I'm in the market for a house... and I live in the SF Bay Area, where housing prices have been leaping upwards at an insane pace. many people are still of the mindset that you just can't lose when buying real estate... but I recently came to the decision to wait a bit and continue renting.

I also found this site and would be interested to hear other peoples' opinions. there are also links to numerous well-respected sources:

http://patrick.net/housing/crash.html

I'm going to withhold making any personal thoughts/statements for now. I'm curious to hear some opinions, particularly about item #7.

note: this is a blog about housing in the SF Bay Area, but I think it applies to numerous hot markets all over the country.

 

Interesting article, a lot of this applies to the market in Miami as well where recently prices are starting to drop.

 

many of his positions are defendable.

interest rates directly impact mortgage payments, and thus the house price one can afford. Some of what he said applies to me in FL, but mostly on the coastal areas. Even so, there is still a lot of development on the shoreline here. At least half the condos are vacant, even in winter. I'm seeing more for sale signs popping up, too.

His biggest point (IMO), that salaries do not support prices, is dead-on.

 

I just signed a purchase agreement on a new house that will be finished in september. I do not plan to list my house for another month but am only slightly worried for a couple reasons.

The housing market in my area is fairly strong and my home is in a fairly high demand price range and in a desired community as well as bieng only four years old. The new place that is being built I bought at a discount as one of the last remaining lots in a development. I think it is well underpriced for its value.

I think competition for sales of existing homes will increase, prices will stagnate, and homes will be listed longer before they sell, but I do not expect a collapse. I would be more concerned if I were in the $600K and up price range but I am not.

I am worried about interest rates and my lock, but may have to "suffer" with a rate of about 6.25% when the time comes, until I can refinance cheaper in the future.

Most of the panic comes from people who buy more than they can afford anyway, and I choose not to do that. Homes in the $200K-$400K range will ALWAYS be in demand in my area, regardless of market conditions. In my area $400k can buy a 3000 sgft new home on a half acre wooded lot, in San Fran, it buys a tent on the sidewalk.

PS>>>>>BUYING AND SELLING A HOME IS STRESSFULL ENOUGH WITHOUT THIS KIND OF THREAD!!!!!!!!!

 

Steve and Mav also make good point, but you guys live in communities where lots of people buy rental and vacation property and second homes. Those large discretionary types of property are the first to dry up.

In other areas (like MPLS/ST Paul where nobody decide to buy vacation homes and freeze thier ass off) where the market is for mainly primary residences, are not subject to quite the same market pressure.

 

Gawd I am seeing that link pop up everywhere. Its far more scary than it needs to be. If you plan on keeping a home for a while instead of renting then buy now and lock in your rate. You have nothing to worry about if the market crashes, which I doubt it will very much.

However if you are in the real estate industry for profit, I would be scared. Just like vader1 said in his post:

"competition for sales of existing homes will increase, prices will stagnate, and homes will be listed longer before they sell, but I do not expect a collapse."

I agree 100% vader1

I have middle of the road credit and I just locked in a rate at 4.5% on a loan in January - Yes thats how good it still is today. If you have a steady job and can afford a house payment why wouldnt you do it? it's usually comparable or cheaper than the rent on most apartments.

Even if the bubble pops and you have a locked rate and steady income and are willing to stay with a house for a while what are you worried about?

 

So here's the short bit...'cause I won't have time to rip this apart until I get home...BUT...yes the housing market in the Bay Area is absolutely overvalued. Prices will correct at some point through either a crash or a stagnation.

That said this guy's article is about a poorly reasoned as you can possibly be. He's pretty much off on most of his points. He's 'math' about renting versus owning, is so much of a disaster that it's funny.

Basically he's read what others have posted and tried to analyize it himself but has done an extremely poor job of it.

This article is a classic example of why you shouldn't rely on information on the 'internet' to make decisions. Oh it sounds 'reasonable' on the surface, but if you probe just slightly deeper you'll see that there are so many flaws in it to make it completely uncredible.

Remember with the internet ANYONE can post ANYTHING with absolutely no oversight. This means no peer review, no fact checking, no secondary analysis. Unless the internet article is from a reliable trusted independent source it should be treated with the utmost suspect until it proves that it has investigated the issue thoroughly.

If you're forming opinions based upon what is written in this blog you are making a mistake. I'll strip it apart later tonight when I have more time....

 

He's full of crap. I've lived in the bay area for 32 years, and we haven't had a real crash yet. There have been some small downturns, but overall prices have steadily increased. Every time I thought they couldn't go higher, they did.

 

Speaking like a true scientist.

 

I don't understand why so many people think the market will crash. Sure it might stabilize, level off, or have a slight decline but how many times have you actually seen the real estate market crash. Unless they find radioactive waste in your backyard, the thought that the market will crash significantly is a pipedream IMO.