Housing Bubble is Now Not "Pssssst....." but "KABOOM!"

Oh, great! We'll be putting our house on the market in July. Just peachy. First time we've moved in 12 years. Timing is everything, eh!

Posted by Donald Sensing at April 27, 2007 11:55 AM

I've been following the housing bubble at places like http://thehousingbubbleblog.com/ for several years now. It was a great relief to me when I first ran across these sites because there was a certain amount of feeling that somebody must be crazy in the housing industry, and they told me it wasn't me!

Any time you inject money into a system, the prices go up. Econ 101, but remember, "things are different here" and "the old rules don't apply."

If people tell you that the old rules don't apply, hold on to your pocketbook because they do— oh boy, they do. And unfortunately, a whole lot of economic illiterates are set to find that out in the next few years.

Posted by B. Durbin at April 27, 2007 12:16 PM

In beautiful Dana Point California a development project called "Strands At The Headlands" recently sold $148 million of beach front lots with an average price of $7.5 million with 7000 square feet of California Tierra Oro.

A cash deposit of $250,000 is required to hold them. Housing bubble? Bubble....we have no stink'n bubble!!!! This housing cycle was fueled by seller's greed and buyer's fear of losing out on the American Dream.

What happened was the middle class was sqeezed even more and buyers who could not afford the dream didn't want to be left out in the cold.

What is the result of all this? A lot of grief, nashing of teeth and rage against the machine, but for those few who see the opportunities they will not wait to grab their fair share of bloody profits.

Oh well, just another day in paradise.

By the way, those lots I wrote about earlier, besides the normal property tax, all 44 property owners will pay $30,000 a year in "special assessment" fees for 30 years. Boy, if I remember correctly, $30,000 is more than the average income in the United States.

Well, the rich get rich and.... Not that there is anything wrong with that!

Posted by Robert Hows at April 27, 2007 12:43 PM

But not at Costco, right? ;)

Posted by Black Rabbit at April 27, 2007 3:46 PM

How much you spent on rent in the last 10 years? What's your return on it? No matter your timing, you couldn't have lost that much by owning.

Posted by curtis kreutzberg at April 27, 2007 4:20 PM

Some hows I just knew you'd have something to say about that and would not be shy in sharing.

You are right there is seldom a bubble at the beach. Just a tsunami from time to time.

Posted by Gerard Van der Leun at April 27, 2007 5:04 PM

The rent-vs-buy argument always surfaces and I in no way would denigrate owning a home if that's what you want to do.

There are, however, situations where renting is by and large a much better deal than owning. I would suggest that for many areas of the country that's where we are now.

As for "losing" money on rent, well that depends on what the rent vs. buy ratio of costs actually is and, if you have a savings from renting vs. buying, what you do with that savings. If you spend it on happy meals you lose, true. But if you take the savings and invest it wisely in the market you'd be seeing a nice enough return. Maybe even enough to let you buy a house.

If, for instance, you rented a house at 1,500 that would have cost you 3,000 a month to carry and took the left-over 1,500 and bought Apple and Google consistently month after month for the last ten years..... well, you'd be ahead of the curve considerably.

That said, the rent vs buy argument will always be with us. If you want to buy now, buy. If you want to sell now, sell. The bubble only breaks in the faces of those who buy too late or sell too early. And those who have mortgaged their lives to the mortgage companies. You can see tale after tale o woe at









plus my long time favorite, if not now very active,


Posted by Gerard Van der Leun at April 27, 2007 5:15 PM

Yah. I can either pay my rent every month, eat healthy, and have some extra cash for fun or emergencies or pay a crushing mortgage for half as much space (if that), eat ramen, and do nothing aside from work two jobs for the next decade. Plus have no savings whatsoever.

Sometimes renting is a better deal, and in most of California that is now the case.

Posted by B. Durbin at April 28, 2007 12:16 PM

Thanks for waiting to buy until after my daughter got out of her house last year.

About four years ago, after I, the financial conservative in the family, was safely out of town and on the other side of the Continental Divide for several weeks, she called to tell me she was buying a house. In fact, she had already found the house and put a contract on it. It was the second house she looked out. Seems her father had decided it was time she owned her own home and he was going to help make it happen.

And would I like to help? I ask a few probing questions like what did it cost? how many square feet? what about the inspection? and on and on. More I heard, the more queazy I became.

Since it was a fait accompli, I ended up declining investing, saying it didn't sound like a very good investment to me. It had three times the number of square feet as my home, a roof and furnace whose bilogical clocks were ticking, and was far, far beyond her financial means.

But what's a mother to do but bite her tongue? I ended the conversation something like, "better thee than me." "But it's adorable," she said. I gave her the last word. She moved in for three years. And indeed it became a money pit. But to her credit, she and her boyfriend, who's into remodelling, put some work into it, and she especially scraped and sanded, in much of her free time.

I kept my mouth shut as best I could as I continued to read and sense the housing bubble getting overblown. Okay, occasionally, I said a few subtle things.

The the phone call that every mother prays for, but never holds her breath to receive finally came last spring, a year ago, from my daughter:
"You were right mom. I have to get out of this house. Can't afford it anymore. I'm putting it on the market in two weeks."

Did she really say I had been right? I restrained myself from too much ebullience and merely responded, "Wow, that sounds like a good plan to me."

To her great credit, she sold it, made a dashing profit, paid off her debts, including the one to her father, bought and paid for a darling little condo that is well within her means.

And all before you bought into the market, and the bubble broke!

Glory be. Seeing a loved one get out of financial bondage to any and everyone is truly a gratifying experience.

Posted by Webutante at April 29, 2007 1:04 PM