stops, who knows?

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randomizer
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Re: Is this a housing bubble?

Post by randomizer » Mon Mar 05, 2018 2:08 pm

Sure does feel bubbly.
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Re: Is this a housing bubble?

Post by mac808 » Mon Mar 05, 2018 2:17 pm

Amazon HQ2 is the best bet for creating a "Silicon Valley East" (assuming it's either in Boston or VA-MD) and lessening pressure to be in the Bay Area. Until then, SFBA rules the roost alone.

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Re: Is this a housing bubble?

Post by aristotelian » Mon Mar 05, 2018 3:07 pm

Cycle wrote:
Mon Mar 05, 2018 8:48 am
How does one bid $550k over market without the real estate agents disclosing other bids? Wish housing was like eBay...
If you bid $1.55M on a $1M house, the market is actually $1.55M.

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Re: Is this a housing bubble?

Post by RRAAYY3 » Mon Mar 05, 2018 3:11 pm

all i know is i keep seeing more and more renovations / "for sale" signs every week ... not to mention the chatter of 2 girls in my office talking about buying a house as an investment ...

so, if it's not a bubble yet - it sure is trending in that direction.

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Re: Is this a housing bubble?

Post by Valuethinker » Mon Mar 05, 2018 4:45 pm

RRAAYY3 wrote:
Mon Mar 05, 2018 3:11 pm
all i know is i keep seeing more and more renovations / "for sale" signs every week ... not to mention the chatter of 2 girls in my office talking about buying a house as an investment ...

so, if it's not a bubble yet - it sure is trending in that direction.
But is this in the Bay area?

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Re: Is this a housing bubble?

Post by Cycle » Mon Mar 05, 2018 5:14 pm

Valuethinker wrote:
Mon Mar 05, 2018 1:09 pm

Actually you are wrong. Autonomous Vehicles will eliminate much of the time cost of commuting-- one will be able to work, read or rest whilst commuting. Thus commuter distances and times will grow even larger, in the way they have in major Asian cities like Bangkok (Moscow is decently horrible, too). We will jump in our Tesla AV at 530 am, catch some shut eye, and arrive fully rested for work at 830 ;-).

I, of course, could be wrong ;-). :sharebeer
Why would an employer pay to heat a physical building when it gets equal or better productivity from it's workers using AR rigs at home. If augmented reality delivers half of what it promises, the work environment will be unrecognizable compared to today.

My point is for many dispersable roles, there won't be an office to commute to.

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Re: Is this a housing bubble?

Post by RRAAYY3 » Mon Mar 05, 2018 5:31 pm

Valuethinker wrote:
Mon Mar 05, 2018 4:45 pm
RRAAYY3 wrote:
Mon Mar 05, 2018 3:11 pm
all i know is i keep seeing more and more renovations / "for sale" signs every week ... not to mention the chatter of 2 girls in my office talking about buying a house as an investment ...

so, if it's not a bubble yet - it sure is trending in that direction.
But is this in the Bay area?
Nope, I don’t live in the epicenter of our universe unfortunately

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Re: Is this a housing bubble?

Post by HRPennypacker » Mon Mar 05, 2018 5:56 pm

RRAAYY3 wrote:
Mon Mar 05, 2018 5:31 pm
Valuethinker wrote:
Mon Mar 05, 2018 4:45 pm
RRAAYY3 wrote:
Mon Mar 05, 2018 3:11 pm
all i know is i keep seeing more and more renovations / "for sale" signs every week ... not to mention the chatter of 2 girls in my office talking about buying a house as an investment ...

so, if it's not a bubble yet - it sure is trending in that direction.
But is this in the Bay area?
Nope, I don’t live in the epicenter of our universe unfortunately
More and more "For Sale" signs every week? Definitely not the Bay Area I live in.

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Re: Is this a housing bubble?

Post by Watty » Mon Mar 05, 2018 7:33 pm

Valuethinker wrote:
Mon Mar 05, 2018 1:09 pm
Autonomous Vehicles will eliminate much of the time cost of commuting-- one will be able to work, read or rest whilst commuting. Thus commuter distances and times will grow even larger, in the way they have in major Asian cities like Bangkok (Moscow is decently horrible, too). We will jump in our Tesla AV at 530 am, catch some shut eye, and arrive fully rested for work at 830 ;-).

I, of course, could be wrong ;-). :sharebeer
Increasing the number of cars on the road by 10% would result in total gridlock in many areas.

In some situations it might make sense to get an autonomous RV and just set it to circle instead of even going home.

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Re: Is this a housing bubble?

Post by market timer » Mon Mar 05, 2018 8:36 pm

Valuethinker wrote:
Mon Mar 05, 2018 12:45 pm
Interestingly the chart argues that it will - still not back to its pre Crash high. Yet the tech industry is much stronger.

I have underlined the words "Bay Area" in the above. Your hypothesis is of a fall in demand leading to lower prices.

Suppose we changed that to "New York"? What would be your forecast, then? Prices in NYC falling because people moving out of NYC because of the cost of housing?
NYC does not seem as bubbly as SF in this cycle (see chart). SF's outperformance reflects the current dominance of tech over finance in the equity and labor markets. Still, both NYC and SF are high relative to historic averages of price-to-income. If interest rates move higher, there is considerable downside. Tax reform should also weigh on demand in these markets longer term. Personally, I'm glad I'm not yoked to a million dollar mortgage in either NYC or SF.

Image

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Re: Is this a housing bubble?

Post by jminv » Mon Mar 05, 2018 10:25 pm

Valuethinker wrote:
Mon Mar 05, 2018 12:45 pm
market timer wrote:
Mon Mar 05, 2018 8:46 am
I'm seeing a lot of stories lately about people moving from the Bay Area due to high house prices. If I had to bet, I'd guess house prices in the Bay Area won't keep up with inflation over the next 10 years.

Here is the inflation-adjusted Case-Shiller house price index for San Francisco:

Image
Interestingly the chart argues that it will - still not back to its pre Crash high. Yet the tech industry is much stronger.

I have underlined the words "Bay Area" in the above. Your hypothesis is of a fall in demand leading to lower prices.

Suppose we changed that to "New York"? What would be your forecast, then? Prices in NYC falling because people moving out of NYC because of the cost of housing?
It is actually past it's post-crash highs. The data was updated for 2017 late last month. The national price index is also above post-crisis highs. Of course, that doesn't really mean anything, it just shows home prices steadily marching higher. I wouldn't be surprised if higher interest rates, salt reforms, and the price & inventory signals to home builders result in more housing built leading to a decrease in the rate of inflation, though.

Image

Image

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Re: Is this a housing bubble?

Post by unclescrooge » Mon Mar 05, 2018 11:53 pm

market timer wrote:
Mon Mar 05, 2018 8:36 pm
Valuethinker wrote:
Mon Mar 05, 2018 12:45 pm
Interestingly the chart argues that it will - still not back to its pre Crash high. Yet the tech industry is much stronger.

I have underlined the words "Bay Area" in the above. Your hypothesis is of a fall in demand leading to lower prices.

Suppose we changed that to "New York"? What would be your forecast, then? Prices in NYC falling because people moving out of NYC because of the cost of housing?
NYC does not seem as bubbly as SF in this cycle (see chart). SF's outperformance reflects the current dominance of tech over finance in the equity and labor markets. Still, both NYC and SF are high relative to historic averages of price-to-income. If interest rates move higher, there is considerable downside. Tax reform should also weigh on demand in these markets longer term. Personally, I'm glad I'm not yoked to a million dollar mortgage in either NYC or SF.

Image
Why would interest rates cause a decline in these markets? Buyers are making all cash offers. I would think their ability to afford the house has no relationship on interest rates.

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Re: Is this a housing bubble?

Post by madmartigan » Tue Mar 06, 2018 1:01 am

Valuethinker wrote:
Mon Mar 05, 2018 12:46 pm
madmartigan wrote:
Mon Mar 05, 2018 12:33 pm


These are the realities of the bay area. My personal speculation is that the housing prices will continue to go up, as I see no significant increase in supply, nor lack of high tech jobs available in the market.
The big tech companies are starting to build housing for their employees, it's becoming such a problem.

The tech cos can, presumably, relocate operations. Perhaps Google will move to Salt Lake City, and Apple to Houston or Atlanta. Housing prices are much more reasonable relative to income in those cities :happy
Google would have built their housing years ago if allowed; Mountain View has prevented this from occurring due to zoning restrictions and general concerns of congestion, among several other regions. Affordable housing, and housing within a reasonable commute distance has been a topic of discussion at various Google all hands. Google also offers many shuttles to get to all of their office locations, as do other large tech companies.

Last I knew the numbers, Google employed ~50% of their workforce in the bay area. As with I think any major company, if you want have the most opportunities, you need to be at HQ. Same principal with the bay area; the general talent pool, and availability of that talent makes it difficult for an established company to make the move. Perhaps some have? If so, I'd be interested to read about the results. If a company like Google was going to expand out, I'd imagine they'd try to pivot to Seattle or Denver (areas they are both expanding in as well, if I recall correctly).

madmartigan
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Re: Is this a housing bubble?

Post by madmartigan » Tue Mar 06, 2018 1:09 am

Cycle wrote:
Mon Mar 05, 2018 1:04 pm

The money will stay in the Bay area but the jobs won't. Augmented reality will negate the benefit of co-location for work and the only things attractive about the bay area will be the non-job related attributes.

This is still probably 10 years out, as WebEx still doesn't allow for one to reliably dial into a conference call.

I could be wrong.
I disagree with the premise. Based on my experiences, the majority of companies do not formally support working remotely, and only tolerate it at best. Google, for example, does not support working remotely. An individual's productivity, in general, is worse without a structured area to work. Furthermore, collaboration is significantly worse. The spontaneous interaction amongst teams and personnel cannot be recreated without physical proximity.

I'm not normally an absolutist, but I hate all forms of work-based communication. Conference calls, WebEx, Hangouts, etc; they're all horrible. Years of improvements and they're all still bad.

WanderingDoc
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Re: Is this a housing bubble?

Post by WanderingDoc » Tue Mar 06, 2018 1:30 am

pondering wrote:
Sun Mar 04, 2018 2:10 am
I saw this news report: https://www.mercurynews.com/2018/03/02/ ... price-tag/

and wondered if people think this is a housing bubble or just the normal market?
Yep. They have been telling us that "its a bubble!" in SF, SD, LA, and Honolulu for the last 40 years. We still enjoyed 9% appreciation and 6% rent growth, year-over-year, this includes the corrections !!! Properties have doubled in price reliably every 10 years since the 1960s. Makes me smile when people keep on parroting "BUBBLE". Makes me want to go to Disneyland and blow bubbles with the kids :) :beer
Don't wait to buy real estate. Buy real estate, and wait. | Rent where you live, buy where others pay your mortgage for you.

visualguy
Posts: 680
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Re: Is this a housing bubble?

Post by visualguy » Tue Mar 06, 2018 2:41 am

WanderingDoc wrote:
Tue Mar 06, 2018 1:30 am
Yep. They have been telling us that "its a bubble!" in SF, SD, LA, and Honolulu for the last 40 years. We still enjoyed 9% appreciation and 6% rent growth, year-over-year, this includes the corrections !!! Properties have doubled in price reliably every 10 years since the 1960s. Makes me smile when people keep on parroting "BUBBLE". Makes me want to go to Disneyland and blow bubbles with the kids :) :beer
Yes, this has a long history. I remember a very active Bay Area housing forum/blog (patrick.net) devoted to the supposed housing bubble and imminent crash. It was very active 15-17 years ago, and it is now long dead, but it took a long time for people to give up on all those misguided perceptions and predictions. Prices tripled since then...

Valuethinker
Posts: 35676
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Re: Is this a housing bubble?

Post by Valuethinker » Tue Mar 06, 2018 4:12 am

madmartigan wrote:
Tue Mar 06, 2018 1:01 am
Valuethinker wrote:
Mon Mar 05, 2018 12:46 pm
madmartigan wrote:
Mon Mar 05, 2018 12:33 pm


These are the realities of the bay area. My personal speculation is that the housing prices will continue to go up, as I see no significant increase in supply, nor lack of high tech jobs available in the market.
The big tech companies are starting to build housing for their employees, it's becoming such a problem.

The tech cos can, presumably, relocate operations. Perhaps Google will move to Salt Lake City, and Apple to Houston or Atlanta. Housing prices are much more reasonable relative to income in those cities :happy
Google would have built their housing years ago if allowed; Mountain View has prevented this from occurring due to zoning restrictions and general concerns of congestion, among several other regions. Affordable housing, and housing within a reasonable commute distance has been a topic of discussion at various Google all hands. Google also offers many shuttles to get to all of their office locations, as do other large tech companies.

Last I knew the numbers, Google employed ~50% of their workforce in the bay area. As with I think any major company, if you want have the most opportunities, you need to be at HQ. Same principal with the bay area; the general talent pool, and availability of that talent makes it difficult for an established company to make the move. Perhaps some have? If so, I'd be interested to read about the results. If a company like Google was going to expand out, I'd imagine they'd try to pivot to Seattle or Denver (areas they are both expanding in as well, if I recall correctly).
Thank you for the update on local NIMBYISM. A problem everywhere, it seems.

I was speaking ironically ;-). Houston and Atlanta may have affordable housing, but AT in particular has awful traffic issues. Infrastructure has not caught up with the city growth. Although both cities have their tech sectors (Oilfield Services is very high tech) it's unimaginable that Google, say, would put a second corporate HQ there.

But for exactly the reasons you identify: 1). head office will be the place to be in Google (or any other tech co) 2). if they want to attract a new, young high skilled satellite workforce, then cities like Denver or Seattle are the most likely* 3) their "satellites" are more likely to be in other countries, like India, China, Taiwan, Germany etc. than in USA.

* Pittsburgh might be the odd one there. It has very cheap housing, but it also has stellar universities, cultural amenities. However it has Pittsburgh's climate.

Vancouver used to be a great place, but the soaring cost of housing (some of the most expensive in North America) has squeezed the life out of the place. It still is a great city, but hard to attract young people- -you can't pay them enough.

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Cycle
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Location: USA

Re: Is this a housing bubble?

Post by Cycle » Tue Mar 06, 2018 9:08 am

madmartigan wrote:
Tue Mar 06, 2018 1:09 am
Cycle wrote:
Mon Mar 05, 2018 1:04 pm

The money will stay in the Bay area but the jobs won't. Augmented reality will negate the benefit of co-location for work and the only things attractive about the bay area will be the non-job related attributes.

This is still probably 10 years out, as WebEx still doesn't allow for one to reliably dial into a conference call.

I could be wrong.
I disagree with the premise. Based on my experiences, the majority of companies do not formally support working remotely, and only tolerate it at best. Google, for example, does not support working remotely. An individual's productivity, in general, is worse without a structured area to work. Furthermore, collaboration is significantly worse. The spontaneous interaction amongst teams and personnel cannot be recreated without physical proximity.

I'm not normally an absolutist, but I hate all forms of work-based communication. Conference calls, WebEx, Hangouts, etc; they're all horrible. Years of improvements and they're all still bad.
AR will allow you to be fully rendered and visible to your coworkers while plugged in. The major firms aren't using it bc it is still nascent tech mainly in startups and r&d. It will improve productivity, especially for me since my team is 6 time zones away. This is still 5 - 10 years out, lot of kinks. I work with it in r&d, but as a product not as an office tool.

AR will be transformative.

Your comments are relevant to today.

alfaspider
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Re: Is this a housing bubble?

Post by alfaspider » Tue Mar 06, 2018 10:26 am

Cycle wrote:
Tue Mar 06, 2018 9:08 am
madmartigan wrote:
Tue Mar 06, 2018 1:09 am
Cycle wrote:
Mon Mar 05, 2018 1:04 pm

The money will stay in the Bay area but the jobs won't. Augmented reality will negate the benefit of co-location for work and the only things attractive about the bay area will be the non-job related attributes.

This is still probably 10 years out, as WebEx still doesn't allow for one to reliably dial into a conference call.

I could be wrong.
I disagree with the premise. Based on my experiences, the majority of companies do not formally support working remotely, and only tolerate it at best. Google, for example, does not support working remotely. An individual's productivity, in general, is worse without a structured area to work. Furthermore, collaboration is significantly worse. The spontaneous interaction amongst teams and personnel cannot be recreated without physical proximity.

I'm not normally an absolutist, but I hate all forms of work-based communication. Conference calls, WebEx, Hangouts, etc; they're all horrible. Years of improvements and they're all still bad.
AR will allow you to be fully rendered and visible to your coworkers while plugged in. The major firms aren't using it bc it is still nascent tech mainly in startups and r&d. It will improve productivity, especially for me since my team is 6 time zones away. This is still 5 - 10 years out, lot of kinks. I work with it in r&d, but as a product not as an office tool.

AR will be transformative.

Your comments are relevant to today.
I'm rather skeptical that AR is really going to replicate the in-person experience in a way people would actually wants to use. Nobody wants to wear a pair of VR goggles for 8+ hrs a day. And even a very high quality AV experience is a pale imitation of being there in person. Besides, you can't go out to lunch with someone who isn't actually there- and social bonding is a big aspect of an integrated workforce.

Valuethinker
Posts: 35676
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Re: Is this a housing bubble?

Post by Valuethinker » Tue Mar 06, 2018 11:12 am

Cycle wrote:
Tue Mar 06, 2018 9:08 am
madmartigan wrote:
Tue Mar 06, 2018 1:09 am
Cycle wrote:
Mon Mar 05, 2018 1:04 pm

The money will stay in the Bay area but the jobs won't. Augmented reality will negate the benefit of co-location for work and the only things attractive about the bay area will be the non-job related attributes.

This is still probably 10 years out, as WebEx still doesn't allow for one to reliably dial into a conference call.

I could be wrong.
I disagree with the premise. Based on my experiences, the majority of companies do not formally support working remotely, and only tolerate it at best. Google, for example, does not support working remotely. An individual's productivity, in general, is worse without a structured area to work. Furthermore, collaboration is significantly worse. The spontaneous interaction amongst teams and personnel cannot be recreated without physical proximity.

I'm not normally an absolutist, but I hate all forms of work-based communication. Conference calls, WebEx, Hangouts, etc; they're all horrible. Years of improvements and they're all still bad.
AR will allow you to be fully rendered and visible to your coworkers while plugged in. The major firms aren't using it bc it is still nascent tech mainly in startups and r&d. It will improve productivity, especially for me since my team is 6 time zones away. This is still 5 - 10 years out, lot of kinks. I work with it in r&d, but as a product not as an office tool.

AR will be transformative.

Your comments are relevant to today.
Travel is not getting any easier - congestion and delays, security etc. We have yet to see a really big terrorist attack on a train (Madrid was perhaps the worst, at least in the developed world) but we will, no doubt and then trains will get a lot less convenient. Plus "Think. Is your journey really necessary?" as the wartime posters advertised. There is an environmental cost to our hyper mobility, and I expect to see that being increasingly taken into account. Companies being forced to account for the travel of their employees, etc.

At the urban-regional level traffic congestion grows and grows. Autonomous Vehicles could make it a lot worse (lowering the time cost of being stuck in traffic). The only plausible way to control it is various forms of road pricing and usage restriction.

And companies are global. Your development team could easily be in Taiwan, India, Mainland China. Fulfillment somewhere else again. It's getting harder just to relocate staff with increased immigration restrictions, Brexit etc.

So we will see more of these sorts of solutions. I am agnostic on Virtual Reality because I have not experienced it yet.

But give it time.

itstoomuch
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Location: midValley OR

Re: Is this a housing bubble?

Post by itstoomuch » Tue Mar 06, 2018 11:41 am

Seattle area (we closed Mar2, buy) :
Our RE says no. Huge down payments and way above 20%. Still a lot of cash purchases. Very good Loan-to-Income ratio.
YMMV
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

LeSpy
Posts: 38
Joined: Wed Aug 09, 2017 2:56 pm

Re: Is this a housing bubble?

Post by LeSpy » Tue Mar 06, 2018 12:07 pm

Valuethinker wrote:
Mon Mar 05, 2018 11:12 am
cherijoh wrote:
Mon Mar 05, 2018 9:03 am
anoop wrote:
Sun Mar 04, 2018 6:11 pm
It's a bubble only in as much as tech is in a bubble. Each time a company goes IPO you have a 100 people or more loaded with funny money looking for houses to buy with cash.

CR say two things need to be present in a bubble -- overvaluation and speculation. There is no speculation in real estate, hence his take is no bubble even though there is overvaluation.
http://www.calculatedriskblog.com/2017/ ... ubble.html
You can't make that determination based on aggregate data! :oops: Housing markets are local. The author should have done these calculations based on individual MSA markets before drawing any conclusions. It wouldn't surprise me to find that some individual markets are currently in bubble territory, while others are not.
Bill McBride knows this and he's very clear that he is talking about the US in aggregate, not specific markets.

2006 was perhaps the first time the US market as a whole was a bubble, at least since the 1920s.
Is there historic metro area real estate index info going that far back similar to what we have for the stock market?

I was thinking about this recently; how can we know if real estate is a bubble or just a cyclical bull? I heard a hypothesis that the vast upswings and downswings in RE prices in high demand areas has been a phenomenon that has emerged only since financial & capital deregulation that began around the 70/80s.

Afty
Posts: 794
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Re: Is this a housing bubble?

Post by Afty » Tue Mar 06, 2018 12:27 pm

LeSpy wrote:
Tue Mar 06, 2018 12:07 pm
I was thinking about this recently; how can we know if real estate is a bubble or just a cyclical bull?
I'm not sure we can know. Bogleheads have accepted the futility of trying to predict stock market bubbles; why should real estate be any different?

sunspotzsz
Posts: 228
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Re: Is this a housing bubble?

Post by sunspotzsz » Tue Mar 06, 2018 1:17 pm

pointless to discuss one area on a general forum.

a lot of engineers easily make 300-400k a year and that's not typical anywhere else.
Stay the course! | | Californians can save energy, reduce emission and get paid by signing up with ohm. | | https://ohm.co/sunspotzsz

Valuethinker
Posts: 35676
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Re: Is this a housing bubble?

Post by Valuethinker » Tue Mar 06, 2018 2:08 pm

LeSpy wrote:
Tue Mar 06, 2018 12:07 pm
Valuethinker wrote:
Mon Mar 05, 2018 11:12 am
cherijoh wrote:
Mon Mar 05, 2018 9:03 am
anoop wrote:
Sun Mar 04, 2018 6:11 pm
It's a bubble only in as much as tech is in a bubble. Each time a company goes IPO you have a 100 people or more loaded with funny money looking for houses to buy with cash.

CR say two things need to be present in a bubble -- overvaluation and speculation. There is no speculation in real estate, hence his take is no bubble even though there is overvaluation.
http://www.calculatedriskblog.com/2017/ ... ubble.html
You can't make that determination based on aggregate data! :oops: Housing markets are local. The author should have done these calculations based on individual MSA markets before drawing any conclusions. It wouldn't surprise me to find that some individual markets are currently in bubble territory, while others are not.
Bill McBride knows this and he's very clear that he is talking about the US in aggregate, not specific markets.

2006 was perhaps the first time the US market as a whole was a bubble, at least since the 1920s.
Is there historic metro area real estate index info going that far back similar to what we have for the stock market?
Check Shiller's data. He and (either Case or Weiss) tried to create such.
I was thinking about this recently; how can we know if real estate is a bubble or just a cyclical bull? I heard a hypothesis that the vast upswings and downswings in RE prices in high demand areas has been a phenomenon that has emerged only since financial & capital deregulation that began around the 70/80s.
We can't. The story I heard is that zoning has tightened so much. Thus, in coastal cities, rising prices don't create offsetting supply. That's why NY/ SF/ LA prices go up and up, whereas real housing prices in Atlanta and Houston and DFW by and large do not. There's a whole political movement about this problem in California, YIMBY ism (Y for Yes), that's started.

But there were housing booms and busts in American history before the 1970s. Florida land boom in the 1920s. One in Chicago around the 1870s?

My gut is in most places this is merely a cyclical bull. Unemployment is at a 10 year low. The economy is motoring forward. Lending by banks to housebuilders has been sharply restricted post credit crunch. Many housebuilding firms and contractors left the industry. So supply has not been robust.

New types of housing investment vehicles, in particular REITs & PE backed funds that buy SFHs, have entered the market, thus increasing demand.

I don't hear anecdotal evidence of widespread dodgy financing - regulators and mortgage securitizers remain alert to that.

A rise in interest rates will doubtless hurt the market but is unlikely to cause it to crash.

Of course, there will be local bubbles and busts. There always are.

If the tech industry takes a significant downturn, housing prices in the Bay will stagnate or fall. Ditto the entertainment industry in LA, perhaps. Or the securities industry in NY. But the tech boom is most present as a factor in SF Bay area housing prices.

If there is a bubble in SF Bay, it is not in real estate per se, it's in the tech industry which feeds that RE demand.

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