1 year outlook on real estate and economy?

[Jr]

Alright... Who has a crystal ball that is in good working condition?

Where will real estate and the economy be in one year? If you listen to the main stream media, real estate will be worse off then the crash a few years ago.

Opinions are welcome.

[GregWeld]

Alright... Who has a crystal ball that is in good working condition?

Where will real estate and the economy be in one year? If you listen to the main stream media, real estate will be worse off then the crash a few years ago.

Opinions are welcome.



You should take a longer term approach.... nobody has a crystal ball... that's just guessing. Might as well toss dollars up in the air and follow them down the street.

If you want to be a home owner... and your primary residence IS NOT an investment... it is simply a place where you live... and I don't give a **** how long you live there or what the market does - you never make money on it. People say -- I bought for X and sold for X more. Yeah?? BFD..... you also paid INTEREST for "X" years... and property taxes... and up keep... and then you sold your inflated house and paid an inflated price for the next dump you bought to live in and repeat the process. Add up the COSTS -- you didn't make any money. Having said that... the GOAL of home ownership (primary residence) is to retire in a paid for house so that you don't have that cost to bear out of retirement income. If you use that goal... then you'll understand that was a smart decision.

Investment property is an entirely different discussion but I assume you're asking about whether or not you should buy a house for yourself. Then the answer is yes - and be quick about it - prices are rising and so are fixed interest rates. Lock in as long a term as you can at the lowest FIXED rate you can.

[Jr]

Greg,
Good point. We just sold our home, and we are looking to purchase another home. Southern California prices are high right now, but if another recession is close, I'll rent till then.

[Vegas69]

Every real estate market is unique. Find an expert and look at the data. Our market(Las Vegas Area) has progressively softened up this year. The median price has stayed level for 3 months. My active listings are sitting longer. Statistically, we are in a seller's market with 3.1 months of inventory. It's feeling more neutral than that.

With all that being said, affordability is still in the pocket. I ran an analysis not long ago on the median rent vs. median mortgage payment. Within $50. Those are important numbers.

Our market rose 35% plus in 2 short years. It was undervalued due to extreme hardship. My opinion is we have found the pocket where it belongs. The market could jog either way depending multiple variables. I wouldn't be afraid to buy, in fact I'm in the market. However, I'll be patient and wait for the right deal. There is no hurry. If rates rise, the market will soften up even more and I'll make up for it in purchase price.

[GregWeld]

Greg,
Good point. We just sold our home, and we are looking to purchase another home. Southern California prices are high right now, but if another recession is close, I'll rent till then.



Once you sell - the clock is ticking on how long you have to reinvest the proceeds into a house of greater value. If you wait - The problem with that is that if interest rates rise you're going to be paying more per month every single month as long as you keep that mortgage. Since we don't know how much you're financing - it's hard to judge what that might look like.

I was being somewhat facetious about the house crystal ball.... but I was serious about looking longer term. One or two years is pretty short term compared to a 30 year mortgage.

I own a couple of apartment complexes -- I can tell you that we've jacked the rents WAY up.... like 50% UP.... I would not want to have to be a renter.

I also think it depends on what real estate market you're in. Seattle is on fire... Sun Valley is "improving".... Like Vegas just said -- that market jumped 35%... but it was also one of the most depressed. As the job market improves -- and people begin to see interest rates rising - you might see more buyers moving off the sidelines and jumping to buy before they're priced out... or it could have a damping effect... that's just pure guessing and we won't know that until it happens. Either way -- if you're going to live in the house for 10 years... today's price shouldn't really matter.... and the one prediction I would make - is that you'll likely NEVER see these interest rates in your lifetime.

[Track Junky]

All my eggs are in one basket which is real estate. If you would have bought awhile back you would have saved hundreds of thousands but prices have gone up quite a bit in the past couple years. The good thing is that money is still cheap. Personally I follow the ten year cycle. 2006 everything took a dump. I sold three properties at the end of 05 and made a killing. following the ten year cycle from 2006 to 2011 prices continued to decline leveling off late 2012 and then beginning to rise 2013. Peak should be late 2015 into 2016 then watch out cause it will happen all over again.
This is just my personal opinion and how I gauge the market.

Are you looking for a primary residence or an investment property?

[Flash68]

Alright... Who has a crystal ball that is in good working condition?

Where will real estate and the economy be in one year? If you listen to the main stream media, real estate will be worse off then the crash a few years ago.

Opinions are welcome.

To start, I've pretty much nailed the timing on my 4 transactions on the buy and sell sides over the past 11 years. It wasn't lucky -- I research(ed) the hell out of RE and economic indicators (Econ degree here) and I enjoy it.

If wasn't a month away from our first child, I would have sold our primary residence and rented earlier this year. I actually had my wife talked into it. But we decided against it. Moving just isn't okay like I used to be with it in smaller properties. But from a pure analysis discussion, I'd take the money and run and fight another day if were more mobile.

I've been touring 4 plexes lately and there is a tremendous amount of ALL CASH still chasing RE. We still have a big supply constriction issue here in Norcal for most properties in the areas I follow (SF & Oakland/inner East Bay). I'd like to get into some rental property but I am not going to offer 120% of asking to get it. I'll wait.

I say RE will slow down it's acceleration rate and start flattening in about a year. RE moves like a big ship usually. It's fast on the way up and "stickier" on the way down.

You should take a longer term approach.... nobody has a crystal ball... that's just guessing. Might as well toss dollars up in the air and follow them down the street.

Hey dude, this ain't your Investing 102 thread. This is a fun prognostication thread. Let it happen. :)

:popcorn2:

Greg,
Good point. We just sold our home, and we are looking to purchase another home. Southern California prices are high right now, but if another recession is close, I'll rent till then.

I like your thinking. Look at the appreciation and bubblelicious valuations right now. We are right back to 2006-2007 again.... and it's rate & supply driven.


All my eggs are in one basket which is real estate. If you would have bought awhile back you would have saved hundreds of thousands but prices have gone up quite a bit in the past couple years. The good thing is that money is still cheap. Personally I follow the ten year cycle. 2006 everything took a dump. I sold three properties at the end of 05 and made a killing. following the ten year cycle from 2006 to 2011 prices continued to decline leveling off late 2012 and then beginning to rise 2013. Peak should be late 2015 into 2016 then watch out cause it will happen all over again.
This is just my personal opinion and how I gauge the market.

Are you looking for a primary residence or an investment property?

I know it's not scientific, but your 10 year cycle reference isn't far off, although it isn't destined to continue on that trend forever.... we had the early 80's, and the early to mid 90's, then once dot com stabilized the mid 2000's... we are right back there now in the mid 2010's.... wow, G, you're pretty on top of it buddy. :)

[GregWeld]

I like your thinking. Look at the appreciation and bubblelicious valuations right now. We are right back to 2006-2007 again.... and it's rate & supply driven.



I think people have all too soon forgotten what the real estate bubblelicious was all about... and it's root cause.

The cause was the "easy money" -- no credit no problem -- no down no problem... That had people that had no business whatsoever buying houses - flipping houses... and doing just about anything else that was ridiculous in the name of housing.

Banks won't even look at a buyer if their credit isn't pristine... and you'd better bring a wheelbarrow of cash for the downstroke. This isn't the easy money buyers market.

I think the market is still tight on "nice" / "good" houses because there's still a large amount of America that can't sell their house yet. They're still underwater -- or perhaps they took out one of the magical Home Equity Lines of Credit... and they bought a PT car and haven't paid that back....

Good houses at the right prices are selling briskly in the big markets.... Secondary houses are beginning to pick up here locally -- and the market is starting the move up market (million plus) -- here. Our local agent publishes statistics each Friday and the high dollar sales are really becoming noticeable. We looked for weeks with our friends that wanted a condo here to use and rent... and it was real obvious when you saw a property on the market that had been on the market for a long time. Some you wouldn't buy at any price - and some where so stupid over the top asking prices and you knew the sellers were just dreaming or on drugs. My friends were all cash buyers having just sold another property they owned for years in Palm Springs. A condo came on the market one day - they weren't here - we are - we went to look at it and I told them if they didn't buy it I would. Done. They're owners. It was a nice condo - makes a great rental - and was priced right where it should have been. Put a sold sticker on it. The buyer is my buddy that is an agent in Seattle.

I have two best friends that are both agents in the Seattle market -- they're saying that over 50% of the "all cash" sales are all Asian buyers bringing in money from their countries. They don't care as much about the price today... they're investing their capital where they believe it should be safe. In the Seattle market you have a high employment rate with high salaries... with a HUGE hi tech community. I would think LA area is far more "diverse" for employers. So it may depend more on area by area....

[Flash68]

Agreed on the credit. REAL down payments are required, as well as solid FICO scores to even compete. But when listings are being taken down (bought) by all cash and over asking you gotta ask how long can it last and when will the music stop?

The foreign money deal is a hard one to peg as far as how long that will last.

Most of the people I am seeing at investment property tours are locals FWIW.

Rents have absolutely skyrocketed around here too.

[Vegas69]

I've seen both markets 5 days a week. (Then and Now)They are not very similar. Lending guidelines are tighter, appraisers aren't being bought, down payments are larger, more cash buyers, less speculation. Buyers are buying more economically on average, they are more focused on lifestyle not carnality. Your wife's, friends, brother's, cousin isn't very successful as an agent.

Short story, the fundamentals are in check.

Our market is 2/3rd's peak. CA seems to be a more dynamic and cyclical.
Look at the median rent vs. buy. Days on market trend, list price vs. sales price. It will lead you to an educated guess. It's important to look at each area and price range specifically.

I'm with Greg and Dave, I'm not going to play musical residences in hopes of timing the market. I don't have the time or ambition. I'll simply sell and buy in the same market eliminating most of the risk.

[Jr]

Good information.

We will be purchasing a primary residence.

[GregWeld]

Interesting info Todd... the part about people being more conservative. Here's my thoughts. 40 years ago - people bought a home in order to raise a family. Maybe it had an unfinished basement or upstairs area - and the idea was to buy it and add living spaces in those areas as their family grew.

Houses were never bought to flip. Houses weren't bought hoping/wishing/dreaming that you could refinance it and take cash out every other week. Houses were bought as HOMES. The primary goal was to have it paid off by retirement age or earlier. The goal was to have a fixed monthly payment where you knew that eventually your salary would increase and your payment wouldn't.

While we'll probably never return to those days again... they were based on the correct assumptions. Home ownership was about security. It was about living in the neighborhood that you wanted to raise your family in - and then retire in. Things have changed and we're all far more mobile... People don't go to work at the factory and retire with a gold watch and a pension after 35 years of service... I get that.

But if the house is a primary residence... and you plan to make it your home. Then buy something were you're comfortable payment wise... neighborhood wise... and that you can look into your crystal ball and imagine the backyard that you will finish off with a nice patio and you can see yourself on the rocking chair enjoying your neighbors and a Mai Tai. Eventually you'll sell it... but for the 10 years or more you live there - you want to APPRECIATE the home - rather than worry about appreciation.

My Father in Law (God rest his soul) used to tell me about the house they bought in Portland right after he graduated medical school... his house payment was $300 a month and they worried about how the hell they were going to make that payment. As a Doctor his salary grew and they paid the house off as fast as they could. They raised 9 kids in that house... he passed away early - but the house that was bought for 57K - was sold for 500K and a far smaller house was bought that fit a now empty nester. The difference was invested and the income used to supplement other retirement income sources.

THAT was what people were talking about when they said they "made money" on their house.

[Track Junky]

Great right up Greg. I agree 100%. My wife and I grew up in the Bay Area. I loved it growing up as a kid but it changed, I grew up, met my wife, and we had kids. Next thing I was thinking about was good schools for my kids.
My wife and I started researching areas in California with the best public schools, family environment, and homes within our budget. When we found the area that we wanted to raise our kids we drove up almost every weekend and drove through just about every neighborhood. No joke!! Literally every neighborhood and walked many many homes.
Long story short it became a 5 year plan. Never found the exact house we wanted so we bought a lot and 3 years later I built the house of our dreams. Best move we ever made.

[syborg tt]

Here is what I can tell you based off of the commodity we sell which is packaging. Right now we are down at least 30% possible 40% compared to last year at this time with a few of our customers. These customers are directly tied into housing market and new housing starts. So it's a fairly good gauge since our customers sells to plumbing wholesalers, Home Depot, Lowes, Menards & Ferguson Plumbing supply.

The odd part is I was at a Supplier Conferences last week with one of these customers and they were telling us how the housing market is up 6% but all of us suppliers at the table and at dinner agreed that there sales with this customer were down significantly and that the going forward forecast was almost non-existent. So much so that we will be asking for Po's to scrap material that we have on hand in some case for almost a year.

Take it for what it's worth but in 2006 we saw this trend and so did all of the box suppliers and if your not buying boxes your not selling your finished goods. Right now lead times for us are 2 to 3 days on corrugated boxes which was previously 2 weeks or greater.

[Flash68]

Wow that's really interesting. I love those types of leading indicators Marty. The real on the ground stuff that does mean something. And it can be the legal "insider trading" material if you know what to do with it. :)

[syborg tt]

Wow that's really interesting. I love those types of leading indicators Marty. The real on the ground stuff that does mean something. And it can be the legal "insider trading" material if you know what to do with it. :)

The other subject is all of these Venture Capital company's buying Business's for Insane amounts of money. When is the bottom going crash with these guys and have a ripple effect on the Market ?

[Vegas69]

One factor that must not be missed is the security of the new owners since the collapse. The days of the pinkie swear are long gone. Meaning, people getting loans with no job or skin in the game. They are well qualified, many with a large down payment, many all cash. Many of the conservatives have come out in droves.

Where I'm going with this, when the fundamentals are right, you have the luxury to time the market. If you move away, the rent covers the note. Your rate doesn't balloon in 5 years. You put enough money down where you can sell the property at a loss.

Every market is different. I do think to many have a jaded perspective due to the collapse in the rear view mirror. I was one of them for quite some time.

[sik68]

As a Gen Y or whatever (we're 30), I can say that I am in NO WAY interested in buying a home right now, even if we could afford. We briefly looked at buying a condo, because Rent$ to Loan$ (even with 3% FHA down) were about even; but I bet we would be in Mariana trench within 24 months.

The Bay Area is oozing with greed right now, so I am choosing to be fearful. Bidding wars against overseas buyers may provide an adrenalin rush that software engineers would otherwise never experience, but I'll pass on the fun.

[Flash68]

^^ I like that thinking and concur.


In response to Todd's comment of tighter credit, I thought this was funny and relevant.

http://www.bloomberg.com/news/2014-10-02/you-know-it-s-a-tough-market-when-ben-bernanke-can-t-refinance.html

[Vegas69]

And this is the guy pulling the strings. :bang: :lol:

[GregWeld]

As a Gen Y or whatever (we're 30), I can say that I am in NO WAY interested in buying a home right now, even if we could afford. We briefly looked at buying a condo, because Rent$ to Loan$ (even with 3% FHA down) were about even; but I bet we would be in Mariana trench within 24 months.

The Bay Area is oozing with greed right now, so I am choosing to be fearful. Bidding wars against overseas buyers may provide an adrenalin rush that software engineers would otherwise never experience, but I'll pass on the fun.





I do think each persons perspective is based on where they live. There are so many different regions... and one city to the next can be a completely different market.

Housing is supported by employment and payrolls. Cities with low employment and high payrolls have fundamentally higher housing costs. The economy can support it. High unemployment and or low wage - the housing market will be a completely different story. Seattle - San Francisco - New York City.... they're going to command top dollar. The bright side of that is that as real estate appreciates -- usually figured as a percentage -- you're rewarded with a much larger appreciation. You'll also be rewarded longer term as the costs rise around you and you are living in a fixed payment home.

I'd rather "pay up" in a good market than buy anything in a crappy market.

[PBarkley]

^ Kinda what I was thinking. It may seem foolish at times, but when it comes to things like buying a house, I don't look at the world economy or even our national economy. I'm living locally, I'll see how my town is doing and base my assessment off that. Savannah/Chatham is booming (Savannah Port expansion, Gulfstream continuing to hire, etc) and houses are now being built in subdivisions that nearly died in the '08 crash.

I missed an opportunity last year due to an incompetent realtor on the seller's side, but I just went under contract for a house this week and I couldn't feel better about it.