Gyroscopic Investing

At least BND doesn't include municipals.  Puerto Rico is going to create all kinds of havoc in that market.

I seriously wonder if there isn't another housing bubble forming.  I don't know about everywhere else, but New York has gone temporarily insane.

WiseOne wrote: At least BND doesn't include municipals.  Puerto Rico is going to create all kinds of havoc in that market.

I seriously wonder if there isn't another housing bubble forming.  I don't know about everywhere else, but New York has gone temporarily insane.

There is another gigantic housing bubble already in progress that will likely make the previous one look like child's play.

See thehousingbubbleblog.com for almost daily dispatches on this insanity.

Libertarian666 wrote:

WiseOne wrote: At least BND doesn't include municipals.  Puerto Rico is going to create all kinds of havoc in that market.

I seriously wonder if there isn't another housing bubble forming.  I don't know about everywhere else, but New York has gone temporarily insane.

There is another gigantic housing bubble already in progress that will likely make the previous one look like child's play.

See thehousingbubbleblog.com for almost daily dispatches on this insanity.

You got any good charts for this? I'm not intending on buying a home yet but I will in the next few years.

Greg wrote:

Libertarian666 wrote:

WiseOne wrote: At least BND doesn't include municipals.  Puerto Rico is going to create all kinds of havoc in that market.

I seriously wonder if there isn't another housing bubble forming.  I don't know about everywhere else, but New York has gone temporarily insane.

There is another gigantic housing bubble already in progress that will likely make the previous one look like child's play.

See thehousingbubbleblog.com for almost daily dispatches on this insanity.

You got any good charts for this? I'm not intending on buying a home yet but I will in the next few years.

Sorry, I don't have any charts. However, I've been following this craziness for quite some time, and I'm seeing reports again on thehousingbubbleblog.com about bidding wars, buyers writing letters to sellers to beg them to sell to them, frantic building, realtors claiming that this is the "new normal", and all the other symptoms just like 10 years ago.

Libertarian666 wrote:

Greg wrote:

Libertarian666 wrote: There is another gigantic housing bubble already in progress that will likely make the previous one look like child's play.

See thehousingbubbleblog.com for almost daily dispatches on this insanity.

You got any good charts for this? I'm not intending on buying a home yet but I will in the next few years.

Sorry, I don't have any charts. However, I've been following this craziness for quite some time, and I'm seeing reports again on thehousingbubbleblog.com about bidding wars, buyers writing letters to sellers to beg them to sell to them, frantic building, realtors claiming that this is the "new normal", and all the other symptoms just like 10 years ago.

This needs to be moved to a "Housing Bubble" thread but here is my take...

I think the rapid increase in home prices is really confined to certain urban areas (NYC, DC, SF, Vancouver, BC  to name a few). Where I am in CT, the market is only slightly improved from its bottom of a few years ago (and places are being put up for sale in droves as people try to escape the combination of high property taxes & few services). The run up from, say, 1998 to 2005, was virtually everywhere.

One thought is that rich foreigners (i.e., a LOT of Chinese) are buying places in US urban areas that they may or may not be planning on living in right away. Foreigners moving to the US mostly want to live in cities and they mostly want to go where there is already an existing population of "like" people.

With wage growth going nowhere and labor force participation really low, I just don't see the necessary support from US buyers. These higher prices may in fact be the "new normal" for the urban centers where this change is happening. Zillow shows a one-year 3.3% rise in median housing prices countrywide. That's OK but not dramatic.

I think you are precisely correct, Barrett. It's very regional. Some desirable urban markets are totally insane, awash in money and demand from wealthy Americans and foreigners (largely Chinese as you say), but most are pretty flat. You can snag great houses for reasonable prices all over the place; you just have to avoid the totally crazy areas.

There's a trickle down effect as well.  Perhaps wealthy foreigners are bidding up Silicon Valley, but I would argue the new Google/Apple/Facebook/Twitter/(app for everything) explosion is just as influential, as all the new tech millionaires can afford the bidding war. In any case, fleeing Californians (many happily selling high and awash with cash) are rapidly bidding up places like Austin and Denver.  One would not expect every city to grow simultaneously, but the signs of the inflating bubble are certainly there and spreading. 

Tyler wrote: There's a trickle down effect as well.  Perhaps wealthy foreigners are bidding up Silicon Valley, but I would argue the new Google/Apple/Facebook/Twitter/(app for everything) explosion is just as influential, as all the new tech millionaires can afford the bidding war. In any case, fleeing Californians (many happily selling high and awash with cash) are rapidly bidding up places like Austin and Denver.  One would not expect every city to grow simultaneously, but the signs of the inflating bubble are certainly there and spreading.

I agree with most of that. What I haven't heard this time are the workaday folks talking about ordinary places that are $500,000 and saying something like, "That's not bad." I mean, yes, it happens in Austin & NYC. The bubble of the early 2000s was driven by super loose lending practices, not by ultra-rich techies. Again, to reference my little corner of the US here in CT - and I am not talking about Greenwich here - there are lots of folks around here who bought their homes with nothing down. The new multi-gazillionaires can certainly drive up prices in select areas, but for a really broad-based housing bubble I think the middle class needs to be overextended.

If you are smack in the middle of a hot market, it's easy to miss that much of the country is still deleveraging.

As always, just my two cents.

You're probably right.  It's regional, for sure.  I know from friends that some of the vast previously inexpensive Dallas suburbs are also starting to see bidding wars.  Whatever is going on, there are always inexpensive options but times and maps do change. 

The suburbs in Far North Dallas (Richardson, Plano, Frisco, McKinney, Allen) are truly insane!...  My son and his bride put in 3 different bids (all over asking price) in just this past week and lost all three!...

There is a large influx of major corporation relocations primarily from Calif (State Farm, Toyota, Kubota and others) into North Texas that find this area very attractive to relocate...  The prices have zoomed and now unfortunately the first time home buyers are being priced out...

PS: They were able to get a contract yesterday so let's hope it doesn't melt down here in the next few years!

Libertarian666 wrote:

Greg wrote:

Libertarian666 wrote: There is another gigantic housing bubble already in progress that will likely make the previous one look like child's play.

See thehousingbubbleblog.com for almost daily dispatches on this insanity.

You got any good charts for this? I'm not intending on buying a home yet but I will in the next few years.

Sorry, I don't have any charts. However, I've been following this craziness for quite some time, and I'm seeing reports again on thehousingbubbleblog.com about bidding wars, buyers writing letters to sellers to beg them to sell to them, frantic building, realtors claiming that this is the "new normal", and all the other symptoms just like 10 years ago.

Yeah but it seems this time, at least in my region of MN, rents are rising fast as well, and they were rising during the entire last crash. There are still lots of properties with good cap rates for rental, which I don't think can be said very much about the 2006 housing market, though I could be wrong.

I have made a vow to myself never to sell my home in suburban Houston, built new for $135,000 many years ago.

ochotona wrote: I have made a vow to myself never to sell my home in suburban Houston, built new for $135,000 many years ago.

Is this your current residence?

What's the ultimate goal of such a vow?

Yes, I live at this property now. If I were to sell it and move away (as part of a corporate relocation, for example), I might not be able to get back in at a comfortable price. I have seen this happen many times, especially to people in the oil industry who left Denver and Calgary, and can't afford to get back in now. I will retire in ~10 years. I might want to retire there, where I raised my family. I'd rather rent it out, as rental rates are pretty good here, and then refurb it before reoccupying it... or I could sell it if I didn't want to come back for retirement.

moda0306 wrote:

ochotona wrote: I have made a vow to myself never to sell my home in suburban Houston, built new for $135,000 many years ago.

Is this your current residence?

What's the ultimate goal of such a vow?

I have friends who live in a midwest town that suffered a large tornado hit.  People are finding that the cost to rebuild a house is a lot more than the market value of the house.  So a person had a 2000 sq ft house worth say $230K.  But to rebuild it, the insurance payout is say $300K.

Some people are saying "I'll pocket the 300K, sell the lot, and buy another existing home".  What this situation tells me is that over some long run, house prices need to rise to get closer to replacement cost.

barrett wrote:

Tyler wrote: There's a trickle down effect as well.  Perhaps wealthy foreigners are bidding up Silicon Valley, but I would argue the new Google/Apple/Facebook/Twitter/(app for everything) explosion is just as influential, as all the new tech millionaires can afford the bidding war. In any case, fleeing Californians (many happily selling high and awash with cash) are rapidly bidding up places like Austin and Denver.  One would not expect every city to grow simultaneously, but the signs of the inflating bubble are certainly there and spreading.

I agree with most of that. What I haven't heard this time are the workaday folks talking about ordinary places that are $500,000 and saying something like, "That's not bad." I mean, yes, it happens in Austin & NYC. The bubble of the early 2000s was driven by super loose lending practices, not by ultra-rich techies. Again, to reference my little corner of the US here in CT - and I am not talking about Greenwich here - there are lots of folks around here who bought their homes with nothing down. The new multi-gazillionaires can certainly drive up prices in select areas, but for a really broad-based housing bubble I think the middle class needs to be overextended.

If you are smack in the middle of a hot market, it's easy to miss that much of the country is still deleveraging.

As always, just my two cents.

I think you're right barrett.  It means that what is going on in NYC is not really a housing bubble, because there is real demand & dollars behind it.  Also coops have stricter financial requirements than banks, so there is no mortgage related fluff.  By "housing bubble" I meant that some people are buying because they think the Fed is about to raise interest rates.  This translates to more than the usual number of people bidding on places and driving up the prices.

I was wondering if the frenzy would die down once the Fed does whatever it's going to do, and prices would relax a bit.  I don't expect by much though.

WiseOne wrote:

barrett wrote:

Tyler wrote: There's a trickle down effect as well.  Perhaps wealthy foreigners are bidding up Silicon Valley, but I would argue the new Google/Apple/Facebook/Twitter/(app for everything) explosion is just as influential, as all the new tech millionaires can afford the bidding war. In any case, fleeing Californians (many happily selling high and awash with cash) are rapidly bidding up places like Austin and Denver.  One would not expect every city to grow simultaneously, but the signs of the inflating bubble are certainly there and spreading.

I agree with most of that. What I haven't heard this time are the workaday folks talking about ordinary places that are $500,000 and saying something like, "That's not bad." I mean, yes, it happens in Austin & NYC. The bubble of the early 2000s was driven by super loose lending practices, not by ultra-rich techies. Again, to reference my little corner of the US here in CT - and I am not talking about Greenwich here - there are lots of folks around here who bought their homes with nothing down. The new multi-gazillionaires can certainly drive up prices in select areas, but for a really broad-based housing bubble I think the middle class needs to be overextended.

If you are smack in the middle of a hot market, it's easy to miss that much of the country is still deleveraging.

As always, just my two cents.

I think you're right barrett.  It means that what is going on in NYC is not really a housing bubble, because there is real demand & dollars behind it.  Also coops have stricter financial requirements than banks, so there is no mortgage related fluff.  By "housing bubble" I meant that some people are buying because they think the Fed is about to raise interest rates.  This translates to more than the usual number of people bidding on places and driving up the prices.

I was wondering if the frenzy would die down once the Fed does whatever it's going to do, and prices would relax a bit.  I don't expect by much though.

There is ALWAYS "real demand and dollars" behind a bubble, until it bursts.
And as for people buying now before interest rates go up, what happens to the prices of debt-financed assets when interest rates go up? Hint: they don't go up.