‘Which Area Gets Hurt Least And Why?’
Several readers suggested . “Which area gets hurt least and why? Upper NYS because there’s no place to fall from the bottom? Boulder? The New Urbans like Austin? Ultra high end places like Aspen because nobody would notice a million off the top? Charlotte, Memphis types because of energy concerns?”
Another said, “It seems clear that certain areas (SD, Florida, NoVA) have begun to tank, while other areas seem OK (NYC, SF). Delayed reaction or are some areas just different?”
One added this, “A related topic…Which areas were barely affected but may still get splattered with froth as the bubble pops?”
“For example, I’m seriously looking at acreage out where my dad lives in boondocks Arizona. Land is still available for $1,000/acre. Will even this price go down? Or will a lack of RE buyers from California eventually motivate some land sellers to become desperate for a low-ball cash offer?”
One reader had an answer. “I’d say it will go back to being ’speculative land’ in the old-fashioned sense. That is, don’t buy any old rectangle of dirt unless the offer looks particularly compelling and don’t plan on selling it within 10 years.” A reader from Texas.
“The only the thing banks in Texas won’t allow a 0 down loan on is raw land (in fact some won’t loan at all). I think raw land will fall the hardest (even though they are not making any more of it).”
From Colorado, “Flippers have been buying land too and are starting to get itchy.”
“I’ve been looking for some land in Colorado; one real estate guy in Pueblo has thirty or forty listings and six or seven at least say ‘motivated seller’ or ‘just reduced’ or somesuch. I think one might have come right out and said ‘offered below owner’s cost.’ These are just over the $1,000/acre range as well, for 35-40 acres, so the sellers are almost certainly not in foreclosure, they just want to get out of an investment that ain’t going anywhere. What the heck, go for a low-ball.”
Another added, “One thing about this bubble is the true high-end areas didn’t go up anywhere near as much as the middle/lower end areas. Places such as Marin County, Greenwich/Darien CT, Winnetka/Glencoe IL, Jackson WY etc. did OK, but it was really the Baskerfields and Vegases that went completely loony. The rich actually have the means to afford (in the traditional sense) $1-2-5 million houses and they’re far more diversified across other assets. A few hundred thousand off their house is just an ordinary bad day in the market.”
One looks for value, “I think any non bubble area that has a good public school system, good colleges, universities, and hospitals, and is attracting major companies won’t burst.”
From Las Vegas. “Which area will get hurt least? Las Vegas, of course. I’m predicting another wave of hyper appreciation. Not yet, but… soon.”
‘I’m seriously looking at acreage out where my dad lives in boondocks Arizona. Land is still available for $1,000/acre.’
I hope the poster will give a general area. I saw land out around Seligman, AZ that was in this range and cheaper. With some of the advances in solar, wind and water use, some of the off the grid property is becoming useful. Trying to sell raw land in a hurry can be problematic.
The difference between Vegas and NYC is about a hundred zillion dollars. In NYC. Sorry, but it’s true.
BubbleTrack.blogspot.com
Well, NYC actually has an economy. LV has gambling and the housing boom … not much of a fundamental base to hang your housing bubble prices on.
perhaps #of months inventory is as good indicator as any..Miami/FTL area is currently 10+ months at the present rate of sales..It is BAD!! on top of that many condo completions are on the way in 2006 end /2007/even some in 2008….median salaries are lower than Atlanta!! and tourism is the main draw that is always very fickle….
Unfortunately, I think LA gets hurt “least worst”, because there is so much demand here. I know you guys make fun of anyone who says “it’s different here”, but I’m telling you, for whatever reason, it seems like everyone and their brother is moving here, enough to make up for all the out-migration. I just advertised a house to rent out, and I had to take the ad off the internet because I was overwhelmed with the response.
For once, I agree with you. In real terms, LA, SF, NY get hurt last, least and will recover quickest. That’s because the JOBS are there.
Not once all of the RE related jobs begin to shrink.
Yeah, I agree that there are alot of people here but driving around today in Marina Del Rey/Santa Monica and then later in Hollywood there seemed to be alot of for sale signs and condo for sale sign twirlers, not exactly the signs of a robust RE market. Also the building I live in in marina Del Rey is only about a year old and is still about 30% vacant. I agree there are tons of people here but honestly most of the people you see dont look like they can afford expensive homes, maybe they are sharing a home with 1, 2, 3 or more families? I guess the SoCal RE market will always be a great mystery.
There is no mystery to SoCal RE Market. Most of the people you see are either roommates or renters or living downtown 30 to a single. You would be amazed at how many people buy here at a loss and pay on these things for yrs and yrs because they believe at the end of 30 they are going to come out ahead. Seen that during the last downturn seeing it again. History truly does repeat itself
Yeah, I guess you are right but I am a very analytical persan and I believe that numbers dont lie and the math always adds up. Alot of things just dont make sense here. It is like the salesman that said his prices are so cheap he loses money on every deal, when asked how he stays in business he replied, “volume”.
There are a lot of people here.
The population hasn’t tripled in the last five years, though, while prices have tripled.
There are also a lot of rich people here who can afford to pay $500k plus for a SFH — but the rich people live in Beverly HIlls and Laguna Niguel, not Alhambra, Riverside, and Santa Ana. The houses in all of those communities are priced > $500k, however.
Finally, a lot of the recent arrivals are also recent arrivals to the US. The illegal aliens are harworking and resourceful people, but you can only earn so much while working as a day laborer or fruit vendor. It’s going to take a while before the illegal aliens can afford $500k homes.
Believe it or not illegals are more resourceful than you think. They have no problems taking in roommates and helping family members. I had 12 living in a 2 bedroom. The rent was $1100.00 if you divide that by 12 people you are virtually living rent free. 100.00 dollars a month for rent, free emergency room medical expenses, carpool with the buddies to the day laborer pick-up. L.A. becomes very easy to afford.
During the last downturn I heard of gardners dropping 25 grand on a table cash for a down payment on a $250k house. Break down the payment between 4 or 5 and Viola. Don’t underestimate that segment of the population they are very very resourceful they have to be.
BTW they are already buying 4-500k homes.
Mr. Incomestream, don’t under-estimate the ability of immigrants to be as stupid as non-immigrants.
As the son of immigrants, I can tell you that other than working hard, common sense lacks among many in the community. Many are penny-wise, but pound-foolish.
Be more careful of the sons and daughters of immigrants because they have “learned the ways of the man”.
I think LA gets hurt really bad, because there are so many people there who live in a world of denial (one reason they call it La-La Land). I cite a poll by Robert Shiller and Carl Kase as of maybe summer 2003 which showed the median LA-area respondent believed that 23% YOY gains would continue for another decade (in other words, prices would go up by a factor of four from an already-overvalued base). When reality rears its ugly head, prices will fall harder and farther in LA than in other places formerly known as bubbly, just like they have in pretty much every other real estate bust in US history.
JMHO
GS, I’m in your camp.
Gotta remember that everyone in SoCal mortgaged their properties to the hilt in order to finance the bubbles everywhere else — AZ, NV, OR, WA, etc.
No, some of us lived frugally and paid off the mortgage!
Sorry, I may have exaggerated a tiny bit.
Everyone in LA did not have to behave stupidly to blow a bubble in PHX — only 40,000 or so homes are on the market there, and probably only 50% or so of those were bought by LA-area investors…
It would be fascinating to know exactly how much California (SD, LA & SFBA) money has purchased property through in other states, wouldn’t it?
Oops! Strike that “through”. Should’ve just been “…property in other states…”.
I don’t know about LA, but California had overall net migration of minus 2.8 % overthe last five years. The census report on this says: “California experienced the largest numerical change in average annual net migration between the 1990s and the 2000–2004 period. While the state continued to experience net outmigration between 2000 and 2004, the average annual net out-migration of 99,000 was smaller than the comparable figure of 221,000 per year during the 1990s”. http://tinyurl.com/mkh7g
Several things would make me nervous about LA - high number of flippers, high fuel prices in a city that depends on cars and white flight.
Who will be hurt worse?
I don’t (yet) have a good prediction. However I think the affordibilty factor is one of the best indications for future pain. Bakersfield CA in in the desert fits that barometor! Especially if energy continues to double every 1 months. Power and transportation costs coupled with low wages or no wages in this town cannot be supported and a disaster si all but eineveitable.
If we knew how things will play out, then we could predict LA San Diego, SF, NYC, maybe Naples Fla.? For sure New Orleans, Mobile etc. are the first “total” wipe outs! That amazingly the economy never missed a beat???????? according to government statistics.
But if I had a best guess… I select the Financial centers NYC or Boston. The enormous excess speculation from derviatives, stocks commodities and real estate, all purchased with debt (or funny money = unconfirmed trades 6 month old), appear to be the BEST yet to be “POPPED” secrets.
Real estate values expanded like an accordion, the least desirable places appreciating least or not at all; the most expensive, most desirable expanding a factor relative to the mean. The declines will relate directly to the expansions, declining to the relative levels at which they expanded. The “wild cards” are the probable glut of homes due to overbuilding and the substantially higher interest rates (resulting from a weak dollar and inflationary trends) which may affect home values more adversely than a simple mean reversion.
Oh, yeah, and there has been very little construction of new housing here in LA, due to a combination of tough regulation and expensive/nonexistent vacant land (unless you count the thousands of $400,000+ condos being built in the SFValley!)
Huh? You been listening to Realtors® again? This really is always the big lie in every bubble place and is nothing more than a repackaged
“they aren’y making anymore you know.”
Way to go Robert!
I’ve said it before and I’ll say it again..LaInvestorgirl is most likely a troll.
Nah, I don’t think so, she’s on the ground I just don’t think she has ever been exposed to a downturn before. Most likely working in a property management or some type of RE company and parroting the rebuttall of the stuff she see’s here. That’s my assumption I could be wrong but thats the impression she gives too me. Whatever it may be she’s very close to the industry in some form.
I’m a former RE attorney, currently just managing my rental properties, waiting for a correction so I can pick up some more in some LA-adjacent county. I get my info from what I see and hear, I talk to my tenants, I talk to the neighbors, some of whom are RE agents. If that makes me a troll, so be it. I don’t know where RE is going, but I don’t think there’s much upside at this point. Personally, I think there is a good chance of a 25% correction. But even if I did think RE is the greatest investment there is and the bubble does not exist, so what??! I think we should welcome diversity of opinion on this board. I don’t mind listening to counter arguments at all, why do they bother you so much?
“I think we should welcome diversity of opinion on this board. I don’t mind listening to counter arguments at all, why do they bother you so much?”
Unless we are talking about Israel, right?
Someone help me out. Why is lainvestorgirl a troll? I do not understand the connotation. Second, what does Israel have to do with all this?
Israel? WTF?
True, financing is absolutely ridiculous here. According to my broker acquaintances, nothing changes hands without ARM/IO financing.
Bobby, whoa, let’s get some information here. LAInvestorgirl was saying that there has been very little construction of new housing here in LA, and she assumed that it was because of lack of developable land. Are you saying that there *is* a lot of developable land, or that there *are* a lot of new developments in LA, or both? The last semi-big ones that I knew of were the La Vina development (Altadena), the Halston development (Burbank), the Porter Ranch behemoth in The Valley, and all of that stuff going on in Playa Del Rey. Are there other, newer, (big) developments in LA?
It’s not LA, per se, but Santa Clarita’s still building out.
Las Vegas hurt the “least”?
That was a joke, right?
That was from LV_Landlord card shark. It must be because of all the luxery condos. LOL!
Nah, that was me. I’m not crazy. I’m living in the middle of it and I know what’s going on.
The thing is, Las Vegas had a finite amount of land. For a while, builders were building at a slow, sustainable rate, and everything was going fine. Then starting around 2004, when prices started going up, builders started gobbling up every last acre of buildable land and building as many houses as possible as quick as possible. Like all the houses we will need for a while were being built all at the same time. So 2 years later what do we have? Excess inventory, and hardly any big chunks of land left.
You would think that would make prices go down. But when you look a little closer, we don’t have that much excess inventory. Maybe 5-6 months worth. And the land is gone. Drive around the city on the 215 Expressway and you will see what I mean. Where there used to be miles of desert, there is nothing left but small infill lots. Hardly any wide expanses of land are left. It’s the big acre projects that allow the builders economy of scale. But that opportunity is quickly becoming a thing of the past. What we will see going forward is high-density projects on infill lots.
When the current wave of over-building works its way through the market, we are going to face a second wave of appreciation. It’s inevitable. Las Vegas is becoming crowded like San Francisco or Manhattan. The land here is finite. The population is growing.
Okay, I know none of you guys take me seriously or believe what I am saying, but check back with me next year. You’ll see.
Hey, I just heard that only about 20% of residents in Las Vegas are high school graduates. I know there are alot of immigrants in LV but could this be true? please tell me this is wrong?
you fail to take into account what the combination of toxic loans that recent buyers used, the effects of a credit crunch, and exploding inventory can have.
ziprealty Vegas inventory now at 19,870. On 4-3-06, the beginning of the month, it was 18,348. Increase of over 1,500 in 23 days. Going up by 65 units/day. I guess the sellers can’t find buyers willing to commit to suicide loans for grossly overpriced RE. Either that or market for subprime MBEs has dried up and the cream of the crap no longer qualifies.
I mean MBSs.
Sounds like a slow but steady crash is underway in LV, same as SD…
Don’t forget Phoenix (ground zero). Arizona is a growth state, and housing is the name of the game. One of every three dollars of the Arizona economy is Real Estate related according to an article in the Arizona Republic (2004) . “The results were startling. No other major U.S. city relies as much on the housing industry for its economic well-being.”:
http://www.azcentral.com/specials/special50/articles/1121houseintro21.html
I’ve made the drive from SoCal to Las Vegas a few times, and let me tell you - they are not running out of land!
While the “Las Vegas proper” area may be dwindling, there’s plenty of room to expand. And if you think people want to be in the “middle of the action,” close to the Strip, etc…. well, that’s what people in LA were probably saying before there was Riverside, the OC, Bakersfield, Anaheim, etc., etc., etc.
Yes, the biggest eye opener is the flight from LA to Vegas. I have been making this flight every week for 2 months. As you fly out of LA there is not one inch to build on as far as the eye can see. When you fly into Vegas there are alot of homes clustered close to town but as you look out you see nothing but desert, plenty of room to build and I hear the BLM is pretty much selling it off as needed. The only shortage they really have moving foward is water.
That simply isn’t true. You can’t build houses in the Red Rock recreation area. You can’t build houses on the Nellis Test Range. You can’t build houses in the Lake Mead conservation area. You can’t build houses in Mt. Charleston National Forest. You can’t build houses on the Moapa Indian reservation (unless you are a Moapa Indian). There is land, but you can’t build there.
It’ll take an act of congress to release more BLM land. I’m not sure how much is left from the last act of congress, but I think it is only about 7,000 acres. Enough for 2 or 3 more auctions.
Here’s an interesting link with pictures:
http://www.landdevelopmenttoday.com/Article367.htm
There are places where you can build, if the BLM releases the land, but it isn’t Las Vegas. Once you are 40 miles out of town, you are somewhere else. You can build houses in Mesquite or Pahrump or Primm, but that isn’t Las Vegas.
Land shortage in LV? A check of realtor.com yields 250 pages of land parcel listings in the LV area.
Awefully ticky-tacky point, LV. 40 miles out of town and you are somewhere else? Wow, let me sit down before the depth of your statement overwhelms me. Riverside, San Bernadino, OC, Ventura are all “not LA,” either. THAT’s why LA is safe? All of course neighboring counties which will crash with the mothership. You want cities within a county? Vista, Poway, Escondido, La Jolla, Del Mar, Carlsbad, Oceanside, San Marcos, El Cajon, La Mesa, National City, Chula Vista… These places are all “not San Diego.” So what? These places were all nonexistant 40 years ago. Built up as San Diego sprawled. And they’re all going to tank.
Check back with me next year. You’ll see.
The 800 pound gorilla in the Las Vegas development arena is limited water. All that desert is not gonna do any good if there is no more water.
You have no reason to want to deceive us, do ya LV_Landlord? We all know that LV real estate prices always go up, and very quickly at that…
I would have thought you would have looked up your precious reference and read thru the entire report where they point out Las Vegas land has dropped 47% in the last 12 months (March 30,2006). Your research is seriously flawed.
LVL, you’ve never explained how Las Vegas will survive once construction grounds to a halt, given that it’s the only major industry outside of gambling. Casino workers can’t afford $300K houses, let alone $500K condos, using fully amortized loans.
On another thread you claim that Las Vegas has fundamentally changed in the last five years. We’re all dying to know exactly how. Well?
You mean you haven’t heard about the tech stock firms and the biotech startups and the pharmaceuticals and the military-industrial manufacturers that have recently reinvigorated the LV economy? Don’t feel bad about it — neither have I!
LV landlord..another perpspective in LV?
see housing bubbleblog? - operated by a Las Vegas resident…recently posted 20,000 residential units for sale, March sales of 3,200 = six months supply..Unfortunatly the new condo & home building boom is about to double this number by June/ July!
But the “big” news Friday, in Las Vegas is not supply, but the Hard Money investor bubble up blow up.as more details ae becoming public… Hard money greases the Real estate land development market.. USA Capital and their $950 million in investors, whose money is NOW tied up 1 potato 2 potato 3 potato years or more?
HERE are a few facts from the Reveiw Journal article 4/28/06!!
58% of the loans were delinquent!
62 of 107 loans are delinqunet!
46% of the loans USA Capital is invested through participation or equity! Disclosures were available but there is NO evidence that any investor received the info! {my first hand experience - this is SOP in Las Vegas..the investors sort of don’t think they need their legal due diligence package they just want their 12- 18% return}!
80 % of the 80 daily phone calls to the state regulator said they don’t know what they are invested in. Many were clients of Harley Harmon blow up in 1997, apparently their greed overcame prudence once again!
Bice, the neglegent under staffed regulator, is quoted “Frankly a fire sale at this point is not in the best interest of the investors”
LV landlord let me translate this….
We are in no rush in cleaning this mess up!..There are attorney fees, interest payments,management fees, court costs, audits & tax liens to appropriate {chew up the little remaining equity }..and ultimately land foreclosures to see executed…before the local home builders ever get to develop these properties.
Now since USA Capital is one of 30 licensed private lenders in the state. and 58% of their loans are/ were delinquent (”nonperforming”)
LV Land lord, my question is : Is this a SINGLE outl-liar or the first of many ?
Is it reasonable to assume that USA Capital was just unlucky, poor busness men? While the other 29 snake oil salemen are clean as a whistle?
More data before you answer: USA Captial has been in business in LV at least 15 yrs. based on my 1st hand knowledge of the principals…
Answer:?
SSSSSccccrrreeeecccccchhhhh! that sounds like a train wreck at your front door!!!!!
You’ll see the crash in LV-area land prices was a leading indicator of where built property prices were headed…
The only places which will be hurt worse than coastal bubble zones will be the places like LV where the idiot coastal homeowners planted their cashed-out home equity. When the bubble tide recedes, the coastal fools will have to sell their LV investment properties in order to consolidate their severely debt-burdened household balance sheets, and at that point the doubling of LV prices will go into reverse. Pretty soon the LV housing market will closely resemble a desert…
Stucco,
That same scenario seems to be the case in New England also. NJ/NYC/CT scum, balls deep in debt will ultimately have to make a choice between dark, cold and jobless rural “vaction” houses and a paycheck back in SlimerLand.
Do you conduct your business solely in VT? If not, please do so going forward. You are like Sinead O’Connor railing against America. Go sell your wares back in your “homeland” if it is so damn great there!
The Lingus is a PUNK food server that spits in the food of his clientele.
You sound angry little freddie.
That’s the first post by The Lingus that didn’t include the word “Bush” four times. He might be straight after all!
It’s nevertoo late to start. Anybody else feel vindicated now that Bush and his congressional cretins are on the ropes?
I just wish I knew where Lingus lives so I could add his state to his list of 3 states. Then I could be as clever as he is.
Another NoVA inventory milestone: more than 18,000 listings! And it didn’t just squeak over the bar, it blew right past it to 18,200 (300 new listings today; 500 new listings in the past two days). Loudoun County also passed the 4,000 mark. Loudoun County’s 2004 population was 240,000, so that means that there’s one home for sale for every 60 people in the county! If we assume that the average household is 4 people, that means 1 of every 15 homes is for sale.
This afternoon we drove through Great Falls, a beautiful town just outside the beltway on the Potomac, and it seemed like half the town was for sale. Sign after sign after sign - sometimes two in a row. I’ve never seen anything like it.
It seems like every 2 or 3 weeks there is another surge of listings. This week was definately a surge week.
The latest census says that the average household in LC had 2.82 people. Still, there’s a lot of homes for sale.
http://en.wikipedia.org/wiki/Loudoun_County%2C_Virginia
Thanks for the household stats, Tom! So it looks like it’s one of every 21 homes for sale.
The Washington Post reported today that the Pentagon is refusing any new applications for security clearances for the indefinite future. It’s a problem for government contractors and the jobs they’d like to fill. I don’t know how it will affect the local economy, if at all. It seems to me like it’s not worth staying in No. Va. for technical jobs as the wages are just as strong in cheaper areas (Raleigh, for example).
Likely a surge week because May is right around the corner. Some sellers like to list on the first day of the month. I was always anticipating that the % increase would stay steady - we will definitely increase until past June 1 and then it gets very interesting.
It seems to me like it’s not worth staying in No. Va. for technical jobs as the wages are just as strong in cheaper areas (Raleigh, for example).
Exactly. A home that costs $900K in NoVA costs $400K in Charlotte or Raleigh (if that). At 6% interest rates, that’s $3000/mo; $36,000/yr less in mortgage payments. Given a 30% tax rate, you’d need to make $51,000/yr more in NoVA to break even.
Can you provide a link or summarize why they’re not accepting new applications?
Nevermind, found it myself:
http://www.washingtonpost.com/wp-dyn/content/article/2006/04/28/AR2006042801878.html
DSS got its budget cut.
the closer an area is to a healthy job center, i.e. dc or manhattan, the less it gets hurt. with traffic and high gas prices proximity to employers matter
vacation properties get slammed, outer suburbs get slammed,
inner suburbs and cities get hurt less so.
http://www.dcbubble.blogspot.com
Moreover see this post on how dc is changing
http://dcbubble.blogspot.com/2006/04/dc-paradigm-shift-prices-in-dc-are.html
Then why did the townhouses and condos in North NJ dropp 40 to 50% in the last crash and sfh went down 25%. Boston fared even worse and went down faster.
When the bubble bursts there will be no such thing as a “healthy job center”.
most of the NYC real estate is cooperative apartments. New buildings are condos and plenty of houses, but mostly co-op’s here. Difference is that a co-op is not real property and the building is owned by a corporation where the apartment owners own shares. When i bought my place, i got a stock certificate with some shares in a corporation and a lease to live in a specific apartment.
the big difference is to get in and getting a mortgage is only half the story. you need to be approved by the board of directors who are elected by the apartment owners. they are volunteers who run the building.
You normally have to put a downpayment of at least 15% on your purchase and have at least 6 months cash in the bank in case you lose your job. Then they do a credit check on you and you have to give them tax returns, bank statements, pay stubs and other documents so they can trace your income to make sure you aren’t lying or you aren’t a drug dealer. In some cases they hire a private investigator who calls you and sets up an interview with a few hours notice and asks for documents to make sure you can prove who you are. Then you, your family, dog and anyone else who is going to live in the apartment goes for an interview with the board so they can meet everyone. then the board takes a month to decide if they will accept you. if you have bad credit or don’t have enough liquidity or they don’t like your kids or dog then they don’t let you buy in. There was a building in Manhattan that didn’t let Madonna buy in because they didn’t want any problems with photographers waiting outside. And if they deny you they don’t have to give you a reason and you can’t sue since the courts side with the boards 95% of the time. And the board doesn’t have to buy the owner out like in a condo, they tell the owner to find someone else.
Part of the mortgage process is Fannie Mae looking at the building’s finances to make sure they are OK since if the building goes bankrupt then all the shareholders become renters with a mortgage. And in the expensive buildings where a 2 bedroom is $1 million they usually ask for 50% downpayments and have stricter standards. there is a building in Chelsea where Calvin Klein is the president of the board of directors. I think Nicole Kidman owns a place in there.
To keep investors out many boards have rules like flip taxes, rent taxes, reserving the right to approve any renters and requirements like you have to own for at least 2 years before you can rent the place out. The system isn’t perfect and people forclose and whatever, but it’s not like Miami or Vegas or California.
The biggest reason for the 1990’s co-op bust was that most of the buildings went co-op in the 1980’s. The offering plan said the original owners could sell to anyone without board approval. They all bought in and tried to flip at the same time like in Miami. These days there are very few original owners left and most sales are board approved. And there are almost no more buildings to go co-op left as well.
Sounds like fascism to me. Why anyone would give up so many individual liberties for the “privilege” of leasing an apartment baffles me. IMO only a masochist or somebody with lots of dough ought to be living there. Don’t get me wrong, I think it’s a great place to visit. I’ll just never understand the draw to live there.
Becouse in NYC that’s mostly all there is. If you want a condo, you’re looking at a newer unit, you’re looking at over $1000 per Square, and you’ll be over 1.5mil. See?
In the Seattle area you can get a new condo overlooking the sound with a backdrop of Olympic mountain sunsets for $350 per square. Wages less taxes in NYC are not 3 times what they are here. I guess my point is that you can live much better in many other places making a lot less. But, if money is no object, then perhaps throwing it away on a NYC condo is as good a way to spend it as any. Guess it’s too far away from my current situation to fully comprehend. Perhaps some day I will be wealthy enough to understand…
I think the Pacific Northwest will weather the storm best. Popuolation growth figures are similar to AZ and NV but the prices are not as inflated. some towns with lots of California investment may suffer temporarily, but many californians and desert people will start moving there to escape from high energy prices and the housing price collapse damage of their areas.
Not inflated? I think there have been a number of articles about Seattle as being one of the most expensive cities in the country to live in?
I believe in the “rolling boom” that has been discussed here. But very quickly what may look attractive in Seattle today to a Californian, may look unattractive if California prices drop and Seattle prices keep going up. Short term, a California exodus could help Seattle. But over time, if California sneezes, Seattle catches pneumonia. IMHO.
My price/rent calculations put the greater Puget Sound region between 25 to 40% over trend prices. Lending standards are starting to tighten, ARMs are adjusting and interest rates are rising. Once the credit bubble implodes, housing prices will follow shortly thereafter. Microsoft growth is peaking and Boeing is at the top of it’s game for now. I have been around long enough to know how cyclical the aerospace business is. Anybody from Southern California over the age of 40 should know this too. IMO the Seattle area is not immune.
deflation guy
I’m with you on a gut level - I just don’t know how it could be otherwise given the prices of things here. I’ve been nothing less than stunned that people I work with (everyone here seems to be 25 some how) are all looking at buying here. Maybe they’re making 60-70K household income and looking at 300-400k homes. Most of them, being young have some serious obligations credit card and student loan wise…..hard to calculate really.
Other friends on Whidbey were all gushy about living there and advising me to get a place etc. Now they’re sub parcelling their property - in part I imagine to pay off debt. It appears they’re just selling off their “investment” pay off down the road. It’s not a home equity loan but it’s not far from it it seems. With WA ferry debt and the rising cost of fuel I dont’ think I’d want to be stuck off the coast really. Daily tabs of $12 just to get a boat ride before sitting in long lines to get into Seattle, Redmond etc., have got to add up?
I predict 20 to 40% over actual value also not based on rent, but based on where prices should be today based on extrapolation of the “pre-bubble” past at an appreciation rate of 4%.
Seattle will not escape. In fact as one of the last dominos to fall Seattle will end up being one of the last places people migrate from after other places have fallen and look more attractive.
It will just take longer up here….
I was in Cheyenne, Wyoming last week. It seemed like an extrordinary number of older homes for sale. But, there is also a lot of new home construction going up. A local, born and raised, told me there was a lot of large-lot development-little ranchettes-all over. I think this might be an area pretty hard hit because there does not seem to be a lot of jobs or industry. The biggest thing there is the air force base and a refinery. Cheyenne strikes me as a place that could be pretty hard hit in a recession.
Drudge has a map on his web site showing gas prices nationwide. Wyoming has the lowest gas prices in the nation- plus NO state Income tax. Hey Mabel, when do we leave?
Before you pack your bags, Wyoming overall taxes are in the top 10 of all states. Plus, only burger flipping jobs.
To estimate the risk of a downturn, look at three metrics for each area in question:
- The divergence of income:homePrice from historical norms
- The divergence of rent:PITI from historical norms
- The percentage of loans that were interest-only over the past two years
The higher the scores in these metrics, the higher the risk of a correction.
John in VA,
Good reasoning. Throw in the increase in sub-prime loans, and I think you have a excellent risk profile for any given area.
Good point, Robert. Make that four metrics.
Good start — also throw in the percent of recent private sector jobs created in the RE-sector (construction, mortgage lending, home-equity-cashout-supported retail outlets, Realtors (TM)…). This is the face of systemic risk in places like San Diego, LV, PHX, and St. George, UT — high home prices driven up in part by industry insiders who know better than the rest of us that real estate prices always go up.
Everyone gets hurt equally when a bubble pops - some just less directly than others.
NFW. Some people are going to kill themselves or themselves and their spouses and children. Statistical certainty. Don’t talk about equally, this is a nasty, violent social upheaval. I’ve made serious and expensive life decisions in order to protect my family. I don’t think it is appropriate to suggest equal pain even if indirectly applied.
Just what kind of social upheaval are you talking about?
Oct 1929
Worse, much worse.
Whiskey & Gunpowder has been soliciting mail on what the next depression will be like, and those that lived through the last one believe that people back then were much better prepared to deal with it. They foresee much greater crime & violence this time around.
I can’t help but agree. So many these days expect the government to rescue them. See Spielberg’s “War of the Worlds” remake? Avoid the scared & angry masses…
I believe in a lot of pain with all of this, but do you truly believe a 1929 scenario?
Peter,
The circumstances now are arguably worse than they were leading into the Great Depression.
I’m with you, Robert. I’ve done the same and am expecting much violence. I would enjoy hearing about preparations as well but that is a different topic altogether. If anyone has a blog that deals with this issue I would love to hear about it. Most folks on this blog have taken the first step and are out of real estate but probably not the second step of preparing for the fallout.
I posted this in the “Bits Bucket”, but I think it’s more appropriate here (and I’ve added a bit to it).
Many of the discussions revolve around “what areas” and “how quickly” — which areas will unravel first and how long will it take for them to unravel. There seems to be a general concensus that on the east coast, Florida is unraveling now and moving reasonably quickly and that in the western US Phoenix and Central Califormia are on the glidepath to landing (soft, hard, or other).
There also seems to be a concensus that NYC, LA, and SF will be slower to unravel (if at all).
However, my question to readers is this — since we hear about “CA investors” in PHX, Sacramento, Tucson, Boise, etc, etc — investors in the most speculative areas — is there a strong probability of a domino effect from a crash in these areas? In other words, if the PHX, et al speculators have HELOC’d their CA home to make the investment, if the investment goes bad, will it have an inpact on the supposedly “safe” areas? Economically, LA, SF, NYC are strong (but SF has reasonable rents and spectacularly priced housing) are aren’t dependent on RE to the degree that PHX, SAC, etc are. But the speculators came from somewhere, is it possible that the crumbling of the secondary metropolitan areas will have a direct (albeit delayed) impact on the major areas?
Thoughts?
And a second — for those of you in SF, NOVA, LA, NYC — how many of your friends/acquaintances have recently purchased additional properties as “investments”?
Thoughts?
I have been saying this all along- your next door neighbor has HELOCed to buy 5 houses in Phoenix, but you don’t know it. He’s trying to sell them now, is going to lose them, and his house. Chain reaction, meltdown starts in Phoenix or San Antonio or St. George and spreads to San Diego and San Jose.
Comment by Scott
2006-04-29 15:34:40
I’ve made the drive from SoCal to Las Vegas a few times, and let me tell you - they are not running out of land! While the “Las Vegas proper” area may be dwindling, there’s plenty of room to expand. And if you think people want to be in the “middle of the action,” close to the Strip, etc…. well, that’s what people in LA were probably saying before there was Riverside, the OC, Bakersfield, Anaheim, etc., etc., etc.
Agreed.
All the land within a 20 minute driving distance of the LV Strip has been bought up and built out. But the rest of the area, there is still plenty of vacant desert. Drive 30 minutes out of Vegas and you can see it.
There is only a “land and housing shortage” within a few miles of the LV strip. There is still plenty of land in Nevada for people to build homes on and have a reasonable commute if they work their (by reasonable I mean less than an hour’s drive).
I don’t see how this area is not going to be touched in a negative way by this bursting housing bubble.
When the current wave of over-building works its way through the market, we are going to face a second wave of appreciation. It’s inevitable. Las Vegas is becoming crowded like San Francisco or Manhattan. The land here is finite. The population is growing.
HAHAHAHAHA. That is the funniest thing I’ve heard all day. No offense, but keep believing that if you want.
*looks out her window at all the empty desert surrounding her house and wonders if she should go hiking today, she must be blind to not notice the huge skyscrapers covering every inch of land in Nevada*
I have been paying some attention to Boulder’s market and today I noticed there are quite a few new listings advising that showings will start on such-and-such a date - as in long term rental props.
Some listings show what the old tenants per month rent has been. Several of the pics show obvious college kid decor - foosball table in dining room, chick poster in hallway.
This is something new.
Rents have been dropping in Boulder. Prices have been flat to down a bit.
Seems some LLs feel now’s the time to cash out.
Scott is SO right. Same experience.
Hello everyone,
Went to a conference yesterday with a colleague and she stated that she had just purchased a house for 150,000. The house is three months from beginning finished and she stated the it had already increased in value to 170,000. Now i am no rocket engineer but that just blown my mind. Now I live in NC and this house is in Charlotte, NC, but to purchase a housing now in any market is just mad. I live 30 mile from Charlotte,NC and the housing scene here is D.E.A.D. Also, a housing that I toured in May of late year sold for 150,000 late December. Now it back on the market for 170,000. Now this clown is from Florida and I guess he wanted to escape the market there, but If he through it would be Better here, he will be saddly mistaken. This neighborhood that he purchased the house is beginning overrun with USDA low income mortage families. They are buying 160000 houses onthe government dime and paying minimun payments. The Homebuilder can not get regular people to buy so it is getting Low income USDA people
I disagree that the market in Charlotte is “dead”. It’s just a slow, neutral market like it’s been for the past several years.
There’s appreciation, but it tends to be from improved perception of certain neighborhoods. Someone buying in Chantilly or Midwood 3 years ago has done just fine. But a house on the fringes of 485 in a bland tract development won’t be doing much.
Hello everyone,
Went to a conference yesterday with a colleague and she stated that she had just purchased a house for 150,000. The house is three months from being finished and she stated the it had already increased in value to 170,000. Now i am no rocket engineer but that just blown my mind. Now I live in NC and this house is in Charlotte, NC, but to purchase a housing now in any market is just mad. I live 30 mile from Charlotte,NC and the housing scene here is D.E.A.D. Also, a housing that I toured in May of late year sold for 150,000 late December. Now it back on the market for 170,000. Now this clown is from Florida and I guess he wanted to escape the market there, but If he through it would be Better here, he will be saddly mistaken. This neighborhood that he purchased the house is beginning overrun with USDA low income mortage families. They are buying 160000 houses onthe government dime and paying minimun payments. The Homebuilder can not get regular people to buy so it is getting Low income USDA people
“Several readers suggested . “Which area gets hurt least and why? Upper NYS because there’s no place to fall from the bottom?”
This is definitely a wild card. Upstate NY, and in particular, the adirondacks have been overrun by parasites from NYC/NJ/CT and a few MassHoles interspersed. These beasts appear to commute between their two shacks as witness by the herds of these monsters driving gas guzzling behemoths on I-87 on fridays and mondays. How long these wastes of flesh can sustain paying overhead on two residences will be interesting considering the exploding fuel prices and property taxes in NY.
I read, maybe on itulip.com that the outermost areas get hammered first with declining values and moves inward toward metro areas. I don’t feel right gloating at others misfortune but I have to say that these grotesque sloths are a deserving bunch of heathens.
Lingus,
Summer 2005 Adirondack Life has an article outlining exactly the city-type inundation you’re talking about. Husband (who’s family sold camp in early 90’s as things were getting too crazy up there) reading it this past week.
Like I’ve said so often here…. The truth is the truth, no matter how ugly. And the maggots from NYC/CT/NJ are truly ugly.
Here’s a local story many of you should find interesting. Local auction in my town earlier this week, expanses of property at 3 or 4 different locations ….one of our friends went to check things out. He told us a bunch of guys from NYC bought about 7 lots for $2800/acre which he figured to be about $1000per overpriced. I know he’s searching for land on the cheap to flip but his opinion was that the NYCers way overpaid. And he’s a local…born and bred who’s done well w/land investments.
Another thing I noted was that starter homes weren’t lasting a week on the market. I’m seeing SOLD signs on those left and right all of a sudden. A friend of a friend sold her 2 bed in 10 days.
That being said, our values didn’t skyrocket like others but some markets have still doubled in the past 6-7 years. I always keep in mind we could go back there easily.
Upstater,
Those NYC idiot grossly overpaid! $2800 an acre?!!!! This stupidity has been going on for 5 years now and I still haven’t figured out their intent.
Here’s another thing I consider….Assuming 50% reduction of values across the board. Boston home (ie) loses $350,000 in value…..I lose $120,000. Who’d you rather be? Plus think of all that gasoline we save on those 15 min commutes!
The question of whether dc has under gone a paradigm shift is an interesting one – most people here seem to scoff at dc bubble’s theory, but I think it worth considering. Given the generally high levels of income in the dc area, housing prices have always been relatively cheaper than those in LA, SF and Boston. Also, rent ratios have historically been lower than those markets – even now that ratio for dc proper is around vs 25-35 on the west coast. In some of the econometric models of housing prices (I am thinking of the NCM or PMI models) there is unique residual/intercept term for each area that is independent of the variables driving the model (e.g. population, employment, income, rents, etc) – the residual can be interpreted as a desirability index – DC has had a relatively low index relative to the other bubble markets. So a paradigm shift would mean a higher desirability index relative to everyone else. For dc proper this is clearly true. However it is a regional market, and I would say that the quality of life in the ‘burbs has declined because of overcrowding and traffic.
There are also geopolitical risks here that you don’t have in other markets. A complete Republican meltdown (There is almost a scandal a day here now, and probability of Bush finishing his term is no longer 100%) could mean a more austerity minded Dem takeover. The last time that happened (early 90s) the government actually shrank, and we had a real recession and housing slump. Also, the possibility of terrorist attack is always on peoples’ minds
Paradigm shift in DC? Try years of unbridled government spending. A very large percentage of all new jobs created in the last five years have been in government. Play record deficits & debt against soon-to-be-plunging revenues and you have the recipe for massive layoffs. DC will soon stand for “dead calm”.
Austerity minded democrats?? I assure you, republican or democrat, that the politicians will keep spending. Its what they do; spend money and talk about things. DC area will always do well in terms of government money being spent locally. Wages, pensions, and construction projects, such as Metrorail plus two current multi billion dollar highway projects: the Wilson bridge replacement and Springfield mixing bowl reconstruction.
“A complete Republican meltdown (There is almost a scandal a day here now, and probability of Bush finishing his term is no longer 100%) could mean a more austerity minded Dem takeover. ”
We can only hope and pray.
Your Dems are just as corrupt and self-serving. Both parties are bereft of soul, morality and any ethical fiber. The primary poilitician lobbying AGAINST improved auto efficiency for U.S. auto manufacturers is that idiot Carl Levin, a Democratic Senator from Michigan, whose sole career goal is to reelcted forever.
Going Backwards
Fuel Efficiency Bill Faces Opposition
by H. Josef Hebert
WASHINGTON –– A proposed huge increase in vehicle fuel economy, which prompted predictions that people would have to do without SUVs, is facing stiff opposition.
This is a technology-driving amendment that will save Americans money at the gas pump, reduce our dependence on foreign oil, and reduce global warming.
Ann Mesnikoff
Sierra Club
The proposal to raise automobile fuel efficiency by 50 percent, to an average of 36 mpg, has become so sensitive that some senators say it probably will be stripped from a broad energy bill.
The Senate scheduled a vote Wednesday on a less ambitious proposal that would require the government to order within two years that cars become more fuel efficient but would set no specific mileage requirement.
“We are going backward,” said a frustrated Sen. John Kerry, D-Mass., as the Senate engaged in an emotional debate over auto fuel economy most of Tuesday and into the evening.
Opponents of Kerry’s proposal to reach the 36 mpg level by 2015 argued it would force automakers to make smaller cars, which would lead to more traffic deaths and threaten SUVs and minivans.
Kerry insisted: “No one in America will have to drive a smaller car” if the new requirements become law. “No one will take away your SUV.”
He called the alternative proposal, offered by Sens. Carl Levin, D-Mich., and Christopher Bond, R-Mo., an “artful dodge, a great escape” from doing anything about fuel economy.
“The technology is available today to meet the higher standard,” Kerry insisted, citing a National Academy of Sciences study last year that concluded significant fuel efficiency improvements are possible without reductions in car size and weight.
Levin said his approach would achieve efficiency gains without threatening the auto industry, workers’ jobs and consumers’ ability to choose their vehicles.
Several supporters of Kerry’s proposal admitted late Tuesday that Levin and Bond likely have the votes to strip the 36 mpg requirement from the energy bill and replace it with their own proposal, supported by the auto industry.
“I’m not very hopeful,” said Sen. Richard Durbin, D-Ill., a strong supporter of the Kerry proposal. “It’s doubtful that we are going to pass any meaningful fuel economy standards as part of this energy bill.”
The auto industry and the United Auto Workers have lobbied aggressively against the Kerry measure. The White House contended last week it would lead to thousands of additional traffic deaths as cars and other vehicles become smaller and lighter. Opponents have taken out ads criticizing “some senators” for threatening Americans’ right to own a sport utility vehicle or minivan.
The theme dominated Tuesday’s Senate debate.
“American women love their SUVs and minivans … because of their safety,” proclaimed Sen. Barbara Mikulski, D-Md., a co-sponsor of the less stringent proposal.
If Kerry’s proposal became law “about the only way we could get there is to put everybody into glorified golf carts,” added Bond.
Both sides repeatedly cited the National Academy of Sciences report that concluded that fuel economy improvements, including gains of as much as 42 percent on SUVs and minivans, are achievable without sacrificing size or horsepower, using technologies already available.
But the study also warned that without adequate lead time, automakers could be forced to resort to smaller, lighter vehicles, reducing safety. The scientists said that was the case in the late 1970s and 80s.
Kerry countered that the 13-year lead time in the legislation is plenty for automakers to comply using current and emerging technologies, including hybrid electric-gasoline vehicles now appearing in showrooms.
Supporters of the tougher measures argued it’s impossible to address the broader issue of energy conservation without reducing gasoline consumption. Passenger vehicles use about 40 percent of all the oil used today, or nearly 8 million barrels a day.
While fuel efficiency increased dramatically in the late 1970s and early ’80s, there has been no progress since 1988, when the motor fleet reached a peak of just under 26 mpg. The average for all vehicles was 24 mpg in 2000, about what it was 22 years ago.
The primary reason has been the huge popularity of SUVs and minivans, which are subject to less stringent fuel economy requirements and average about 20 mpg, as opposed to 28 mpg for passenger cars, according to the Environmental Protection Agency. These vehicles, along with pickups, account for nearly half of all vehicles sold.
There is a huge demand for these gas sipping vehicles, imo. This idiotic bill will allow the big 3 to continue the error of their ways and build big gas guzzling autos. However, it is this misjudgement that will hasten their demise (again just my opinion) because when the next big wave of gas price hikes comes along, folks are certainly NOT going to choose a gas guzzler over an affordable alternative (which are being developed overseas as we speak ,I just don’t have the link handy). Now, it may end up that the UAW can successfully lobby to stop the importation of these vehicles in the short run but in the long run they will be available. Unfortunately our country will probably have to unnecessarily burn several billion more barrels of a nonrenewable resource before we get there.
I hate to tell you this, but both parties are filled with the same corrupt losers. Neither has anything to do with housing (or will do anything with it, anyway).
BubbleTrack.blogspot.com
Absolutely right on! The politicians care about themselves and that is all. It is called self preservation. Good pay, great benefits and terrific pensions.
OT but I have to agree with bubble-x that both parties are to blame for where we are. IMHO most politicians stoke the sheeple into party arguments as a diversion to real issues….which my cynical mind believes was that the elite (from both parties) are taking care of themselves at the risk of the strength of our country.
I don’t think the sheeple will ever figure this out as they enjoy shouting to their “other party” neighbor why they are dead wrong….and stupid to boot. Politically, we’ve devolved into a nation of Hatfields and McCoys…with all critical thinking gone from the arena. (Wasn’t pointing out how irresponsible this was how Jon Stewart got Crossfire cancelled?)
“(Wasn’t pointing out how irresponsible this was how Jon Stewart got Crossfire cancelled?)”
Yes, and that was pretty awesome…
“Politically, we’ve devolved into a nation of Hatfields and McCoys…with all critical thinking gone from the arena.”
You can thank Fox News and their ilk for that.
Can you believe CHARLIE RANGLE in charge of Ways and Means? HEHEHEHEHEHEHEHEHEHEHEHEHEHEHEHEHEHE My finger got tired. Get the KY ready for your butt. The Dems will raise your taxes to give your $ to the welfare queens and queers as well as the ILLEGAL aliens.
You are mistaken. Read the news.
lmao….. I love how the shrinking minority of republikkkan apologists harp on the same worn out Fox News created banter. The right wing majority reign of stupidity took 70 years to achieve and only 6 years to lose. Their failed policies based on a warped economic philosophy is on display for the world to see yet the shrinking minority of apologists desperately attempt to shift the focus.
The fact that their party holds all 3 branches of govt cements their doom. Poor treacherous republicans. [smiling]
There will be no long term political winners in this unfolding mess because BOTH parties are responsible and will NOT discuss root causes. I’ve not heard any good ideas from either side because there is NO fix! The U.S. dollar WILL crash as will the economy because the U.S. cannot pay off the accumulated debt AND keep the entitlement programs intact (and you know that those programs are off limits to any meaningful change). Both sides are operating with the same flawed economic assumptions instead of looking at the root cause of our economic problems. Massive printing of money and unrestrained gov’t spending that is directly related to the dishonest monetary system embraced by the Federal Reserve act of 1913. This system will implode just like all other fiat currencies have done in the past, as soon as the rest of the world loses CONfidence in its “reserve” status. That appears to be happening a bit faster than anticipated, in my view.
DNC offers to spend more on EVERY program including military
only one way to save http://www.lp.org
I just looked at the lp.org page. First topic on the menu is “Bureaucrats to blame for high fuel prices” and goes on to expound on how fuel taxes are to blame. If you’re really dumb enough to believe that the fuel tax is the cause for the uninhibited fuel demand, you need a psychiatrist.
Phoenix area will be hit very bad, especially around queen creek. It seems that they have nothing else to do but building new houses. With gas price above $3, it is not pretty.
This blog has clearly shown that housing values are cyclical the world over (no place is immune, ever), and that the asset is in the first phase of the bursting process. Of all the historical graphs I’ve seen, don;t recall ever seeing an extended plateau.
What is new/different for this bubble is the effect of an increasingly globalized economy - long term rates have remained low because of coordinated actions of G7 on liquidity and because buyers of US bonds (China, Japan, etc) who benefit from US low interest rates (we are the golden goose). What remains to be seen is how globalization will effect the timing and shape of the downside curve. Another new feature of this cycle is the growing wealth disparity in the US. This has the effect of proppingg up the higher end homes.
In the US, the hinterlands which have experienced heavy appreciation but where median wages are low will fall the hardest. This would include perhaps all of Arizona and Nevada. In California, the Inland Empire is somewhat better insulated this time (compared to the last crash) because there has been some job growth there, but it will still drop substantially by 2008 (25-30% IMHO). The Central Valley will drop 30-40% by 2008.
Within the densely populated bubbles like SoCal, the most expensive places like NB will drop up to 20% - although no places are immune from asset bubbbles, those with deep pockets can sit out the storm.
Globalization is all about equalization and that means our wages fall while wages in places like China and India rise. At some point a new equilibrium will relieve the pressure. So don’t expect housing prices to “plateau” while wages catch up. It is not going to happen.
Which brings us back to “who are these buyers with the great jobs who are going to swoop in and keep the RE ball rolling along?
As far as the disparity between the haves and have-nots, what is keeping the prices up (at least here in Seattle) is the high end of the RE market where houses have heated up a little this spring. All the price reduced signs are in lower end properties which are no longer being snapped up as “investments”. The “bad areas” are growing while the “good areas” are shrinking. This will bear watching as the “crash” plays out in the major urban centers.
BTW….I have friends in Aus (peaked in 2004) and Pol (peaked in 2005) so I concur that there has been a worldwide bubble.
S-Moose,
I’m not sure where the money is coming from now. HELOCs, cash-rich boomers in their peak earning years, toxic loans explain the activity in the $200-700 house range. But places that sold in newport beach for $1M 5 years ago are now for sale at $3M. I guess that differential is from Bush’s tax cuts for the rich, and a strong economy.
What will happen there? Down, yes. But unless there’s a weakening of the job market, it will only be proportional to rising interest rates.
DC holds value best because the sheople allow congress to burn money endlessly
we lost 10-15 % in 1990 to 1993 angot to par by 1995
I’d say that the established areas, including small cities, further out from the bigger cities in equit nomad destination areas get hurt least. These are the areas being populated by “second level equity nomads”. Using Maine as an example:
Many NY, Ct, NJ etc. equity bandits come to Portland and have driven up home prices. Very simply, most locals can’t afford these prices. Many long time Portland residents decide to do the same thing as the first wave of equity bandits and they move out of Portland to less expensice areas such as Waterville.
If Waterville prices were to one day get extremely expensive, some could decide to become equity bandits and move yet farther out. The problem there is there aren’t many cities of comparable size where one could go - not ones with less expenisve real estate. So the real estate bucks stop there.
Now some will move out to the country, but this is not for everyone as it’s typically removed from many of the services available in cities such as hospitals and culture. Also, depending on the area, country prices will often reflect a certain number of vacation homes and such second homes are the first to be sold off when times get tough.
Because of the new blood coming into a place like Waterville, the city tends to become more vibrant and its existing menu of offereings tends to become augmented as a result of the influx.
“while other areas seem OK (NYC, SF). Delayed reaction or are some areas just different?”
In SF Bay Area, HP already went into a 1B restructuring last year. Sun is in the wings on the their 1/3 headcount reduction, and Intel has announced their 1B restructuring by end of this year. Most will come from hight cost bay area employees. That could be 10-20,000 pink slips that are going out this year. The ripple effect on the vendors that service these 3 big employers and the supply chain will kick in by Dec 2006.