Friday, November 29, 2013

Bubbles, Booms and Busts

The latest real estate bubble in California is getting long in the tooth. Not much more room for speculation as values have just about topped. Hot money is already flowing out as cash investors are becoming less and less of the market. Once they leave what will be left? A few homeowners soon to be underwater again. Sound familiar? It's really a shame that all that is left of the housing market is nothing more than Banks, Hedge Funds and Foreign Money playing a casino game. And we can thank Big Ben and the government charades for all this.

This will still end ugly, once all is said and done. The downside risk keeps growing for those entering the market now. Still totally unsustainable. 


Anonymous said...

Personally, I have been in the market for a condo since late 2012 and what I am seeing on the westside (zip codes 90025 and surrounding area) is places had more or a less a bidding war from late 2012 into summer 2013 and now they are overpriced, sitting on the market and making price cuts.

Now is this seasonal (ie Holiday time = slow down) or systemic? That to me is the $1mm question.

Anonymous said...

I agree. There are lots of developer flips just sitting on the market.

It feels like a top tp me.

Anonymous said...

I agree with the prior comments.

An interesting question is how many of the active buyers from late 2011 to last summer represented a backlog of buyers who were ready and able to buy in the period 2009-2011 but held back. The next question is, how much of that backlog demand has now been met so that the market must now depend on a new pool of qualified buyers.

We'll see next spring.

Anonymous said...

A friend of mine is a broker on the Westside and around mid 2012 his comment was: the reason there is a surge in prices and closing of escrows is all the arrogant buyers who (in 2010, 2011, 2012) kept sitting on the sidelines thinking prices were going to go down again. Well, all of us who sat on the sidelines watched prices increase more than 20% since 2010 are now hoping they will drop again... when in 2014? if so, by how much? bringing us back to 2010 levels? while burning through rent money?

Anonymous said...

unless your a cash buyer its not like all of a suddden your paying just your loan.
owning a home you are paying interest on the loan, taxes to california, maintenance fees.
in the same time period the stock market is up around %75 since 2010. you get paid a 2% dividend to hold that money. so where is the better investment?
And let's see where housing goes from here. Think its going up 20% a year going forward with rates set to rise and no job wage growth. California is truly living the dream. dream, dream, dream, dream, dre eee eeee eeee eam

Anonymous said...

Prices appear to be up about 10% over the last six months.

Anonymous said...

Hedge funds like Blackstone are buying up thousands of homes in the Atlanta area among other places. I wrote them and asked what are they going to do if RE starts going down. Of course they didn't answer. Who can they unload all those houses to? Probably not the little guy. That would take too long. With many people strung out on easy auto loans for cars they have no business buying, there is even less money available to them. Most likely they (hedge funds) will need to go to foreign buyers and sovereign funds for the money. Then we will have great blocks of homes in the US with foreign landlords.
However I now am hearing about Blackstone bundling up these homes and selling them in some kind of financial instruments very much reminiscent of what was done pre 2006 said...

They are called RBS (Rental Backed Securities) where they bundle all the homes,slice and dice and try to value them by their rental incomes. Just like the MBS (Mortgage Backed Securities)before based on people paying their mortgages. It's an old fashion real estate swindle. Wanna buy some land in Florida?

If people are dumb enough to buy them they deserve them. Unless our beloved Govt buys them like they did before. Just more Boom and Bust. We are definitely close to the bust now. Only now, big blocks of homes will be dumped instead of individual homes.
What a world!

Anonymous said...

are you Ever? going to post another blog post here? I miss this blog! said...

Yes. Hopefully this month.

Anonymous said...

CNBC says all cash buyers are pushing up prices. However they said that hedge fund buyers are slowing down their purchases and it's the Mom and Pop cash investor/buyers that are taking up the slack.

Hmmm. Could it be the top? Just the same thing that happens in the stock market when the retail investors rush in and buy at the top