Housing Crash?

The Marginal Home Buyer by Gary North.

There have been quite a few articles recently from all over the place talking about an imminent housing crash. As housing prices have continued to grow at record speed, I've begun to believe them. Living in the SF Bay Area, I have seen probably the most dramatic housing boom in the world.

Since I am stubbornly unwilling to buy a house on 0% or 5% down, we have been unable to "get in", with prices rising enough to stay always out of reach. It's frustrating, to be sure, and the inevitable "I've missed the only chance we ever had" feeling nags at me once in a while. But I look at the prices, and it just boggles my mind. The fundamental question that bothers me is: Just what has happened in the Bay Area to make houses worth so much?

Has the weather improved? Has the job market gotten better? (dfeinitely no on that one) Have wages gone up? Have homes started to attract stray $20 bills like some sort of money magnet? What?

The answer is that people are buying solely because they think prices will continue to go up. If there is a better definition of a mania, I don't know what it is. Buying just because everyone else is.

But, knowing my luck, I'll be wrong. And even if housing plummets 50% from current prices, that's only back a few years in terms of prices. I'll be glad I missed the top, but if I just could have bought in the 90's! To all my friends with houses, all I can offer is: Don't increase the size of your mortgage no matter what!

Comments

[Stephanie]

its craziness... good thing Jason and I are looking to buy in Provo, Utah instead of here in the OC. :)

[Allen Jeng]

Gosh John ... I'm pretty much in the same boat as you are -- don't want to do the lame 0% or 5% down because that's really risky, not to mention giving extra interest to banks when you can invest em? My wife Fanny and I look at houses from time to time just for kicks -- the scary part is that the last cool place that we saw was a condo near Intel (Rivermark plaza) - can you belive that a brand new 1,000 sq ft 1 bedroom, 1 bath condo goes for a whopping $460,000? There's also the single family community over there near Sunnyvale DMV. The 32 unit houses went for as low as $890K and as much as $960K. They were SOLD OUT before model homes were finished... not to mention the 90+ names on the waiting list hoping to grab the last 3 available unbuilt houses. Hello people... almost 1 million bucks ... right next to Sunnyvale DMV? That's total madness!

After reading lots of articles from Mercury News online and hearing from people in the housing market, people are treating the real estates in bay area as "investments"! People buy them on 0% ARM and hope that the house will raise in value after 6 months to 1 year then sell it for a profit.

It's nice that people are investing -- but this feels more like greed. A quick cash turn around... safer than stocks, faster than CD or bonds. At times, this kind of lure seems tempting to us as well! But then, from God's prespective, how should we view this?? An investment or pure greed? It definitely feels like pure greed out there -- I mean ... if it's greed, there will come a time when people are going to say -- this housing market is ridiculous ... thus all those "investors" will have tons of houses on their hand as price starts to drop.

Comments? Love to start some discussions on that!