Bah!
I’m selling condo’s right now for $285K! Southern NH. Easy commute to 128 area jobs. Three bedroom, three baths. Drive under garage. It’s worth every penny!
A Deflated Supply via regulation opinion from last Spring by Harvard Professor of Economics; Edward L. Glaeser:
[quote]
Rising housing prices over the past ten years can always be explained by another omitted shifter of demand. However, evidence on construction suggests that demand alone cannot provide the answer…The increasingly common combination of rising prices and tiny amounts of construction pushes us to focus on housing supply…Soaring home prices are primarily coastal phenomena that have left the growing states of the American interior untouched…The places that are building have little housing price appreciation and the places that have housing price appreciation are not building. Demand alone can’t explain the difference in housing price growth between New England and the South Atlantic. Florida alone permitted almost as many homes in 2002 as all of New England did over the entire five-year period. If we want to understand why housing is so expensive, then we must understand why housing supply in New England, the Middle Atlantic States, and California has become so inelastic. Housing supply research is also necessary because regional growth rates depend on the rate at which these regions build homes…
In Manhattan, the average price for condominiums has topped 600 dollars per square foot. In San Francisco suburbs like Marin or San Mateo counties, median housing values hover around $500,000. The physical costs of new construction do not explain these high prices. Something else must be making supply inelastic.
There are two primary hypotheses about why housing supply has become so inelastic in some areas.[ol][li]These places are high density and they are simply running out of land.Housing prices are the result of land use regulation, which deters new construction (read: building up), not the absence of land…regulation --not land shortage – lies at the roots of high housing costs[/ol]…Increasingly inelastic housing helps to explain high housing prices on the American coasts. This inelasticity is itself the result of an increasingly tough regulatory environment that deters new construction. The big question that remains is: what are the causes of these regulatory changes? Why is San Francisco so toughly regulated, but not Las Vegas? Why was Los Angeles a developer’s dream in the 1960s, but not today? To understand the rise in housing prices, we must understand how local homeowners have become increasingly interested in blocking new construction and increasingly able to do so[/li][/quote]
From the State of the Nations Housing Harvard Report 2004:
In spite of the baby bust, demand is expected to rise while currently mortgage deliquencies relatively low.
I don’t know what conclusions you wish to draw, but an exodus off the coast leading to a market crash in those areas remains a possibility. Common sense tells you, when a home owner sees his property value fall below the financed value, they’ll just drive on down to their mortgage banker, hand him the keys and say, ‘here, it’s yours’.
Etc, etc.
Why all the sad faces? Sure, the real estate market may be a bit overvalued. If prices drop then some people might be in for tough times. But, I don’t see any reason to be moping about in this situation.
Home ownership rates are at record highs.
Interest rates are at record lows.
House values continue to rise.
These are all very good things. Even if the market goes down significantly, people will be OK if they have locked into a good rate. If someone is planning on living in a home for a long time and they get an interest only mortgage, then they are too stupid to deserve our sympathy.
It’s as if you’ve won 15 times in a row at the casino and your cursing your back luck because of all the work it will be spending the money. Be happy, fer crissakes people! Some day times won’t be so good and then you can complain all day. But complaining now just seems like uncalled for pessimism to me.
What goes up, must come down. Or have we forgotten the dot-com bubble already?
Not to hijack the thread, but I think that unless the mortgage has been paid off and wrapped up, using the term “home ownership” for someone with 20-some-odd years to pay off the darn thing doesn’t really count.
Actually, that’s kind of what I did from 1988 to 1993. Not that I could’ve predicted what would happen in Asia at the time. But prices were too high in my neighborhood so I just muddled through life as a renter. When prices became more reasonable we bought. Smartest (OK, luckiest) move I ever made. Not just financially, but the satisfaction of owning is, as they say in the commercials, priceless.
Biggest problem: The house has gone up in value so much that I risk a lot of money by staying put. And we love our neighborhood. But I do find myself thinking a lot about following Sam Stone’s advice - sell, buy something in a lower cost area - and live off the difference.
FWIW I think we’re heading into a big stock market boom right now, which should keep housing prices from falling for a few more years.
I think that’s one of the reasons Vegas values are going up. People from L.A. sell their homes for a lot of money and decide to move somewhere cheaper - but not the middle of no where, and Vegas fits that bill better than Albequrque. They don’t need a great job - their mortgage will be paid off in Vegas from the capital gains of whatever they owned in L.A., they figure they’ll need a job that gets them medical bills, pays the property taxes, and lets them eat.
Demand in Vegas goes up, prices go up. Eventually Vegas won’t be so attractive to relocated Las Angleans. Prices stablize (or go down).
This is what $400,000 buys you in Fair Haven, New Jersey.
$500,000 in Rumson, New Jersey will get you this.
Sea Bright, New Jersey is a much better value. $400,000 buys you this, which has TWO bathrooms.
That’s insane! Those aren’t exactly highly in demand locations, are they?
Who buys houses like that?
By the way, not one of those houses would be worth more than $150,000 in Edmonton.
This is an example of what $184,000 will get you in the Houston suburbs.
My god, you’re right, it’s terrible! Based on that link, $184,000 in Houston apparently gets you nothing!
Damn, I was still logged into their database, maybe that’s why the link didn’t work. Now logged out, let’s try again.
Try This
Eastern Monmouth County, where I live, is within commuting distance from Wall Street by high speed ferry. A lot of people in the area are Wall Street investment bankers and brokers - who are among the highest paid people in the world. These are small, quiet towns, close to the ocean, with very good public schools. Fair Haven and Rumson are located on a peninsula. The police have nothing to do. Consequently, children here enjoy a great ‘free-range’ childhood, riding their bikes to the river to fish off the dock.
The real estate prices here are mind-boggling.
Here is the biggest joke - a bunch of shacks strung together for $475,000. The ‘house’ is on a pond, and the buyer would tear it down and rebuild.
I have no idea who is buying the houses. I did read this article last week and thought it was interesting.
"The percentage of households in California able to afford a median-priced home stood at 18 percent in March, a three percentage-point decrease compared with the same period a year ago when the Index was at 21 percent, according to a report by the California Association of Realtors (C.A.R.). The March Housing Affordability Index (HAI) declined 1 percentage point from February, when it stood at 19 percent.
In San Diego County, the percentage of households able to afford a median-priced home dropped to 10 percent in March, down from 11 in February and 15 in March 2004
The minimum household income needed to purchase a median-priced home at $495,400 in California in March was $115,910, based on an average effective mortgage interest rate of 5.81 percent and assuming a 20 percent down payment. The minimum household income needed to purchase a median-priced home was up from $97,290 in March 2004, when the median price of a home was $428,060 and the prevailing interest rate was 5.48 percent."
Here is what $369k buys you near where I used to live in Indiana, over here 300k gets a 3000-5000 sq ft house built in the last 20 years. The real estate boom seems to mainly affect the coastal areas and those of us in the flyover states are still doing fine, in fact my older brother built a 1800 or so sq ft house for around 95k last year.
What I don’t understand is why a shack sits on a piece of property worth that kind of money. You’d think if someone could afford a half-million dollars for a house, they’d buy the lot, raze it to the ground, and put a modern house on it. That’s what happens a lot here in Edmonton - in the prime real-estate areas (river valley, lots overlooking the city, etc), the real-estate is just too valuable to allow some 900 sq foot shack.
I mean, if it’s an old historical house, that’s one thing. But those New Jersey houses look like dumps.
Is it zoning laws that prevent those areas from being recycled?
Wow! Here in Edmonton we have some of the cheapest real-estate in Canada, but you still couldn’t buy a house anywhere near that kind of quality for that much money. Why the bargain? The construction cost alone of a house like that would be more than $180,000, never mind the property. In fact, I don’t think you could build a 3,000 sq ft house out of brick these days for less than $250K for just the house.
We almost moved to Florida in the early 1990’s after seeing how cheap real-estate was there. We looked at a house in Ft. Lauderdale in 1991 - it was a ranch-style bungalow with a double attached garage, about 10 years old, with a sunken swimming pool in the back. It was a good size - around 1700 sq ft as I recall, in a nice neighborhood, and beautifully landscaped. It was under $100,000.
Given by the prices shown so far in this thread, I’d say the ‘housing boom’ is very much a localized phenomenon. Clearly some areas are still very affordable and maybe even under-priced.
I agree that it’s localized. Where I am now I bought last year
1905 Victorian Mansion
4500 (or so) sq feet.
4 levels
Four bedroom (could be five but I have an office in the top level instead of a bedroom)
$80,000
Of course, you have to live in Marietta.
Here’s some more data for you from The Washinton Post.
I tell you what…that sort of cavalier attitude toward indebtedness scares me. I’m not some old geezer. I’m 38 years old and have purchased 3 homes in my life (with luck soon a fourth). And I treat debt like I would someone with an undiagnized disease: you might have to approach it but you don’t have to like it and you want to get rid of it as quickly as possible.
It scares me too, but it makes economic sense for a lot of people. When you can get mortgage money for 5%, and you’re sitting on hundreds of thousands of dollars of equity, it doesn’t make sense to take out 10% car loans and 8% lines of credit. And it makes even less sense to maintain 18% balances on credit cards. So refinancing and using it to pay off higher cost debt makes sense.
But the problem is that once the credit cards are clear and the overall monthly payments are low, it’s just too easy to take on even more debt. Where people get in trouble is when they load their credit cards up with $20K in purchases, then pay it off by refinancing the mortgage, and then just run the credit cards back up again. And far too many people are doing that.
The other mistake people make is to use cheap loans and loose lending rules to live beyond their means. Here in Alberta, you see a lot of young working class males driving around in $40,000 trucks. The auto companies will lend them the money, or they keep their monthly payments low by leasing instead of buying. These are people making $40K a year, driving vehicles that depreciate almost $10K a year in the first two years. This is crazy, but the costs get hidden or spread out such that they just don’t see it. And if you can use the money from your home equity to buy the truck, it looks almost free. But in five years the truck will be worth $15,000, and the 25 year mortgage they took out of their house to pay for it will be barely dented. It’s a good way to dig a deep hole for yourself.
Those houses ARE dumps. The prices are a joke. 2 bedrooms, one bathroom, for 400K?
Rumson and Fair Haven are very small towns, with limited real estate for sale. Most of the houses are um…pretty sweet. What I didn’t show you are houses like this, on the water for $5,200,000, or this, listed for $9,500,000, or this, for $6,250,000, or maybe this, for $4,950,000. Hey, it’s got nine bathrooms!
When the people who live in these houses sell them, they take all their money and move to Las Vegas, and drive up the price of real estate there. One of these days, maybe you’ll see me coming your way.
The Cleveland market is really, really strange.
The population of the region isn’t growing, but urban sprawl continues; household sizes are shrinking, so the same amount of people are taking up more space.
On the average, housing is affordable – $100 a square foot or so for an older house ina middle-class neighborhood. Taxes are on the high side, and natural gas is very expensive, but housing here won’t break your bankbook, The quirks, though:
-
Most new houses are very expensive. Unlike the 1950s through the early 1990s, no new hosues are being built for middle income groups; everything new is high-end, at least in eastern Cuyahoga County and Lake County. Even in older, middle-income areas where housing is relatively cheap, a new infill house will cost two or three times as much per square foot as an existing home. A pre-WWII 1,600 square foot house in Cleveland Heights might sell for $140,000, with an infill townhouse of the same size across the street selling for $400,000. Some new 1,800 square foot patio homes in Lyndhurst are selling for $450,000, surrounded by 1950s era ranch houses selling for $150,000. What. The. Fug.
-
I’ve never seen a market where school districts had such an influence on home prices. I live in South Euclid, an older eastern suburb of Cleveland. A 1,600 square foot house here might sell for about $130K to $150K or so, depending on the amount of updates that have been done. Cross a street and enter Beachwood, and that same house will set you back $230K to $250K. The schools aren’t that much better in Beachwood, but for the two houses in South Euclid that were on my final list, both owners were moving to Beachwood – for the schools.
I’m trying to find a second job, to save up for a down payment for a second house. My investment strategy - a two-family house near a growing Orthodox Jewish temple, or a two-flat in a section of Cleveland Heights with a pedestrian-oriented business district.