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is this a bubble?

March 25th, 2016 at 12:07 am

A house near to us went on the market for $868k for 4 bd/2.5 ba, 3028 sq ft with a 4400 sq ft lot. It went on 3/23/16. The craziness? It was bought last year 2/20/15, yes 13 months ago for $789.9k and no work has been done.

The house was built in 2012 and sold 6/1/12 for $669.9k. Then sold less than 3 years later for $100k more, but now in 13 months the sellers are asking $78k more than they paid or 10% appreciation. How much longer will this type of appreciation last?

The sellers are moving back to where they are from. They bought because of course you make money and renting is a waste. So if we had bought last summer before DH quit, with our cash and credit would we have made 10% in 6 months? I think maybe.

I'm sitting here pondering because we planned on looking this summer. But I'm really nervous this is going to turn ugly. That we'll again buy at the peak of the market in a market we don't fully understand.


7 Responses to “is this a bubble?”

  1. creditcardfree Says:

    I'd talk to your realtor about the area. I completely understand not wanting to buy at the peak. It takes a really long time to recover. But then again, if you are looking to be in your home long term does it matter?

  2. LivingAlmostLarge Says:

    CCF you sound like DH. He doesn't care because he says we'll be here a long time. Last time it was 10 years and we rode out the peak of the market we bought at to a new high.

  3. snafu Says:

    I'm guilty of that thinking too at one level but I believe a house is 1st a shelter and support for the family, I have a separate investment plan and do my best to stick with it even when I'm frightened. I'm more alarmed that people have hardly any equity in a home in a year. The payments may be unaffordable given factors in their lives, goes for interest, taxes, insurance, PMI, HOA and whatever else they can role in. The price bought and sold adds additional factors like realtor fees, assessments, mortgage brokers, transfer fees and more. Worse yet, statistically, the percentage of workers able to afford/qualify to buy a house is shrinking. Less people can afford to buy the house under discussion.

    I'm not confident the milleniums want to buy a house, they operate on a different system of values. However, I recall my dad saying how puzzled he was by the change in values demonstrated by my brothers and I. His issue was that while his and mom's brothers, sisters knocked themselves out to live nearby one another, our generation married partners from other cities, and sought employment 'adventurers.'

  4. AnotherReader Says:

    You are competing with money from Asia, primarily China. Those folks have plenty of cash and are anxious to establish a home base in the US or Canada. If the Chinese economy goes south or the government restricts the flow of money out of the country, the music will stop and prices will fall. Unless and until that happens, you are going to be in a very competitive market.

    To folks from China or other Asian countries that prefer cities, San Francisco looks relatively cheap compared to London or Manhattan. Seattle, Portland and Vancouver also look cheap. Those folks don't see a pricing problem.

    I live in Silicon Valley. We have seen the boom and bust cycles before. The tech economy is the primary driver here, with Asian money a close second. I would not buy here today, because I'm pretty sure the law of economic cycles has not been repealed.

    Also, the density of people in the Bay Area has become intolerable. Population density, traffic, and access to amenities for the next ten to fifteen years would be part of my consideration of whether to buy or rent as well.

  5. ceejay74 Says:

    That's an interesting point AR, because I was thinking as I read this post that I don't see another bubble happening with wages stagnating the way they continue to. The last bubble I believe was propelled by other economic growth enabling people to borrow more and more (enabled by banks willing to offer risky loans). But money from other places where wages aren't stagnating would explain this huge growth in LAL's area that's not being seen in many other parts of the world (that foreign investors might not be as interested in).

  6. rob62521 Says:

    Wow. That's all I can say. It must be in a different area than where we are. Houses are not going up here, but our economy is pretty bad and I live in Illinois that STILL does not have a state budget.

  7. LivingAlmostLarge Says:

    Snafu, I mentioned that as well that how are people affording these homes so easily? I know people make good money and Dual income families are likely making $200k but is that the new norm? I am a little curious that people make so much when the median income is $60k for a family. I ask because if less than 5% of the us population makes over $100k and about 1% makes $250k family how are people affording these homes? But AR might be right. It might be more investor driven than us citizen affordability driven.

    AR what's the law of the economic cycles? What do you mean boom and bust? How long between cycles? How do people compete to buy and live? Is renting the only answer?

    CeeJay, I thought wages had stagnated too and I'm surprised how many people are affording homes so easily. I'm also surprised people make so much money.

    Rob I don't understand it either.

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