OK - Is there a housing bubble? Will it burst? Will we have deflation?

[suziedemocrat]

I'd like to know what all of you smart DU'ers think on this subject.

[cally]

1. I think we can expect deflation in the housing markets in many

regions. It will probably take many years to recover. I also think we will have a small correction in the overall housing market. I would be very careful if I was buying now.

[DistantWind88]

2. Unless you can afford the house you want

and plan on staying it for 15-30 years, caution might be wise.

[On the Road]

3. Yes, Housing Prices will Fall

although the details are murky.

I am personally holding off on purchasing a house for that very reason.

[wicket]

12. same here

And anyone I know shopping for a house I advise them to do the same.

[maveric]

13. What will happen to the people in San Diego that have bought

900 sq ft homes for $625,000.00. Will refinancing plans be available.
I know people who have done this and the market cant really go up any more.
Will these people lose money?

[DistantWind88]

14. What do you mean by refinancing plans?

As long as they don't sell the house, they won't "lose" money.

[wicket]

15. But their investment won't be worth as much

And who knows if it'll ever come back.

[DistantWind88]

18. It'll eventually come back

it may take 30 years, but it'll come back.

[On the Road]

19. Those People Will Have Lots of Negative Equity

in which case they can:

1) Simply not move for the next 10-20 years.
2) If they have to move and can afford it, carry a $100,000 debt around after selling their house for less than they bought it.
3) Declare bankruptcy. I know someone who has done this.

[unblock]

4. you might want to ask your question here as well:

in the economy, budget, taxes & jobs forum

http://www.democraticunderground.com/discuss/duboard.php?az=show_topics&forum=114

[suziedemocrat]

8. Thanks - I hadn't seen that forum - I'll start going there!

DU is so big! It's easy to miss stuff.

[Wisc Badger]

5. Most of my friends are working class like me

and we can not understand who has the money to pay 1k plus mortgages each month.

Houses here in SE Wisc 175k - 250K or more, I don't see how that can continue.

[papau]

6. Housing starts at 2.0 m - a very high number and up big time from last

quarter.
http://www.census.gov/indicator/www/newresconst.pdf
Seems most folks do not see a housing bubble.

[suziedemocrat]

20. I wonder if current houses will be almost obsolete if oil gets too costly.

I worry about al of these houses they are building. I read here that houses today are more energy efficient - but most still don't make an effort to have passive solar heating, natural cooling, etc. I've been wondering what will happen if the price of energy goes through the roof and people start wanting homes that are super efficient. May not matter in So. California - but here in Indiana they are building like crazy too. I've read it is easier to build a new energy efficient house than retrofit an old one. Window placement, etc is a big deal evidently.

[papau]

22. heat or cooling energy cost may be factor in sales price - indeed

I usually look at it before buying a home.

[Dr.Phool]

7. I have a house on the market

In Cleveland. It's been vacant since April. Nicer area, reasonably priced, but no buyers. I had it rented for a year, but threw the tenants out.

No buyers out there. I'm living in Florida, and 2 mortgages are killing me.

[suziedemocrat]

9. That's scary! Good luck!!!

[txaslftist]

10. yes yes no - inflation overall, deflation in home values.

[newportdadde]

11. We are in the process of the bubble topping right now.

This would compare to the 1999 area in stocks. Homes are simply overvalued and have raised in value too fast given historic prices and how they rise. Many things have contributed to this, the very low interest rates have allowed buyers to borrow more for the same monthly and rather then get a good deal on a home, the prices of homes have skyrocketed up to meet that inflow of cash.

Some of us like myself got lucky. I purchased my home in July of 2000 when Greenspan was raising rates and a 30 year loan was 8.5 %. I was then able to refinance down to a 15 year at 4.75 % So I got in before the prices took a sharp turn up because at the time money was a bit tighter.

Another thing is this ridiculous "No Money Down" house buying.. talk about leaving your ass hanging out if something goes wrong... idiots.

Now people are starting to basically day trade houses:

http://money.cnn.com/2005/01/10/real_estate/investment_prop/manwithplan/index.htm

Yep its just going to keep going up and up never down, borrow more sheep.

[Dr.Phool]

16. Where I live now

Prices are going up on average of 2% per month!

[Baclava]

17. I think you hit it right....

I bought mine in 1999 with interest rates around 7.5...and refinanced last year under 6.0.

Now my home has doubled in value according the CMA I had done. My next door neighbor just sold his under the same circumstances. (our houses are basically the same) He sold in under a week. Unreal.

I could sell and cash out but I'd have to move somewhere else...no way could I afford to buy another house around here even with the low rates.

[flamin lib]

21. The market is really spotty.

According to the National Association of Realtors some markets are still hot and some are flat or in recession. I'm a Realtor in Texas and just did a market analysis for a client that went back two years. Homes in his subdivision are selling for exactly the same price per sq foot now as in 2002.

The two coasts seem to be doing OK, but 20% gain in equity/year can't possibly hold up much longer. I'm working with two CA relocations that are selling simply to take advantage of the cost difference. A young couple moved here from CA with the proceeds from selling a 900 sq ft efficiency. They bought an existing 1600 sq ft home for $105k, changed their mind and bought a $250k new home with 2800 sq ft. They are making both payments and still living off the proceeds of the CA sale. Just taking some time off to relax.

Foreclosures in the DFW area are at an all time high. 'Course we got hit really hard with outsourcing of the Telecom industry.