LostWaffle

Hey all,

The real estate market in the Bay Area has just been insane in the last 5 years or so. We're selling little shacks now for 500K.

In your opinion, do you think Bay Area real estate will decline in price, or is ti just going to keep going up on the whole, as real estate historically does?

Thanks.

MrForgetable

I think it will cool off sometime soon, staying steady , then slowly decline poco a poco then level off again..

and yes, I hear you about the 500k thing. there are people renting outhouse-like apartments for $2000 a month and people actually live there (Berkeley). For $2000 near UCLA you could get a nice luxurious apartment with like all the goodies and twice the size.

mrkim019

Actually, the real estate sector hasn't been on fire as it used to be a while ago. But I heard that prices will actually start increasing again.

LostWaffle

Mr. Kim.

Do you know why it might start increasing? The way I see it, if interest rates are going up, less people should be able to afford.

???

4IGS2000

[QUOTE]Originally posted by MrForgetable
[B]I think it will cool off sometime soon, staying steady , then slowly decline poco a poco then level off again..

ironwedge

[QUOTE]Originally posted by LostWaffle
[B]

The real estate market in the Bay Area has just been insane in the last 5 years or so.

LostWaffle

I don't have a subscription to the economist. Care to post some text?

ironwedge

I don't have the electronic subscription, let me see if I can find the issue.

The gist of the article was that in many world markets homeowners, with the help of low interest rates, were over leveraged in mortgages. With unemployment rising and stagnant economies, the assumption was there are millions of owners who would be prime candidates for personal bankruptcy (upside down on the loan and out of work).

Presumably, market value of real estate would erode due to homeowners (outside bankruptcy) competition with bank foreclosed. The other component was the allegation that Freddie Mac and Fannie Mae become insolvent which would cause banks holding the notes to tank. (an interesting observation that made headline a few weeks after the article was published: http://story.news.yahoo.com/news?tmpl=stor...mac_shake_up_12 )

Bottom line is that real estate may not be the "sure thing" for growth that it once was.

Cheers -

Flayer

I think it really depends on where you are.... my parent's home has dropped about 20% since the dot-com boom (saratoga). It's relatively steady now though. All in all, I think it will ultimately be driven by supply and demand. With the bay area un-employment where it is, and with so many jobs being exported off-shore, I think there is the possibility that house prices will come down because we will get back into a over-supply situation as people can't afford their mortgages anymore, or choose to move away from the bay area because the cost of living is too high. Keep in the mind that pay raises have shrunk considerably at most companies, and with high-tech labor costing companies $10k off-shore instead of $75k here, there is little incentive to keep paying the high wages that fueled the housing in the bay area.
/end depressing rant hehe.