Out-Of-Towners Drive Up Home Prices
Two reports on the cash-out phenomenon. “As Durango real estate becomes pricier, some locals said they have been forced outside city limits while newcomers seize land they still consider cheap. A realtor in Aztec, Gary Jinks noted Colorado workers are crossing the border into New Mexico to find affordable housing.’Who wants to pay $300 a square foot in Durango’ he asked, ‘when they could pay between $80 and $120 a square foot in Aztec?’”
“Over the past year, the median house price within the Durango city limits rose to $357,000, increasing nearly 20 percent. Prices for housing in Bayfield, Colo., jumped more drastically during the same time frame from $187,000 to $268,650, or just more than 40 percent.”
“There are some, however, who find housing prices in Durango a relief. Travis and Jennifer Jones relocated here from California this month. They toured a newly finished five-bedroom home in Forest Lakes north of Bayfield with Wells Group realtor John Ralph on Monday and found its $379,000 price tag warranted.”
“‘You can’t beat that,’ said Travis Jones, adding a comparable home in California would easily reach $800,000. He and his wife took pay cuts to move to Durango but said the cost of living is also cheaper. They said they have been pleased by what they have seen. ‘The market hasn’t been too shocking,’ he said. ‘But then I compare everything to where I came from.’”
“Durango Assistant City Manager Greg Caton called housing a hot-button issue and agreed the supply within Durango has not met the demand. However, as more than 2,000 homes are constructed in Grandview, the housing market may stabilize, he noted.”
And from the Dallas News. “January was the second consecutive month with a year-over-year sales decline. More than 4,300 preowned homes were sold last month through the real estate agents’ MLS. At the same time sales were easing, the median price of homes sold in North Texas jumped 9 percent to $144,000. That’s the biggest annual increase in prices in more than two years.”
“At the same time, more higher-priced homes are trading. In January, the number of million dollar and up homes sold in North Texas almost doubled from a year earlier. ‘Starting last spring and summer, a lot of our buyers are coming from out of town,’ agent Barry Huffer said. ‘A lot of the country has enjoyed significant price appreciation in the last three or four years. Some of those homeowners are relocating and buying expensive houses here, he said.’”
And this is a surprise? Here in VT., we’ve unwillingly imported NJ/CT/NYC slime at an unprecedented pace in the last 5 years. Now it has become unaffordable here. I guess that is a good thing.
They toured a newly finished five-bedroom home in Forest Lakes north of Bayfield with Wells Group realtor John Ralph on Monday and found its $379,000 price tag warranted.”
“‘You can’t beat that,’ said Travis Jones, adding a comparable home in California would easily reach $800,000.
379K seems awfully expensive for a place in Durango. Some places are cheaper for a reason (e.g, jobs, income, climate, etc.). Comparing Durango to CA is like comparing apples to oranges.
This is evidence of a trend that could keep the housing bubble alive for several more years. Instead of one big bubble popping, we could see the most expensive markets deflate, while cheaper markets continue to inflate.
We shouldn’t underestimate the willingness and ability of people to relocate in order to find affordable housing. Furthermore, while speculators in hot markets are getting burned, the desire to own a home has not taken any big hits. As evidence, look how many real estate bears on this blog are anxious to buy a home, only at lower prices. It’s not a big stretch then, to assume that there are thousands of others in the same boat. They are also less informed, probably more willing to relocate, and more anxious to realize what they still naively consider “the American dream of homeownership”.
Furthermore, anxious renters will grow impatient, and again, the less informed will jump at discounts and perceived bargains, in the years ahead. That should keep the most overpriced markets from crashing, while the cheaper ones inflate.
Mr. D:
While I hope you are wrong, I think this is a very viable alternative to a huge slide in prices, unless rates go high enough and/or lenders dry up their creative “product”, which I doubt they will.
I am witnessing it here in OR with inmigration from both CA and WA.
PS - I also wonder if declining prices in places like CA will keep people from migrating. Whether they currently own or not, they may hang around their desired place to live in hopes of moving up or buying in for the first time, instead of trying a lower priced market.
I disagree. This housing bubble is easy credit and liquidity driven. Prices will collapse because funding will not be available to the marginal buyer as credit markets tighten. The ensuing recession will ensure incomes do not exist to maintain lofty valuations. Housing bears and fence sitters alike will no longer be able to afford to jump into the market “on the dips” unless they have a substain cash position. And when I say cash, I mean cash, not equity (evaporated), not stocks. By the time houses are affordable, no one will be interested in buying them, nor will anyone be willing to lend you much money to do it.
I’ve though of this scenario shaking out but at the same time, I’m skeptical as it seems that the Fed is hellbent on drying up liquidity and we all know they overshoot every time. Where will those buyers (either the bargain hunters or the uniformed) go for financing? Although a 30 year traditional at 7% still seems like a bargain to me, the talking heads tell the world the sky is falling everytime the fed raised 25bp.
“This is evidence of a trend that could keep the housing bubble alive for several more years. Instead of one big bubble popping, we could see the most expensive markets deflate, while cheaper markets continue to inflate.”
On a wordwide scale, that’s definitely what has been happening in the last years. The most bubbly spots in Europe had small losses some years ago, but there was no real ‘pop’ because the bubble was (deliberately, I think) spread to other countries in south/eastern Europe and even outside Europe, all thanks to more easy money from the ECB. The RE speculators are still making money.
The Dutch RE bubble that started in the early nineties had some troubles around 2000/2001 (15-30% declines for expensive homes, very limited declines for the cheapest homes) but seems to be starting a new inflation cycle now.
Hey, Trav. We’ll check back with ya in a year or two when you’re trying to sell and can’t get within 70% of what you paid.
“This is evidence of a trend that could keep the housing bubble alive for several more years. Instead of one big bubble popping, we could see the most expensive markets deflate, while cheaper markets continue to inflate.”
true, unless you’re under the impression that a recession will lower all boats. these people selling in california and moving to durango are way ahead of the crowd. when it becomes painfully obvious that california/new york/massachusetts are toast, the housing prices will be down substantially (hence less equity to transfer) and the lending environment won’t be so friendly to those looking to relocate.
the CA sellers are way ahead for sure! I’m in a rural area of the Netherlands (think AZ etc.); the big price increases here started around the time when the bubble in the big cities (like CA, NYC) popped, and prices increased strongly here for several years while prices in the big cities declined.
The quick sellers are starting with the next level of the housing bubble game (yes, unless there is a depression coming but I think that will take many years).
Interesting theory, Mr. D. Here’s my problem with it: When you move from a high-priced area to a low-priced area, someone still has to buy your old home. If the market in, say, CA starts falling (which I believe it’s already doing in some areas), how is someone going to get out of their old home? You COULD make a case that even if they have to sell their $600,000 house in CA for $500,000, that’s still enough profit to buy a $300,000 house elsewhere. But I see a problem with that, too: So many of these homes in high-priced locations have been bought with 100% financing, or close to it. In other cases, where buyers purchased years ago, many have refinanced, taken equity out to waste on other stuff, etc. So their combined loan-to-value ratios have generally risen despite a huge surge in equity. So net/net, those $600,000-to$500,000 sellers can’t really afford to sell at $500,000.
That’s my interpretation anyway. We’re in a transitional period right now where people don’t realize just how much the hot markets are going to slow down, so the “we can’t sell our old home” problem hasn’t yet whacked the low-priced markets. But I think that’s coming in the next several months, too.
My two cents anyway
The rising tide of RE has certainly floated the boats in every corner of the country. Overally, I would expect that the number of people “cashing out” of especially bubbly markets will fall, not rise, as the bubble deflates. Shorly, there will be less equity to cash out, and because of skyrocketing inventory, it will be harder to dump the bubble home. As out-of-state speculators pull up stakes from Texas and other “cheap” areas, that will more than offset the price pressure of people cashing out and moving to these “bargain” areas. But that being said, we are awash in so much cheap money, that who knows what will happen. Pure insanity.
it definitely works like Mr. D says, I can assure you from first hand experience. You should consider this:
1. though some have purchased recently with 100% financing or refinanced to the max, many people have substantial equity in their homes. A quick look at the statistics (home values vs. mortgages) says it all. A sizeable chunk of homeowners is sitting on many 100% gains, and some of them have not refinanced at all.
They can buy back a similar house elsewhere and an additional investment property and still have plenty of cash left.
2. sure, this equity is only there as long as a small number of them wants to sell, there is no way they can all cash out (also for other reasons like job/income) - but that doesn’t need to happen to get a big influence on prices. A relatively small number that is selling (and buying back in the cheaper area) can have a BIG influence on the average home price, because that is determined by current sales prices.
3. sure, after some time this trick no longer works because many people see what is happening and prices are adjusting. However, RE markets are not very transparent and it often takes years before the average buyers adjusts to reality.
“Furthermore, anxious renters will grow impatient, and again, the less informed will jump at discounts and perceived bargains, in the years ahead.”
Good point - makes me wonder how many first-time home buyers will be patient enough to wait out a correction. Patience is a rare trait nowadays, and this is used against the average American consumer in many ways.
How many “happy renters” are there out there? Most people that rent don’t even like to admit it…they think it makes them look like they’re poor or something…just struggling to get by. I live in Los Angeles, where it’s much more hip to be driving the new beemer into the driveway of your new $1M stucco box on a postage stamp size lot. So what if it’s taking 50 or 60 % of their gross income to pay for it every month…it’s just dirty paper anyway.
No thanks, even though I’m recently married and would enjoy owning my own piece of property, I’ll wait this one out. I’m not one to be concerned what others think…I rent a small but nice apartment at the beach, drive a 12 yr old car, buy things only on sale, and enjoy the simple things in life. My rent and non-existent car payment total about 4.5% of my household income…no stress here. The race is long, and in the end it’s only with yourself.
“Most people that rent don’t even like to admit it…they think it makes them look like they’re poor or something…”
It’s actually kind of funny. I’m renting (in a new town) myself after having sold off several properties and indeed people do look at me differently. However, I find it rather amusing and I am happy to have my real estate profits now positioned against the bubble.
I remember how excited I was when I bought my first new car.. now I couldn’t care less what I drive. I’m sure it’s like that with itchy renters looking to buy. Please don’t do it, you’re actually saving alot of money by letting time pass - defer the gratification.
Colorado data
Texas data
Some good counterpoints (on potential price arbitrage).
The problem is, we don’t have good cumulative data. Recent buyers are highly leveraged. But, do they represent a large percentage of all homeowners? (I suppose you could do some math and figure it out). Yes, there’s a been a lot of refinancings, but surveys, including the fed.’s still indicate a lot of equity.
At any rate, I think the decision to move to what they hope will be a better life (and the grass is always greener) will be made before the seller realizes that they can’t get what they thought they could for their house. By the time they’ve listed, they are already locked and loaded for their move. New jobs, hopefully, new house maybe, whatever, I doubt many will back out.
But what happens to that equity on a 30% market correction? I believe book equity is far overstated. Fraudulent appraisals is the next blackeye on a crumbling asset class.
This topic strikes a personal chord with me. My fiancee and I live in SE Florida, as everyone knows one of the biggest bubble markets around. We currently rent, and in the current environment cannot look forward to being able to buy a house down here anytime soon. (We pay $1500/mo rent, and cannot afford or justify paying $400,000 for the median house here.)
We have seriously entertained the idea of moving back up north; I’m from Northern NJ and she from Pittsburgh. NNJ is not doable because of the housing costs, but Pittsburgh is looking really attractive to us right now. We could get a house for probably around $150,000 up there, which wouldn’t get us squat down here.
My current attitude is one of wait and see. I’d like to stay in FL (job, family, weather are all contributing factors.) A lot hinges on whether the market tanks down here anytime soon. If it does, it will still be a toss-up, housing cost isn’t the only concern; insurance, overpopulation, etc all come into play in our decision.
The last thing I want to think about is if we do make the call to move up north in another year of so, that it won’t be affordable then because they’ll have their own local bubble going on then…
The whole “wealthy people from somewhere else are wrecking this place” theme can be repeated over and over again for the entire country. I think these stories are anecdotal and are like immigrant impact stories in that the effect is exaggerated.
I do not think that people relocate to find cheaper housing, but to find better employment. Once people are free of employment (a salesperson w/ a home office, self employed w/ Internet business, whatever) then I agree they will relocate for housing. This is done, however, if the major factor holding people in place, family, is mitigated.
Where will one go eventually? It seems like every place is high priced and not as nice as it was in the past. The only cheap places hold no desire for most people.
FYI has anyone been to Durango? I really liked it there. HOWEVER it is hours and hours from a major city, it really is a Cowboy and Indian town, and is very dry and elevated. Not everyone’s cup of tea.
Using that logic, don’t bother with VT/NH as most of the jobs are minimum wage.
Once people are free of employment: like all those boomers, for example? just imagine what happens with local homeprices when 1% of CA cashes out and moves to a low-population state. Because wage levels and population densitities in these areas are often very different, only a small percentage that is moving can make a big difference.
To give an idea: my rural area in the Netherlands has an average wage that is 2-3 times lower than in the big cities (at about 150 km distance), and there are less double-income households. Mostly because of bubble migration, homeprices are now just 10% less than in the big cities, 15 years ago the difference was 60-80%.
Misinformation is everywhere. NH (south, central, seacoast) is prosperous and very different from Vermont (and even Vermont has IBM, professionals, self employed and a very middle class population) and boomers today are from 41 to 59 in age. So neither of these comments makes much sense.
Irrespective of your wage innuendo, the the stranglehold grip around the necks of imported slime just got tighter. :):):):)
I have been to Durango as it happens, for one day (to take that old-time train trip to Silverton :)). The idea of adding 2000 houses there leaves me a little breathless, unless there’s been a major new source of employment added since 2001.
Off topic I know, but it was while I was staring out of that train window that (as an Australian) I suddenly got a feel for the American phrase ‘trailer trash’. At one point you get a great view of a local trailer park, and some of the vans looked very old and tired.
The ‘relocation’ argument overestimates the potential and the ease of moving to cheaper venues which have fewer job opportunities now, and which will present far fewer opportunities in the event of a recession or even a flat economy. The cheap places are cheap for a reason, and that reason is generally a lack of industry and/or services. When the economy tanks, it really tanks in the cheap places.
nhz - I appreciate your European perspective, but I believe it is incorrect to project a 100% correspondence between what has happened there and what will happen in North America - just as it happened differently in Japan. I don’t have any hard evidence yet, but I suspect that American geography, population density, and culture - social, political and financial - will create significant differences in how the crash will play out here, and I expect the downturn to be more precipitous this side of the Atlantic.
I’m sure there will be many differences, but at the same time it is good to look what happened elsewhere because the roots of the bubble are largely the same on both sides. The fact that there are differences applies just as much within Europe (e.g. Germany has no housing bubble at all and there are some obvious reasons why).
I think price inflation even in the areas the bubble refugees are moving to will be severely limited and probably suffer some price declines too.
From reading Ben’s blog we already see that Arizona, the refuge of so many fleeing the California bubble, is having housing market and overbuilding problems.
We also know from reading this blog that the slowdown is working in reverse. Whereas during the boom, the first-timers buying starter homes were eagerly plunging in so that existing homowners wanting to “move up” were easily able to sell their homes then buy more upscale ones. The effect trickled up. In some places, the first-timers are now drying up. So starter homeowners or mid-level homeowners wanting to go higher cannot sell their existing homes. And those wanting to downsize from their upscale homes cannot find buyers ready to buy their upscale homes because the mid-level homeowners need starter home owners wanting to move up. It sucks being stuck in the middle of this traffic jam.
People who do manage to cash out of the coastal bubbles and plunk cash down on a house in what they think is a nice safe bubble-free place could find themselves under. You could argue that a retiree may not care - he just wants to live in the place for the rest of his life, so he’s not going to care if the value of his refugee house in the bubble-free zone should also go down. But there are problems with that argument. One, when property prices deteriorate, so do neighborhoods. What was once a nice neighborhood can change character, and you may feel like you’ve gotta move. Two, suppose the government forces you out through eminent domain. If you’ve plunked down $400K cash on a nice house and the market value is now worth $150K and the government is only willing to give you that price, ouch. There a lot of reasons that plans could change.
I think some economists would call this entire situation a misallocation of resources, when some sort of wackiness or imbalance in one area leads to distortions in other areas. The coastal bubbles have sloshed over into inland markets due to people fleeing the bubble areas, and the economic dynamics can get unpredictable. Assets and liabilities are not valued realistically and nobody has a clear picture of the “true” situation. A false sense of security has built up. It’s sort of like you’ve lent your mop out to somebody (resource depletion), so now you don’t have it to clean up your spill, and you now have to use up rolls of paper towels you wouldn’t normally be using (resource overuse). In the same way, affordable housing in the coastal areas (resource depletion) is triggering building and housing market activity elsewhere (possibly overruse of resources). When coastal prices come back down to earth, maybe some of the refugees will want to move back (I don’t think that will happen, but suppose). What would happen to the refugee markets then?
There has been a philosophical debate for a while now among economists. For some time, many economists, Greenspan included, have said we won’t know it was a bubble until after it has burst. So the Federal Reserve has sat on its hands. Last year some economists started to take issue with this, arguing that the existence of bubbles distorts economic decisions. Consumers develop a false impression of wealth and take on unbearable debt loads. The Fed has tools to deal with speculation, and has utterly failed to use them.
Feds fail to revive Regulation X
Upstart economist says Fed should respond to asset price bubbles
sold my home in the eastern san fernando valley,studio city area for close to a 500 k profit, and relocated to san luis obispo calif,where i rent a 1,000,000 beach house for 2k a month send my kids to public school overlooking the ocean and pay no property taxes.i love being a renter. in the year i have been here i have seen real estate prices falling,and its just the start of the party.i love the fact that my neighbors are paying 10k a year in property taxes,yes they look at me differntly…THEY ARE ALL JEALOUS….that i get what they get for 2k a month…which is a bargain if you take in the fact i get lodging, schooling and all the city services, for that price
SLO is about 10 miles inland. Maybe you have a loose definition of ‘beach’?
i sold my home in the studio city area of los angeles in spring of 05 for close to a 500k profit and relocated to san luis obispo calif for a better quality of life. i rent a ocean view home for 2k a month which is worth close to a million dollars. i love being a renter, isend my children to public schools and take advantage of many city services all for 2k a month..sure my neighbors look at me differently,they pay close to 10k a year in property taxes alone…THEY ARE ALL JEALOUS,i get what they get at a bargain price,why i patiently wait for the bubble to burst,and it is slowly deflating here,prices are going down and inventory is building.the central coast of calif is speculator heaven with people from la and san fran buying there retirement homes,years before they retire,as the prices begin to fall this second home investments will not be so attractive,and i am looking forward to getting a good deal on the steps of city hall…..
I too have made a move from Southern California to the central coast, and I too am renting. However, I still own my house in SoCal, and I’m renting it out for positive cash flow. There seems to be a great demand for rental houses in some areas because people ARE seeing the value of what you can get renting vs. purchasing (at least in the current market). The people we are renting our central coast house from are they themselves renting a house in Tustin…
I have an unorthodox reason to gleefully watching this asset class crumble; to witness the stream of slimers from NJ/CT/Mass slow to a trickle. And then to watch the value of their ugly shacks (that they overpaid for anyways ;)) spiral in value.
Many out-of-town investors–if not most–aren’t very sophisticated! For some reason, they think they’re “Donald Trump” and the availability of cheap money makes them itch to buy real estate. And they buy the most bubble-prone properties: hastily built condos or rental-to-condo conversion, often site unseen!
In other cities, especially florida, it’s foreign investors looking to “legitimize” some $$$ or put some money in a safe place in the US.
For many investors, over a long period (10+ years) buying US Treasury bills would end up being a much better investment.
It’s amazing what watching carlton sheets informercials ad nauseum for the past 20 yrs will do to people
A January 8 article in the LATimes actually refutes the idea of renters as desperate homeowner wannabes. Some of the people cited in the article actually sold their homes and moved to apartments closer to their jobs, sick of their long commutes.
Oops, sorry about that. Upside of scaling down link.
Ben, I miss the preview feature here.
Always related topic:
Deficit fearmongers wrong again:
“The new bonds drew a yield of 4.53 percent, the lowest on record for a 30-year bond ”
“Indirect bidders, which include foreign central banks and may include pension funds, purchased 65.4 percent of the bonds sold today” (up from the 44% average for the 10 year note)
http://www.bloomberg.com/news/markets/bonds.html
With all the hand wringing about soaring trade, and supposedly soaring budget deficits (which actually fell last year), let alone soaring money supply and inflation, it looks like it’s the economists that are worried, and not those that vote with real money.
of course, the pension funds are dumb money (at least the Dutch ones, which are among the biggest worldwide). I don’t doubt they will happily invest OPM in stuff where they make big losses.
the fact that economists have cried “wolf!” too early or too often doesn’t mean the wolf isn’t coming.
If economists actually looked at long-term data, they’d see our trade deficit was growing throughout the 90’s, during a productivity boom, disinflation, and a gradual channeled trend down on long bond rates. People did indeed vote with money into the stock market.
Oddly enough, Kudlow was ringing the inflation bell last nite on Kudlow &Co. COMPLETELY out of character for him.
Bubble-mania.
Moved from buble ville DC in 2002.. Watching the No Va house inventory tracker.. got home from work 2 hours ago and inventory in FrFax Cty alone has gone up 47 homes in 2 hours…. and 250 in trhe last 3 days..
Here’s the shitbox I rented in 1989 - 1996 for $800 per month. It was offered to me at $102K in 1996. As you can see, someone did end up buying it, threw up some new wallpaper and carpet, and in less than 10 years, wants double what they paid for it. If anyone pays over $150K for this, they should be committed to an institution for the criminally stupid.
http://www.virginiacook.com/details.cfm?propID=1949991
While $269,000 is steep, its probably not too out of the ordinary. It’s within a mile of Central (US 75) and right off mockingbird next to all of the new development. Add that to the fact that its within 10 miles from downtown and right next to Highland Park. It might be a little over valued, but I see a whole lot more stupid offers here in California. That area is not as shady as it used to be.
Out here, we call that a “scraper”.
In Dallas, I don’t know. Is the land worth even $100K?
and in less than 10 years, wants double what they paid for it.
that’s quite modest, in my country it is normal to charge 4-10 times the price of 10 years ago - without any improvements except maybe a small paint job on the front. If you want to lock up the criminally stupid it’s best to make a fence around the whole country here
A 3 & 2 1500 sqf. I challenge you to find that for less than 500k anywhere in Los Angeles.
I’ve seen that same house go for 1.2 out here truly amaing
TXchick57: amazing!! we owned a house in Plano and I only paid 101k for it in 1995 and the market value on it now might be 150k and it was 2500sqft with a pool on a corner lot…wish I still had it!
I think Mr. D’s comments on rolling bubbles are interesting, but I really don’t see it happening for a few reasons.
First, all of the normal spots that people retire to are already in bubbles. I really don’t see lots of people retiring to non-bubble areas like Pittsburgh, Indiana, Alabama, etc. Call it snobbery, but no one from Cali or the Northeast will move to these places if they can help it.
Second, non-retirees won’t move to these places either because there are no jobs.
Third, there are all of the credit issues as others have mentioned.
An interesting result will be if homeowners simply refuse to cut prices below a certain level. No one will be able to trade up because they won’t be able to sell. As someone above mentioned, this “traffic jam” effect could last for a long while and have strange effects. People won’t want to buy “starter” homes because they’ll fear they won’t be able to trade up. Such a market would have a strange effect on pricing
This is only one example, but it’s big bucks, and it calls into question two assumptions held dearly by the bears:
1) There’s nothing to drive the economy once housing slows
2) Corporations will sit on their cash
wonder if this is the beginning of a trend:
“Microsoft spending $1B to expand HQ ”
“Microsoft Corp. on Thursday said it would accelerate its plans to expand its headquarters, spending $1 billion over the next three years to grow the campus by a third.”
http://tinyurl.com/dqtgj
And this is only half the project.
Theres no question Corporations are flush with cash as witnessed by huge share buy backs but capex is being spent outside the country. And I believe the rest of the world will follow as our Fed dries up excess liquidity.
“First, all of the normal spots that people retire to are already in bubbles. I really don’t see lots of people retiring to non-bubble areas like Pittsburgh, Indiana, Alabama, etc. Call it snobbery, but no one from Cali or the Northeast will move to these places if they can help it.”
I don’t see your logic here. People are moving to get away from a bubble so that is precisely why they will move to these nonbubble areas. It’s true that I don’t expect many retirees to move to Indiana, Ohio or any of the other Midwestern states; but, I sure can see Kentucky, Tennesee and some of the other Southern states as destination points. They remain affordable and that is precisely what many of the seniors on fixed incomes are looking for.
Obviously, I’m guessing here, but you may be underestimating the amount of snobbery that exists against Southern states.
Where I grew up (near Boston), people will move to FL and maybe Atlanta. The Carolinas have only recently lost their hick reputation. I’ve never heard anyone say they want to move to KY, TN, AL, AR, etc.
Now I’m not saying this is fair. Still, I think that this prejudice is real and will prevent many people from bubble states moving to non-bubble ones. And we’re only talking about the non-bubble states with decent weather. forget about the cold ones
Oddly enough, I’ve seen quite a few people move to Arkansas from here (San Diego area). When I asked them why, they all responded it was because of lower prices and better quality of life. None of them had family there or had lived there before. I thought it was odd, but met at least 4 or 5 families headed there in the past few years.
“Second, non-retirees won’t move to these places either because there are no jobs.”
Once again, look at the South as an example of a non-bubble area that is creating jobs sometimes at the expense of the Midwest and the Coasts. Where did Nissan move its headquaters too? Tennessee.
Additionally look at all the automotive plants that have opened in the state of Alabama in the last ten years, let alone all the growth experienced in the state of Texas.
this is a good point.
The auto plants only stay until their tax breaks run out. Then they leave. And they bring many workers with them per union contracts.
“I really don’t see lots of people retiring to non-bubble areas…”
What baby boomers want, and what they’ll end up doing, are two different things. My bet is that many will end up renting a trailer in the Rio Grande valley (I don’t mean this as condescending. Some days I worry I’ll end up there as well).
http://www.campsouthtexas.com/palmgardens/
you think this is more likely than boomers just staying put in their overpriced suburban houses?
Stay put?
Some will, because they’ll have to keep working. But, they will more likely sell their McMansion (to whom is a good question, because there simply aren’t enough genexers to buy them) and rent a cheap condo. This really exposes the lie that demographics are positive for real estate. The fact is, after 2010, it’s all downhill for the peak homeownershop demographic).
Plan b, which I think will be a big trend in the future is three generations under one roof (Walton’s go to Suburbia). It’s probably the only way many retiring boomers will make ends meet.
Earlier threads also mentioned turning McMansions into boarding houses.
Of course there’s still hope for a rolling bubble, where arbitrage brings prices back into line nationally.
Mr. D,
Your point about a rolling bubble is proving true, so far. The reason (as you know) is because it is a credit bubble, not a housing bubble, per se. It is not until we see a tightening of credit standards that prices will truly start to fall. If/when that ever happens in anyone’s guess.
Also agree w/you about a long-term downtrend in housing prices (and general deflation) as boomers start cashing-out to provide for themselves in retirement. Perhaps this credit bubble is a forward-looking tactic meant to offset that???
“It is not until we see a tightening of credit standards that prices will truly start to fall.”
And if not, at some point, rising prices would cause supply to soar, demand to fall, pushing prices lower. I think that’s happened in some markets already, and they will deflate. If you’re right and the credit bubble remains, then a rolling bubble would be likely.