March 1, 2017

Driving Up Prices Because They Expect Prices To Increase

A topic starting with the first of two emails I’ve received recently. “Me and my wife have been thinking about investing in a home of our own. Unfortunately we live in the most expensive neighborhood in USA, Bay Area California. The prices for housing is too high. Investing in a home here will need all our savings. I have been following the housing boom and am not sure if there will be a correction coming soon. What would your advice be in this case, any help is much appreciated.”

The second. “We are looking to buy our first home in San Francisco suburbs. I have been searching a lot on internet about housing predictions for 2017 but almost everyone is saying market is good, prices are going to increase. And if you could suggest what shall we do…wait or buy?”

The US News and World Report. “Home prices rose again last year, and the housing market is starting off 2017 at a brisk clip. According to S&P CoreLogic Case-Shiller data, which includes the 20 largest U.S. cities, home prices regained their 2007 peak late last year and increased 5.6 percent from November 2015 to November 2016 — the latest figure available. Zillow’s Home Value Index, which measures median home value nationwide, predicts its index will reach the 2007 level this spring.”

“Zillow found that home values rose 6.8 percent last year and predicts a 3.5 percent uptick this year. But could these impressive numbers actually be the precursor to a housing bubble?”

“‘We are absolutely not in a bubble,’ says Ralph McLaughlin, chief economist for the real estate portal Trulia. ‘The economic definition of a bubble is when people are driving up prices only because they expect prices to increase.’”

From Las Vegas Now in Nevada. “Valley home prices are on the rise. Zillow reports the median house price is at around $216,000. However, the Greater Las Vegas Association of Realtors reports a median home price is closer to $238,000. Both prices are increases. Local realtors say houses between $200,000 and $300,000 are in hot demand. So, considering everything that happened when the housing bubble burst, one can’t help but ask, ‘are prices climbing too fast?’”

“Home prices are on the rise about 9 percent from a year ago, according to the Greater Las Vegas Association of Realtors. ‘It’s stable. Stable is the new sexy,’ said Dave Tina, president of the Greater Las Vegas Association of Realtors. ‘We’ve been having about an 8-10 percent growth year over year.’”

From Florida Today. “The Brevard County real estate market didn’t tap the brakes in January. It showed some acceleration instead. Sales of single-family homes on the Space Coast rose nearly 3 percent over the year, while the median sale price — the point at which half the homes sell for less, half for more — jumped to $195,000, up more than 18 percent from a year earlier.”

“‘We’re on a positive trend,” said Julia Dreyer, broker/owner of the Indian Harbour Beach-based Dreyer & Associates Real Estate Group. ‘I don’t think it’s a screaming, rocket trend, which is not what anybody wants. Really, 18 percent, year over year, is a good number. It’s a sustainable number.’”

The Boulder Daily Camera in Colorado. “The rapidly rising price tags on Longmont homes are certainly no secret. Median house prices increased 15.5 percent in the last year alone. But perhaps the best measure of the post-recession recovery is this: The average cost of a single-family home in the city has roughly doubled in less than a decade, from $205,454 in the depths of the recession — November 2008 — to $406,762 last month.”

“That’s a 98 percent increase in just over 8 years, roughly 12 percent appreciation per year. The same gains would take 28 years to achieve at more historic levels of appreciation of 3.4 percent, according to the Case-Shiller index.”

“Nationally, the low point for U.S. home prices was $166,200 in 2011, according to data from the National Association of Realtors. Today, it’s around $235,000 — a 41.3 percent increase. ‘During the housing boom (of the early 2000s), there was price growth that reached close to or above doubling,’ said Adam DeSanctis, economic issues media manager with NAR. ‘Now you’re starting to see price growth accelerating or reaching that point again.’”

“But, DeSanctis cautioned, that isn’t because we’re in a bubble. The recent run-up in prices is being driven almost entirely by low supply, which makes it different from the frenzy that created the housing bubble, and the recession, in the first place.”

“‘Back then, people were buying homes faster then they could earn money,’ said Kyle Snyder of Longmont’s Land Title Guarantee. ‘This market is built on wealth and not credit.’”

“Longmont is in high demand as first-time buyers flock to the only sub-$400,000 market in Boulder County. But those days as an affordable haven might be over. Longmont first crossed the $400,000 average threshold in September, and will likely continue to do so throughout 2017, Snyder said. ‘There’s nothing out there that changes the direction of this market. Interest rates are not going to go up significantly; inventory’s going to remain fairly tight. It’s just going to be an expensive world from now on.’”

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Comment by oxide
2017-03-01 05:36:09

Really, 18 percent, year over year, is a good number. It’s a sustainable number.

Da fuq.

That’s some quality red meat for HBB… have at it boyz…

Comment by Bubble Boy
2017-03-01 05:47:23

Holly Cow, I couldn’t believe anybody could actually say something so ridiculous. Obviously, this person flunked 6th grade math.

When prices continually grow 9x faster than incomes, how could anything possibly go wrong???

Comment by leydan
2017-03-01 09:41:49

said Julia Dreyer, broker/owner of the Indian Harbour Beach-based Dreyer & Associates Real Estate Group

“good number” means for her, not for the market or anyone not in the business.

Solution: all of us should become used home salespeople. Then our incomes will track prices.

Comment by Albuquerquedan
2017-03-01 10:00:06

When Chinese housing prices were going up 10%+ per year, their incomes were going up ten percent per year, now they are going up 8% per year the housing price increases have slowed down accordingly. Yet this board sees China as having the bubble and the U.S not so much. Sorry, housing prices should be measured in relationship to rents and incomes to determine whether a bubble exists. Under that standard it is the U.S. and not China that does have the problem, although the problem is not as severe in the U.S. as it was in 2006.

Comment by Mafia Blocks
2017-03-01 11:03:49

Housing is “measured” in production cost + profit. Just like oil.

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Comment by snake charmer
2017-03-01 13:20:46

You have to be kidding us with that post. The average middle class income in China is less than $12,000. The average income as a whole is about $2,000. So first-world housing prices indicate … what, exactly?

This board sees the U.S. as having a bubble, it’s the self-serving real estate people in Ben’s amusingly excerpted news stories who don’t.

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Comment by Albuquerquedan
2017-03-01 15:34:09

Your numbers are way off, you are entitled to your own opinion but not your own facts, per capita income which includes children and retirees is more than four times your $2000 income. The first-world housing costs is just in the tier one and tier two cities and yes they are expensive and one of the reasons the Chinese have such a high savings rate:

Comment by Mafia Blocks
2017-03-01 16:32:36

Chinas GDP collapsed 50% by their own admission and it’s still falling. That’s from a country who fudge their own economy data…. again by their own admission.

Comment by Albuquerquedan
2017-03-01 16:57:51

Sorry a 50% reduction in the rate of growth is not the same as a 50% collapse in GDP. Just look at the percentage China makes of total world GDP now and what it was in 1980, the difference is mindboggling.

Comment by snake charmer
2017-03-01 17:06:52

Jeez, $8,000. That’s called “a distinction without a difference.”

Comment by Blue Skye
2017-03-01 19:01:33

GDP per capita is not personal income!

According to data from National Bureau of Statistics of China…

In 2016 the per capita disposable (after taxes) income was just under $5,000 in 2016. The catch; this is only for Urbanites! Rurals are something like 1/3 the income of Urbnites. Keep in mind that the top 1% live in the coastal cities, so that Urban income includes the millionaires.

Comment by @AltFacts
2017-03-02 05:09:55

Since when are we not entitled to our own facts?

Comment by Carl Morris
2017-03-01 11:00:09

When prices continually grow 9x faster than incomes, how could anything possibly go wrong???

“It’s just going to be an expensive world from now on.”

Guess we have no choice but to give them all our money and hope they let us eat.

Comment by FED Up
2017-03-01 14:07:47

“It’s just going to be an expensive world from now on.”

That sounds like Robert Toll in 2005:

His conclusions carry a whiff of new-paradigm thinking, but he nevertheless seems convinced that Europe’s present-day reality is America’s destiny. I asked Toll what our children … would be paying when they’re ready to buy. ”They’re going to live with us until they’re 40,” Toll said matter-of-factly. ”And when they have their second kid, then we’ll finally kick them out and make them pay for the house that we paid for. And that house will cost them 45 to 50 percent of their income.”

”It’s all just logic,” Toll said. ”In Britain you pay seven times your annual income for a home; in the U.S. you pay three and a half.” The British get 330 square feet, per person, in their homes; in the U.S., we get 750 square feet. Not only does Toll say he believes the next generation of buyers will be paying twice as much of their annual incomes; in terms of space, he also seems to think they’re going to get only half as much.”

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Comment by Carl Morris
2017-03-01 16:11:54

The Toll quote is exactly what I was thinking of when I posted that.

Comment by rms
2017-03-01 23:39:55

Toll’s great grandpa probably ran a penny-hang in London.

Comment by Big Fat Beautiful Bubble
2017-03-01 19:48:21

-> “That’s some quality red meat for HBB… have at it boyz…”

I laughed heartily because of this comment, thank you.

Meat’s back on the menu, boys!

Comment by Senior Housing Analyst
2017-03-01 06:32:47

San Rafael, CA Housing Prices Crater 13% YoY On Skyrocketing Bay Area Inventory

Comment by oxide
2017-03-01 06:43:05

Oh boo hoo.


Many borrowers say the mortgage process is a major pain

By Kenneth R. Harney March 1 at 7:00 AM (Washington Post dot com)

At a time of super-strict underwriting standards, record-high credit-score requirements and hard-wired debt-to-income cutoffs, has the process of applying and qualifying gone a little over the top? Many applicants and borrowers apparently think so. Two new national surveys found that significant numbers of borrowers believe the current mortgage process is a major hassle.

… Fifty-six percent of respondents found excessive paperwork to be the most overwhelming aspect. Some applicants, especially millennials and Gen X-ers, felt they hadn’t ended up with as low an interest rate as they expected.

I asked Steve Stamets, a loan officer with Mortgage Link, a Maryland-based lender, about the survey results. “I get it,” he said. The process “is a pain. But is it the right thing to do? Yes. If you were lending me $300,000, wouldn’t you want to know as much as possible about me?”


Comment by taxpayer
2017-03-01 07:04:50

rocket mort app fixed all that

BOOTS ! dc re season in full swing
slight inventory uptick in 22151

OT -an office building in fxco sold for $65 a sq ft, previosly sold for $280

Comment by Rental Watch
2017-03-01 09:58:45

“Many borrowers say the mortgage process is a major pain”

Good. It should be. If you want to borrow an amount that is a multiple of your income, and likely a multiple of your net worth, with very little of your own skin in the game, it SHOULD be a detailed and difficult process.

Comment by leydan
2017-03-01 10:20:40

Agreed. I know if it were my money I was loaning I’d be even more thorough, so I don’t fault the bank for being cautious.

Though personally I don’t think it’s a difficult process, nor is it that detailed. When I bought my house a couple years ago it was mostly pay stubs, tax returns, and explanation of any large bank deposits (to make sure friends/family weren’t loaning me money for the down payment). None of which was difficult to provide.

I suppose some people are put off by having to explain their finances to an outsider, but you gave up your expectation of financial privacy when you requested hundreds of thousands of dollars from someone.

Comment by Rental Watch
2017-03-01 11:49:04

I didn’t find the process difficult either. However, I did find it frustrating.

The lender wanted me to legally attest to a financial statement that they (and I) knew was outdated. In other words, they wanted me to sign the same financial statement that I prepared at the beginning of the process right before signing loan documents.

Not a chance.

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Comment by Ronnie Evil
2017-03-03 10:35:01

“The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.” John Kenneth Galbraith (1908- ), former professor of economics at Harvard, writing in ‘Money: Whence it came, where it went’ (1975).

The lenders do nothing-the real estate agents do even less-the escrow people are a complete and utter racket-period. Skin in the game? What does the lender lose-you make payments for a say ten years-they get all that money-if you put a down payment down-they get that too. You go bust-they get the house and land-while there is fluxes in a given year have only appreciated-sell if again by again creating money out of nothing-get payments for ten years at probably even a higher interest rate. Never feel anything for these racketeers.

Comment by Raymond K Hessel
2017-03-01 07:09:15

NJ pension debt soared to $49B last year. How is the most corrupt state in the union going to make up the shortfall when it’s chasing off its tax base and productive citizens?

Comment by In Colorado
2017-03-01 08:01:50

They’ll need $5000+ from every man, woman and child in the state to fill in that hole.

Someone’s getting a reduced benefit in the future.

Comment by Raymond K Hessel
2017-03-01 07:13:09

“Gross malfeasance” of public union retirement systems in KY coming to light as underfunded pension plans won’t be able to keep up with promises made to state employees.

Comment by palmetto
2017-03-01 13:30:29

The New York Teamsters Road Carriers Local 707 Pension Fund has won the unfortunate award for “First Pension to Officially Run Out of Money.” According to the New York Daily News, and a host of angry former truck drivers who’ve had their pension benefits slashed, the Pension Benefit Guaranty Corp. (PBGC) has officially been forced to step in and take over payments to retirees of the Local 707, albeit at a much lower rate.

“Narvaez now gets $1,170 a month — before taxes.”

Poof! Seems to be a lot of this going around.

Comment by aNYCdj
2017-03-01 19:27:29

pamy…i still believe they severely underestimated the cost of so many millions who quit smoking and living longer.

Narvaez, 77, got a union certificate upon retirement in 2003 that guaranteed him a lifetime pension of $3,479 a month.

He should have died long before this.

Comment by Senior Housing Analyst
2017-03-01 07:57:33

Boulder, CO Housing Prices Crater 6% YoY

Comment by Blue Skye
2017-03-01 08:17:19

” The prices for housing is too high…What would your advice be…”

If the price is too high, it’s not worth the cost.

Comment by ZH
2017-03-01 08:45:42

WTI/RBOB Tumble As US Crude Inventories Hit New Record High, Production Surges

Comment by Albuquerquedan
2017-03-01 09:39:05

Oil is up five cents a barrel last time I looked hardly tumbling. Oil production may be up but world demand is increasing faster.

Comment by Mafia Blocks
2017-03-01 09:47:21

Problem is there is a globe awash in excess supply and capacity with demand cratering.

Comment by Albuquerquedan
2017-03-01 09:52:20

This is not government data and includes more small and medium size businesses. The government data is more geared to measuring the SOEs:

Comment by oxide
2017-03-01 09:56:29

Ah good, you’re back. About the high crude inventories… didn’t we see that most of that was depleted over the past couple of years, especially from the tanker ship storage?

Comment by Albuquerquedan
2017-03-01 10:59:52

Thanks Oxide. Actually, what you are seeing is oil that was stored at sea and not included in the government onshore numbers is being moved since onshore storage is cheaper now. The numbers are a bit deceiving since the oil in storage worldwide is dropping.

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Comment by Blue Skye
2017-03-01 10:44:08

Let’s be honest. Oil is still down about $50.

Floating on a ocean of credit.

Comment by Albuquerquedan
2017-03-01 11:07:16

As soon as high grading ends in the shale oil fields, oil production will at least stagnant. I think you know but for others high grading is when you either mine the best ore or drill the best wells usually when the commodity’s price is low. A few years ago the average price to produce shale oil was almost 70 a barrel. People assert that the cost has dropped into the 30s but that is deceptive. Before, oil companies were producing both their $100 a barrel fields and their $40 dollar fields for an average of $70. Now they are just producing their $40 fields and they might have reduced their costs to $35 a barrel. However, they are running out of high grade fields to drill so when they do it will take close to $100 to maintain production. Most of the cost reductions are illusionary.

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Comment by MightyMike
2017-03-01 11:40:46

It’s also up 400%.

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Comment by Rental Watch
2017-03-01 11:50:33

This is just proof that if OPEC cuts production, the US will step up production nearly immediately at prices between $50 and $60.

$100 oil is a LONG ways off.

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Comment by Albuquerquedan
2017-03-01 14:51:45

It is a finite resource with a finite number of drilling spots. It is not like Facebook where you just need to scale up and there is no practical limit on growth. The higher production is now the harder it will be to raise production later. OPEC can have $100 a barrel oil anytime it is able to cut production back an additional one million barrels. Saudi Arabia alone could easily make that reduction if it wants to have higher oil prices and no one has the excess capacity to replace the reduction.

Comment by Mafia Blocks
2017-03-01 15:17:43

With production cost of $6/bbl, falling demand and record excess in storage, what do you think is going to happen to oil prices?

Comment by Blue Skye
2017-03-01 15:41:50

The global credit expansion has completely obscured discovering what the normal price of oil might be. The economy starts to go down on its knees when oil hits $100. A sustained period of $100 would require another Godzilla credit expansion like we had in China, or a different “modern lifestyle”.

Comment by Albuquerquedan
2017-03-01 15:50:35

What we learned from the recent price collapse is the net impact of lower oil does not appear to favor faster growth in the U.S. Obama’s war on Putin probably cost Hillary the election even ignoring any possible cyber war. The lost jobs in steel mills (making pipe), in the gas fields and coal mines in Penn. and Ohio probably turned those states red. The higher dollar probably caused enough lost jobs that is caused Michigan and Wisconsin to swing and the higher dollar and higher Saudi production were all needed to move oil lower. $100 oil is not fatal to world growth, in fact it would probably create more jobs since fracking is labor intensive and alternative energy jobs would be created.

Comment by Albuquerquedan
2017-03-01 16:15:04

Seems like I am not allowed to refute anyone. About half my posts post, I find that when one feels the need to censor an argument from the other side, he or she has already lost the argument.

Comment by Albuquerquedan
2017-03-01 16:20:06

Thanks Ben, no censorship was going on. Sorry.

Comment by Rental Watch
2017-03-01 17:04:33

Of course it is a finite resource.

However, fracking has provided a pretty meaningful amount of additional potential supply at prices well below $100. Unless there is new information since, the Wolfcamp finding is a meaningful example in the US.

I’m not saying that we will never reach $100 again.

I’m just saying that I don’t expect it within the next 5-10 years.

Comment by PoohEmoji
2017-03-01 08:54:17

“‘Back then, people were buying homes faster then they could earn money,’ said Kyle Snyder of Longmont’s Land Title Guarantee. ‘This market is built on wealth and not credit.’”

He didn’t really say that, did he? Jeez…

Comment by oxide
2017-03-01 09:11:49

Dontcha know, people’s wealth is growing at the “sustainable number” of 18% each year.

Comment by Josh
2017-03-01 14:34:24

I was just going to quote that. Unreal. Do you think he actually believes that or is just being a parrot/robot/drone?

Comment by Mafia Blocks
2017-03-01 15:19:13

Josh…. how are you my good friend?

Comment by In Colorado
2017-03-01 23:22:04

400K for a house in El Longmonto? They have to be kidding.

Comment by SW
2017-03-01 09:29:18

The low supply seems to be a myth. Logan Mohtashami keeps shooting that one down but analysts keep using it as a basis for steep price increases.

Comment by snake charmer
2017-03-01 13:26:02

“Low supply” is part of the sales vernacular, just like “interest rates are going up soon.” In other words, time to buy. It’s always time to buy.

I see plenty of supply where I live, but that doesn’t stop real estate salespeople from sticking to the script when they’re quoted in the newspaper. No doubt the NAR distributed talking points a while ago.

Comment by Rental Watch
2017-03-01 17:12:57

You also need to ask yourself how the person defines “supply”.

Supply = Number of Listings?


Supply = Amount of Shelter?

Brokers often mean the former. I’m focused on the latter.

Comment by SW
2017-03-01 09:34:56

Spring housing already overheating—think 60 offers on one house

Article makes it sound like a hot market but further reading shows they’re 20 bidders deep on shacks in south central LA. Also, the feature couple here has all the hallmarks of being a budget constrained, low down payment buyer. Sad what will probably happen to them when the market corrects.

I’d say we’ve hit the peak with marginal buyers running up the middle to low end of housing stock.

Comment by Mafia Blocks
2017-03-01 11:18:40

Do you believe the article?

Comment by Rental Watch
2017-03-01 11:42:00

The number in there that was the biggest surprise to me was the 15MM rental homes (up from 11MM). There are plenty of large players (Blackstone, etc.) that purchased homes, but at the biggest, they were something like 50k-60k homes…mom/pop owner/investors must represent the bulk of the 4MM increase.

And those were the lower priced homes (where the rental math actually worked). That’s a lot of more affordable homes no longer in the “owner-occupied” pool.

Comment by Albuquerquedan
Comment by oxide
2017-03-01 10:17:11

I know it’s not connected to housing, but the article on home improvement led to an even worse article:

The Sabins family buys Tucker, a Golden Retriever puppy for $2400 with financing, only to find out later that they hadn’t actually bought the dog:

“…Without quite realizing it, the Sabins had agreed to make 34 monthly lease payments of $165.06, after which they had the right to buy the dog for about two months’ rent. Miss a payment, and the lender could take back the dog.

“If Tucker ran away or chased the proverbial fire truck all the way to doggy heaven, the Sabins would be on the hook for an early repayment charge. If they saw the lease through to the end, they would have paid the equivalent of more than 70 percent in annualized interest—nearly twice what most credit card lenders charge.”

Evidently you can lease a cat too, as if the cat were a Lexus. IMO this is outright extortion and probably animal cruelty. Who is going to return a family pet? And what happens whens someone does return a pet? Do they have used pet salesman, or does the poor pet go to the pound?

Comment by Albuquerquedan
2017-03-01 11:09:16

Since I like animals far more than I like people that story truly disgusts me.

Comment by In Colorado
2017-03-01 11:45:28

Good gravy. Dog shelters are full of free dogs, and people are leasing them? Why? Just because they’re pure bred?

Comment by Lurker
2017-03-01 11:55:41

Push button, get rental dog?

Comment by redmondjp
2017-03-01 16:09:50

Hey, that’s a great idea for a new app, let’s call it “RocketDog”

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Comment by Lurker
2017-03-01 11:58:45

“Why would anyone walk into a pet store to buy an animal and decide, instead, to lease?

Because dogs can be expensive, and not everyone who wants a fancy one can afford to pay cash or use a credit card. Because others, like Sabins, are more eager to bring home their new furry friend than to read the fine print of their contract. But mostly because—thanks to a 36-year-old Nevadan who ditched a career in private equity to help subprime borrowers finance purebred pets—they can.

“When I take a good hard look at what the world will be like in 10 years, I think most things are going to be on lease,” said Dusty Wunderlich, chief executive officer of Bristlecone Holdings LLC, the Reno, Nevada-based company that operates Wags Lending.”"

Heck of a job, Janet. (And Ben, and Alan).

Comment by snake charmer
2017-03-01 13:36:13

This guy sounds like a real winner:

“Wunderlich rents his apartment. He leases his car. He owns his horse. He’s drawn to the rugged individualism expressed in the novels of Ayn Rand and the blog Cowboy Ethics, but he hastens to argue that while he profits off high-cost lending, he’s also improving the lives of subprime borrowers. He is, he writes in a mission statement on his personal website, “living in a Postmodern culture while maintaining my old American West roots and Christian values.”

Wunderlich dreamed up Wags Lending in 2013, then used the pet-leasing business to launch an improbable collection of financing vehicles—writing leases against furniture, wedding dresses, hearing aids, and custom auto rims. In a little more than three years, his company has originated 66,000 leases for just over $100 million. He once worked out a plan to lease cattle to dairy farmers, though plummeting commodity prices soured the economics. (He got far enough to decide that if a cow gave birth during the terms of the lease, the lessee got to keep the calf.) In another idea that never reached the market, he explored lease financing for funerals.

“We like niches where we’re dealing with emotional borrowers,” Wunderlich said.

Comment by junior_kai
2017-03-01 15:36:10

Wunderlich probably rents everything so he can disappear in the dark of night if he needs to and have none of his assets confiscated.

M-F’ing snake, but damn if he didnt cash in on some impulsive fools.

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Comment by Senior Housing Analyst
2017-03-01 09:49:00

Denver, CO Rental Rates Crater 5% YoY

Comment by Not a shady real estate agent
Comment by taxpayer
2017-03-01 12:38:01

lots of contradictory data there

Comment by Apartment 401
Comment by In Colorado
2017-03-01 11:47:13

Flyover wages and near coastal prices.

Comment by Apartment 401
2017-03-01 12:07:49

And traffic worse than L.A.

Comment by In Colorado
2017-03-01 18:02:15

I don’t think so. It’s pretty bad in Denver, but not that bad.

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Comment by Senior Housing Analyst
2017-03-01 11:05:34
Comment by cactus
2017-03-01 11:50:03

AN FRANCISCO (Reuters) - The University of California, San Francisco on Tuesday laid off 49 information technology (IT) employees and outsourced their work to a company based in India, ending a year-long process that has brought the public university under fire.

The university announced the plan last July as a way to save $30 million over five years. The University of California system, which includes health care and research-focused UCSF, has been struggling to raise revenue and cut expenses.

Comment by Foo Bar
2017-03-01 12:20:40

Bubble - what bubble?

Dow crossed 21000. WTF is going on?
Real estate wont crash if stock market is going up (at least here in bay area).

Is this year 1999 or 2000 ?

Comment by Big Fat Ugly Bubble
2017-03-01 12:34:33

Yeah, that was quick, wasn’t it? Only took a month to go from 20K to 21K…

Maybe it will only take 2 weeks to hit 22K..

Then 1 week for 23K…

Then 2.5 days for 24K…



Comment by PitchforkPurveyor
2017-03-01 13:16:01

It’s the Fed’s trickle-down monetary policy. Sure is working wonders for the top. Now it just needs to start trickling… It is going to trickle…right?

Comment by Foo Bar
2017-03-01 14:47:08

I’ve lost all hopes of home buying. Either buy at the top or keep waiting forever. Really frustrating. Any hope that Stock market will crash and the market runs in opposite direction , driving real estate up as well.
Wonder who is driving all this?

I see that nobody is doing great to drive this growth.

We had Debt ceiling 2 years ago, nothing happened.
We had China stock market crash last year, nothing happened.
We had oil industry tanked, nothing happened.
Brexit, nothing happened.
Trump came, nothing happened.

What is actually going to pop this bubble and when?

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Comment by Big Fat Ugly Bubble
2017-03-01 16:11:34

Don’t we have another so-called debt ceiling this month? “Yeah, right.” As if they are going to turn off the money party, LOL. Trillions and trillions. My brain stopped comprehending these numbers a decade ago. Might as well be 100 quadrillion billion, for all it matters.

Like they say on TV — buy everything, at any price, for any reason. Woohoo!

Comment by redmondjp
2017-03-01 16:12:17

Debt ceiling will be smashed again this year too . . .

Comment by MightyMike
2017-03-01 18:07:43

Brexit, nothing happened

If you though that Brexit was going to have an effect on American house prices, that was a very odd assumption.

Comment by Big Fat Beautiful Bubble
2017-03-02 06:19:15

Yes, I’m also not sure what the correlation house + stock prices over time, but they are probably pretty well correlated. That said, I’m not sure for the bay area that a crash in stocks would crash housing too. It might be true that it occurs. Layoffs etc. That is an unknown to me.

Comment by Foo Bar
2017-03-02 12:03:25

I live in Bay area. Price of housing has gone up 50K to 100K per year. Salaries can not meet those prices. Only way to pay is via stock options. In Bay Area, Google, Amazon, Facebook, Apple are the 4 big guns. They’ve tens of thousands of employees who have a lot of stock options worth lot of money.

Last but not the least, there are always some startups that succeed and they create many millionaires every single year. In other words, there is almost always someone who wants to pay 50K or 100K extra for the same house, for whatever their reason may be (close to work/good school district/less commute/ Chinese community / less crime area and so on).

So in Bay area, jobs and stock market are a big influence on housing.

Comment by PitchforkPurveyor
2017-03-01 13:11:55

The stock market is in an insane bubble. A blow off of 50% wouldn’t be surprising.

Comment by Big Fat Ugly Bubble
2017-03-01 14:01:58

It’s very sensitive. You can’t even breathe close to it, or else it pops another 500 points.

Good job, America. You got a really good bonfire going. The warmth is nice.

Comment by Albuquerquedan
2017-03-01 15:26:06

You can believe that the stock market surge was entirely due to Trump making a good speech or maybe it is due, at least partially, to the strong numbers out of


Comment by Big Fat Ugly Bubble
2017-03-01 16:24:00

That’s right. From the Everything In China Is Awesome guy.

Comment by Albuquerquedan
2017-03-01 16:46:09

Everything is not “awesome” in China, but neither is the country facing imminent collapse. It is an imminent collapse that is the prevalent view on this blog. If it were true the world would be facing the imminent global recession which also seems to be common on this board. If the world was facing an imminent collapse the stock market would be acting completely irrational. However, the stock market rise might not be so irrational if what the investors are seeing is a much stronger China which will lift world demand.

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Comment by Big Fat Ugly Bubble
2017-03-01 17:17:29

It’s OK. You could call me the Complete Idiot Who Eats Crow guy, if you want. Hehe.

Actually, I think I’m going to change my name again. I’m tired of being an ugly bubble. I want to be a big beautiful bubble.

Comment by Blue Skye
2017-03-01 19:07:42

Be patient Dan. Big things may take a long time to become clear. Inevitable doesn’t necessarily mean sudden.

Comment by Big Fat Beautiful Bubble
2017-03-01 19:14:51

-> “imminent collapse”

Last time I paid much attention to these things was back in early 2000’s timeframe. Anyone remember the ole usagold forum? I lurked there for a number of years, never posted. It was a very lively and educational place, similar to the HBB, and it was much of the same thing — too much money, too much risk, major failures ahead.

Funny thing is — not all, but many of the things they predicted actually *did* occur — like the property collapse, the big banks, the insurance companies like AIG, and the GSEs…

But, it did not result in society returning to the stone age. Nobody could guess the power of the Fed and re-inflating the asset bubbles.

And here we are again.

“Your powers are weak, old man”.

Comment by Big Fat Ugly Bubble
2017-03-01 16:46:59

One funny thing is… during his campaign, Trump called the stock market a ‘big fat ugly bubble’.

But now, he seems to be enjoying it, very bigly.

Oh, I understand now. It’s not a big fat ‘ugly’ bubble when you’re in power. It’s a big fat beautiful bubble. heh.

Comment by phony scandals
2017-03-01 16:59:00
Comment by Tarara Boomdea
2017-03-01 12:28:29

“Home prices are on the rise about 9 percent from a year ago, according to the Greater Las Vegas Association of Realtors.

Ugh, we’re sitting ducks. Lease is up at end of June, and the house is now more than what we need, but I’m facing a rebellion from husband and daughter who are demanding to stay put. I really have had it with moving, too.

Have to read up on some good arguments for landlord on why our rent should stay the same. The first will be the same as what I told the agent when we rented it - the place was empty for months. He said “what difference does that make?” then reduced the rent.

Comment by Blue Skye
2017-03-01 14:10:05

Sounds like you did not just ask him what he has in mind for the lease renewal.

Comment by Tarara Boomdea
2017-03-01 16:35:09

Not yet.

Comment by SuzeB
2017-03-01 15:02:51

How about “we’re excellent tenants who have always paid our rent on time”? If that is indeed the case.

Or, offer to pay 1-3 months upfront ahead of time to avoid a rent increase.

From what I hear, landlords often have to chase down tenants for rent. A family member has two tenants and I often hear her complain about having to bargain with her tenants on when they will be able to pay rent. Sounds stressful.

I am tenant-at-will, have for over 20 years paid my rent on time or early, yet with very cheap rent for my super expensive city (Cambridge, MA) I have to move within a year (four flight walk-up top floor, can’t take the stairs much longer). I have the money to buy in a less expensive town or city but would certainly be buying at the top of the market yet the prediction is that prices will just go up up up up.

Tiny studios around here are going for between $1500 and $2000, I heard of a one bedroom that sounded nice, now $2300 and going up to $2600 per month in September, not including utilities.

So, do I stick it out for another year or will I just be facing higher rents and higher home prices in a year? Answers, answers! :-)

Comment by Tarara Boomdea
2017-03-01 16:54:00

How about “we’re excellent tenants who have always paid our rent on time”? If that is indeed the case.

Or, offer to pay 1-3 months upfront ahead of time to avoid a rent increase.

Always on time, never call them. The upfront money sounds like a good idea, thanks. I’ll bring up the could be “empty for months” point again even though he got a little hostile last time. Also, $1450 is a high rent for Vegas, but low for the neighborhood (nice, surrounded by not as nice). It’s a big ranch with an unattractive, mostly dirt backyard that the cats track all over; you could jog in this joint.

Rent Jungle says rents are trending slightly downward.

Comment by Big Fat Beautiful Bubble
2017-03-01 17:56:41

Something to think about if you decide to change landlords.. even if you have plenty of cash reserves to pay up-front, the entire lease even, but have no actual employment job that the landlord can verify… I found myself in that situation — freelance guy, taking some time off from the normal job, but plenty of cash and no problems paying rent..

No matter how nice I looked, clean-cut, professional, well-spoken, up to date on current events, etc — it was exceedingly difficult finding a landlord who would trust me. As soon as the “I have no job but will pay cash up-front” thing came up, they all thought I was a drug dealer or some kind of criminal. Not to say this would happen to you, but just a thought.

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Comment by Tarara Boomdea
2017-03-01 21:33:04

I hope we won’t have to move and make an offer like that to a new landlord. I have to get off the dime, call and find out their intentions.

The worst thing a new LL could find out about us is that we have more pets than we own up to. Deny, deny, deny. We’re real desparados ;-)

Inspector Clouseau: “Does your dog bite?”

Comment by SuzeB
2017-03-02 17:02:40

“No matter how nice I looked, clean-cut, professional, well-spoken, up to date on current events, etc — it was exceedingly difficult finding a landlord who would trust me.”

That’s crazy. So it is assumed that everyone is living hand to mouth and no one has substantial savings? Maybe it is because you are male?

Strange world. Not the one I was raised in. Today: take on massive amounts of debt and be rewarded with low interest rates, live beyond your means and be acceptable and even admired in society, get bailed out.

Or, save for your future, live way beneath your means, eschew luxury and sock your money in the bank, thinking you’re smart. Nope, you are now punished for your frugality, you are looked down upon for being a lowly renter and there is no where to be rewarded for your thrift.

Comment by Mot
2017-03-01 17:55:06

Cambridge is booming right now. I don’t see it getting cheaper in the near term.

For myself, I live down in the South Bay and commute into Cambridge.

Check out Renthop for prices in the area.

Comment by taxpayer
2017-03-01 12:36:42

anyone have an opinion on the value of an office building
30 years old vs new
all other factors being equal
20% 30? ??

Comment by traderjack
2017-03-01 13:11:54

all other things being equal the building have the same valuation.

Take it for what it is worth.

As an old broker and appraiser, and econ major, don’t believe things that have that kind of statement.

And selling points would determine which is best.

Older buildings may have been better built, but do not have the modern requirement for health and safety,

Toss of a coin

Comment by Senior Housing Analyst
2017-03-01 12:51:58

Thousand Oaks, CA Housing Prices Crater 10% YoY

Comment by Taxpayers
2017-03-01 15:52:46

Sample of 172? Wake us up when u have 1700

Comment by Mafia Blocks
2017-03-01 16:02:00

Data my good friend. Stick with the data.

Downtown Miami FL Housing Prices Crater 10% YoY

Comment by SuzeB
2017-03-01 15:17:31

From today’s Boston Globe:

Looking to buy a home this spring? Good luck with that

“The law of supply and demand is firmly at work in Boston’s housing market.

Sale prices on homes in Massachusetts hit new highs in January, amid a sharp decline in the number of properties for sale. Meanwhile, rents in the city of Boston — especially on older apartments — are starting to fall as a wave of new buildings open across the city.

The trends reflect a market that has shifted in favor of renters — for now, anyway — but remains expensive across the board.

The median price for a single-family home in the Bay State climbed to $342,500, up 7 percent in January over the same month last year, according to data from the Warren Group, a Boston-based real estate tracking firm. Condo prices climbed at a similar clip.

January is typically a slow month for home sales in Massachusetts, but the gains reported Tuesday continued an upward trend in prices in recent months, fueled by job growth, increased demand from young adults, and tightening inventory. A separate report Tuesday, based on the S&P CoreLogic Case-Shiller Index, said home prices in Greater Boston are at all-time highs, 8.5 percent ahead of their previous peak in 2005.

But supply has not kept pace.”

Comment by Rental Watch
2017-03-01 15:56:08

Summarizing what seem to be the two pervasive views:

1. Prices are driven higher because people expect prices to go up (sentiment driven price increases); or

2. Prices are driven higher because people don’t expect prices to fall, and there isn’t enough supply being added to keep prices from rising quickly (fundamental driven price increases).

I think we all agree that once people expect prices to go down, they will go down…the question is what causes that particular sentiment shift.

Comment by Blue Skye
2017-03-01 16:06:35

3. It’s a mania and logical economic theory can’t explain it. It goes til it blows, then look out below.

Comment by Rental Watch
2017-03-01 17:19:48

That would be equivalent to #1.

Comment by Blue Skye
2017-03-01 19:10:57

Perhaps, unless you are thinking short term business cycles rather than The Biggest Housing Mania in History.

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Comment by home tracking
2017-03-01 16:05:01

I’ve been searching to buy 2nd home for over a year now in new york city,

personally, i am licensed real estate agent too, what’s interesting in the past couple weeks is many of the homes couldn’t sell at their listing price and had to relist them on the mli, and less offers are made on one single home.

almost certain don’t hear much all cash buyers in the past 4 weeks…

something interesting is happening….

Comment by Senior Housing Analyst
2017-03-01 16:05:34

Garrett Park, MD Housing Prices Plummet 18% YoY On Cratering Housing Demand

Comment by Big Fat Beautiful Bubble
2017-03-01 17:32:49

This is how I imagine the Fed, Wall Street, real estate agents.. how they feel about what they have done.

Comment by Raymond K Hessel
2017-03-01 17:35:12

Oh dear. But I thought a Greater Fool always came along to pay an even more insane price for art “investments.”

Comment by Raymond K Hessel
2017-03-01 17:51:10

Whoever thought that central banks creating trillions in “stimulus” funny money out of thin air to gift to their oligarch accomplices could ever cause inflation for everyone else?–finance.html

Comment by Raymond K Hessel
Comment by Big Fat Beautiful Bubble
2017-03-01 18:29:40

I’m sure there are volumes written about these topics, but here’s an interesting article from today, about the big beautiful bubbles — the psychology of people vs. monetary expansion (and misallocation of resources) as the culprit of the bubbles. My uneducated layman opinion, bubbles are fueled by both things.

What kinds of misallocations are going on now? Renting pets? Heheh.

Comment by Senior Housing Analyst
2017-03-01 18:39:50
Comment by Big Fat Beautiful Bubble
2017-03-01 18:59:19

One comment about the previous “subprime is back” thread. My opinion, I don’t think subprime ever went away. Yes, the big banks got out of it, but it shifted to a mix of other smaller players, like the Quickens and Rockets and, of course, Ginnie Mae to guarantee them all.

It seems like they got the “too big to fail” entities out of the garbage, but there will always be a market for everything, including garbage. Maybe it’s better to have Quicken, instead of Guido who will break your legs if you fail to make a payment.

Comment by Raymond K Hessel
2017-03-01 19:51:00

But…but…”We thought our pensions were set in stone!” Sorry, distraught California public employees, but what you were promised was always mathamatically impossible.

Comment by Raymond K Hessel
Comment by Bubblebot
2017-03-01 21:57:51

“Steve Bannon on bank bailouts.”

Yes! He (they) get it! MAGA

Comment by Carl Morris
2017-03-02 10:01:19

Yeah, I mentioned weeks ago that I started to read articles on him knowing nothing about him except that lots of people don’t like him for reasons that sounded logical to me as just a distant observer. I read this and thought hmmmm…he’s the first person in a position of power I’ve seen acknowledge this publicly. Doesn’t sound nearly as evil as I was expecting…unless I was a bankster. If he IS evil, then he’s evil but right…so then what?

Comment by Big Fat Beautiful Bubble
2017-03-01 20:11:59

For the USA country, one good point RentalWatch brings up — the current peak in property prices is not the same as the previous peak in the last USA bubble from 10-12 years ago when you consider monetary inflation since then. (Please forgive me if I am misquoting you, RW.)

I don’t know exactly what the new level would be to equate to the old high factoring in monetary inflation, but we may still have some room to run. Of course, any meaningful spikes in interest rates could change things, it’s complex.

At least for USA, I also don’t see the same level of animal-spirits as prior. Yes there is some, but it’s not like everyone you meet has decided to take up a 2nd career in being a real estate agent, etc.

This one is different.

Comment by Big Fat Beautiful Bubble
2017-03-01 20:24:18

And then you’ve got things like foreign buyers increasing demand, over-building (mis-allocation of money?) increasing supply, subprime being shifted around.. all that factors into it too in addition to the Fed blowing their bubbles on the money supply. There are so many variables, it’s hard to know what the future is.

So just buy everything all the time, and forget about it. /s (kidding).

Comment by Professor Bear
2017-03-02 05:17:13

“‘We are absolutely not in a bubble,’ says Ralph McLaughlin, chief economist for the real estate portal Trulia. ‘The economic definition of a bubble is when people are driving up prices only because they expect prices to increase.’”

Why would anyone buy at current ridiculously high valuations if they didn’t believe future home equity gains will make them look like financial geniuses through the rear view mirror? Makes no sense at all!

Comment by phony scandals
2017-03-03 16:46:47


2017-03-15 22:49:20

I also think the state of the housing market there in the USA isnt a housing bubble but its just an adjustment to natural supply and demand circumstances. There is an old saying buy land they have stopped making it. Land is one commodity that can easily go scarce. Even here in Zimbabwe with a dilapidated economy house prices are still going up albeit at a small rate. I f economic fundamentals here were as good as they are in the USA probably these prices would be also going up at a ridiculous rate.

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