Bubble or no bubble?

Housing Bubble
Home prices in Ca. rose about 25k in ONE MONTH. That was an 8% increase and 24.% from last year. WOW!!!! LA county home prices were up over 24% from last year.

This jump is being fueled not only by scarce inventory but by the fact that more expensive move up homes are involved.Flips are up big time and 30% of sales were by absentee owners.

So is this sustainable? Home prices are rising faster than incomes which can predict bubbles.

The experts got it wrong the last time around. (not me). I got out and told my students to do so also.

What do you think-bubble or no bubble?

Some say that this is just a reaction to long time pent up demand and that as more people put their homes up, prices will settle. Also, interest rates will start to rise as the feds stop pumping money into the system.

I agree. Prices will slow down. Some of the hedge funds will realize that this is not an easy business and dealing with tenants is not all its cracked up to be. Some of the get rich quick in real estate seminars will die down as folks realize you can’t do things the old conventional way and expect to make money. So with inventory rising, and less people competing for deals, prices will slow.

That means you should be careful about what you buy right now.-don’t get caught up in the fever. Only buy below market. However, if you are anticipating a rise each month in prices, factor that in when you are determining your after repaired value. If you are looking at a buy, fix and flip-holding for about 4 months, prices should be higher when you sell I think that a conservative amount would be 1% rise each month. So figure the arv to be 4% higher when you sell.

You need to know the market and how to find deals. Its not just searching the MLS. That is so yesterday. You need help in determining what works today.

Consider joining my small group mentoring starting May 18th.Call the office to find out more-310-792-6404.

To learn what really works in today's real estate market CLICK HERE

Be Sociable, Share!


Bubble or no bubble? — 2 Comments

  1. Hello Phyllis. I wrote to you in early 2006 echoing your thoughts on the EXTREME bubble we had in CA. In fact, I had sent out 1000 postcards in Sept. 2005 with the headline HOW HIGH IS TOO HIGH. I had a graph of interest rates and prices in my area of Sacramento, showing annual increases of 20% for about 5 straight years. It really was insanity with the affordability index at 8%. Prices HAD to drop, and of course, they plunged here 60% so this valley became the black hole of real estate.
    As for the current market, I agree it bears close watching, but we have only a 21 day supply of inventory and since I am usually early on every financial decision I make…..stocks, or real estate, I am thinking that unless the economy implodes from speculation in stocks and homes, another recession(possible), I think I will sell late next spring. I still find deals that provide around a 7% cap rate here, but that is ONLY if you can buy it below market value, as you suggested.
    Ok, speech over!
    Thanks for reading……I enjoy your emails!
    Carl Cooley, R.E.Broker
    Carl Cooley investment Properties
    Citrus Heights, CA

    • Good thinking about maybe selling next year. I do think that things will slow down but at the same time, the economy is improving(because of real ESTATE) SO we will still go up but at a more dignified rate.

Leave a Reply

Your email address will not be published. Required fields are marked *