Reality check on realty
December 29, 2015 5:08 PM Subscribe
American House Prices. FIVE years after the house price crash that nearly took down an entire financial system, America’s property market appears to be in rude health: prices have appreciated by 17% over the past three years. But that statistic hides vast differences in housing markets across America The graphic gives valuation assessments for 25 major cities in the context of what has happened to prices over the past 35 years, and allows you to plot and compare them.
But even if they do stand firm, who wouldn’t prefer a small slice of San Franciscan silicon over a rusting lump of Pittsburgh steel?
I don't know, someone that doesn't have a million dollars, and maybe wants to buy a $50k house and potentially renovate it for profit? From what I hear, Pittsburgh is not nearly the shithole the Economist folks assume it to be.
posted by RobotVoodooPower at 5:27 PM on December 29, 2015 [22 favorites]
I don't know, someone that doesn't have a million dollars, and maybe wants to buy a $50k house and potentially renovate it for profit? From what I hear, Pittsburgh is not nearly the shithole the Economist folks assume it to be.
posted by RobotVoodooPower at 5:27 PM on December 29, 2015 [22 favorites]
Pittsburgh is a great place, but definitely has some rough neighborhoods. Like any city.
posted by glaucon at 5:30 PM on December 29, 2015
posted by glaucon at 5:30 PM on December 29, 2015
In San Francisco, thanks to a tech boom and constrained supply, prices have increased by 50% over the same period, and have now surpassed their 2005 peak. While prices in Las Vegas—where housing was built like billy-o leading up to the crash—have increased by the same amount, they still remain 40% below their peak.
When we were looking at houses a few years ago, it would come out casually that various Boomer couples we knew owned three, four, or more houses in our relatively expensive city. Oh yeah, the Smiths have that pink colonial down the street for their college-age daughter, and they're fixing up that brick ranch one block over. These were what I thought of as middle-class families with normal jobs. You sometimes hear about rich foreigners buying up all the available real estate, but I didn't realize how common it was for "regular folks" to be sitting on large quantities of housing stock. I can't imagine the supply-demand equation looking reasonable again and housing costs coming into line with incomes until their generation relinquishes their hold on all the real estate that they bought when prices were sane.
posted by Ralston McTodd at 5:45 PM on December 29, 2015 [5 favorites]
When we were looking at houses a few years ago, it would come out casually that various Boomer couples we knew owned three, four, or more houses in our relatively expensive city. Oh yeah, the Smiths have that pink colonial down the street for their college-age daughter, and they're fixing up that brick ranch one block over. These were what I thought of as middle-class families with normal jobs. You sometimes hear about rich foreigners buying up all the available real estate, but I didn't realize how common it was for "regular folks" to be sitting on large quantities of housing stock. I can't imagine the supply-demand equation looking reasonable again and housing costs coming into line with incomes until their generation relinquishes their hold on all the real estate that they bought when prices were sane.
posted by Ralston McTodd at 5:45 PM on December 29, 2015 [5 favorites]
If I'm reading the chart correctly, houses in Boston are dramatically lower in inflation-adjusted dollars than when we first moved here in late 2004, which is certainly something I wouldn't have guessed from how hot the market is now. What do you know, the half-a-million fixer-upper we bought last year was a bargain!
posted by Horace Rumpole at 5:52 PM on December 29, 2015 [1 favorite]
posted by Horace Rumpole at 5:52 PM on December 29, 2015 [1 favorite]
I know a lot of middle class boomer families with two houses. Usually it is their first house that they kept as a rental, or a second place they bought for a kid in college as a better option than renting.
But I don't think this is a big enough thing to be skewing prices nationally.
posted by Dip Flash at 5:57 PM on December 29, 2015 [2 favorites]
But I don't think this is a big enough thing to be skewing prices nationally.
posted by Dip Flash at 5:57 PM on December 29, 2015 [2 favorites]
I'm still waiting for people to get over the delusion that a slowly decaying pile of sticks and shingles is supposed to be an appreciating asset. Cars fall in value over time, houses should too.
posted by MikeWarot at 6:09 PM on December 29, 2015 [13 favorites]
posted by MikeWarot at 6:09 PM on December 29, 2015 [13 favorites]
They do, without massive investment in maintenance. It's the land they're sitting on, more or less, that appreciates. As they say, they aren't making any more of it.
posted by Horace Rumpole at 6:13 PM on December 29, 2015 [11 favorites]
posted by Horace Rumpole at 6:13 PM on December 29, 2015 [11 favorites]
They're not making any more land? Ever seen the volcanoes in Hawaii? I'm not sure this puts any significant downward pressure on Hawaiian real estate values, though.
In Pittsburgh, house values in some neighborhoods and for some types of housing are going up quite well. But I'm sure that's not true of every neighborhood.
posted by Anne Neville at 6:22 PM on December 29, 2015
In Pittsburgh, house values in some neighborhoods and for some types of housing are going up quite well. But I'm sure that's not true of every neighborhood.
posted by Anne Neville at 6:22 PM on December 29, 2015
DC still down about 25% from the peak - sounds about right. DC proper is booming, but if you are out in the suburbs you are still screwed. House that just sold in my neighborhood is (I think) the first non short sale / foreclosure since 2008.
posted by COD at 6:25 PM on December 29, 2015
posted by COD at 6:25 PM on December 29, 2015
Unless I missed it, I'd like to see the housing price rebound include race as a measure. It's my understanding that African American houses saw the biggest price drops, and I'm curious what they're seeing for gains.
I'm not sure that data exists in a comprehensive way. AFAIK, banks above a certain size are required to report data on loan applicant's race, but that info isn't recorded as part of the sales process itself. So sales with no mortgage (30% or so) aren't caught, sales where the purchaser uses a small bank aren't caught. You can use census data to look at the ethnic composition of a given neighborhood and then look at home value data, but it's not exactly one for one. The census only does the household survey every five years, IIRC. So in say, a gentrifying neighborhood you might have census data saying the racial mix is such and such, and home value data saying the prices have risen 15% in the past few years, but no data reflecting the change in the racial composition of the neighborhood. Plus it's hard to really suss out ethnic differences from overall geographic trends. Zillow did a report on this a few years ago. They pointed out that if they look at households in predominantly Asian communities they recovered better than the national average. But, predominantly Asian communities are concentrated on the West Coast, California in particular, which itself has seen a much stronger home price increase than the national average. So are Asian doing better, or are Californians doing better? Etc. One could make a converse case for a city like, say, Detroit or some of the other Rust Best cities, I expect.
It may very well be the case that African American communities have been slower to recover --- they certainly bore the brunt of the worst of the bad lending that went on. I just don't know that we have data to bear it out.
posted by Diablevert at 6:27 PM on December 29, 2015 [1 favorite]
I'm not sure that data exists in a comprehensive way. AFAIK, banks above a certain size are required to report data on loan applicant's race, but that info isn't recorded as part of the sales process itself. So sales with no mortgage (30% or so) aren't caught, sales where the purchaser uses a small bank aren't caught. You can use census data to look at the ethnic composition of a given neighborhood and then look at home value data, but it's not exactly one for one. The census only does the household survey every five years, IIRC. So in say, a gentrifying neighborhood you might have census data saying the racial mix is such and such, and home value data saying the prices have risen 15% in the past few years, but no data reflecting the change in the racial composition of the neighborhood. Plus it's hard to really suss out ethnic differences from overall geographic trends. Zillow did a report on this a few years ago. They pointed out that if they look at households in predominantly Asian communities they recovered better than the national average. But, predominantly Asian communities are concentrated on the West Coast, California in particular, which itself has seen a much stronger home price increase than the national average. So are Asian doing better, or are Californians doing better? Etc. One could make a converse case for a city like, say, Detroit or some of the other Rust Best cities, I expect.
It may very well be the case that African American communities have been slower to recover --- they certainly bore the brunt of the worst of the bad lending that went on. I just don't know that we have data to bear it out.
posted by Diablevert at 6:27 PM on December 29, 2015 [1 favorite]
I'm still waiting for people to get over the delusion that a slowly decaying pile of sticks and shingles is supposed to be an appreciating asset.
https://research.stlouisfed.org/fred2/series/LFWA64TTUSA647S shows the working-age population has doubled since the 1950s.
More importantly for real estate valuations, two-income families have doubled (well, up 2/3 more or less), and the mortgage rate has fallen by half since the 1960s.
All this is pushing valuations up, up, up. What isn't helping matters is this:
https://research.stlouisfed.org/fred2/series/CUSR0000SEHA which shows how nominal rents have tripled since 1980 and doubled since 1993.
It's worse than that I think in areas of higher demand and less supply. What I rented for $700/mo in West LA ca. 1990 now rents for $2500 (!). Same decaying sticks and bricks, but the location value has increased dramatically.
posted by Heywood Mogroot III at 6:49 PM on December 29, 2015 [4 favorites]
https://research.stlouisfed.org/fred2/series/LFWA64TTUSA647S shows the working-age population has doubled since the 1950s.
More importantly for real estate valuations, two-income families have doubled (well, up 2/3 more or less), and the mortgage rate has fallen by half since the 1960s.
All this is pushing valuations up, up, up. What isn't helping matters is this:
https://research.stlouisfed.org/fred2/series/CUSR0000SEHA which shows how nominal rents have tripled since 1980 and doubled since 1993.
It's worse than that I think in areas of higher demand and less supply. What I rented for $700/mo in West LA ca. 1990 now rents for $2500 (!). Same decaying sticks and bricks, but the location value has increased dramatically.
posted by Heywood Mogroot III at 6:49 PM on December 29, 2015 [4 favorites]
All real estate is local. All real estate markets are local.
Meanwhile foreclosures like the ones I sell compete with "retail" housing-and do bear in mind not all the houses I sell are crapholes. I am thinking of one neighborhood, one with an HOA, pool, amenities, and big houses-I have sold two houses in there this year almost as soon as I listed them, whereas the new construction and conventional sales are like pulling teeth.
And as for the crapholes I sell, the crappier they are the better the investors like them.
The worst thing in the world to be right now in my world is just an average regular house for a regular family in a regular neighborhood. In our market, we have a ton of inventory. People can be picky, and so they are.
(But on the other hand from what I hear Raleigh is a seller's market, big time, with people climbing all over each other to buy. Unlike us, they don't have a lot of inventory.)
posted by St. Alia of the Bunnies at 6:51 PM on December 29, 2015 [5 favorites]
Meanwhile foreclosures like the ones I sell compete with "retail" housing-and do bear in mind not all the houses I sell are crapholes. I am thinking of one neighborhood, one with an HOA, pool, amenities, and big houses-I have sold two houses in there this year almost as soon as I listed them, whereas the new construction and conventional sales are like pulling teeth.
And as for the crapholes I sell, the crappier they are the better the investors like them.
The worst thing in the world to be right now in my world is just an average regular house for a regular family in a regular neighborhood. In our market, we have a ton of inventory. People can be picky, and so they are.
(But on the other hand from what I hear Raleigh is a seller's market, big time, with people climbing all over each other to buy. Unlike us, they don't have a lot of inventory.)
posted by St. Alia of the Bunnies at 6:51 PM on December 29, 2015 [5 favorites]
they certainly bore the brunt of the worst of the bad lending that went on
I'm not entirely sure this is true. The disregulated "bad" lending was a systemic, top-to-bottom thing that rolled across the country like a tsunami, 2002-2007.
And what nobody really understands even today is how this trillion-odd a year of increased home lending buoyed the entire wider economy for several years, 2005-2007, giving us a higher recovery and a much more violent crash when it finally came in 2008.
https://research.stlouisfed.org/fred2/graph/?g=30Om is one crude estimate of the lending overshoot -- $6T. This wasn't all to minority communities . . .
posted by Heywood Mogroot III at 6:54 PM on December 29, 2015 [1 favorite]
I'm not entirely sure this is true. The disregulated "bad" lending was a systemic, top-to-bottom thing that rolled across the country like a tsunami, 2002-2007.
And what nobody really understands even today is how this trillion-odd a year of increased home lending buoyed the entire wider economy for several years, 2005-2007, giving us a higher recovery and a much more violent crash when it finally came in 2008.
https://research.stlouisfed.org/fred2/graph/?g=30Om is one crude estimate of the lending overshoot -- $6T. This wasn't all to minority communities . . .
posted by Heywood Mogroot III at 6:54 PM on December 29, 2015 [1 favorite]
All real estate is local. All real estate markets are local.
Lending is not local. Anymore.
posted by Heywood Mogroot III at 6:55 PM on December 29, 2015 [2 favorites]
Lending is not local. Anymore.
posted by Heywood Mogroot III at 6:55 PM on December 29, 2015 [2 favorites]
St. Alia, why do investors like the crappiest crap holes?
posted by clew at 7:01 PM on December 29, 2015
posted by clew at 7:01 PM on December 29, 2015
I imagine you buy the craphole cheap, fix and upgrade it, sell it for profit. A few people at my work seem to have done this successfully. They either had the cash to hold and fix the property on the side or they had to live in it while doing the fixing.
We saw quite a few these while househunting in LA. Usually a lot of corners were cut. Tons of cheap cosmetics and lots of half-assed work on the substance.
posted by Hairy Lobster at 7:17 PM on December 29, 2015 [4 favorites]
We saw quite a few these while househunting in LA. Usually a lot of corners were cut. Tons of cheap cosmetics and lots of half-assed work on the substance.
posted by Hairy Lobster at 7:17 PM on December 29, 2015 [4 favorites]
That said the crapholes we saw weren't actually significantly cheaper than equivalent non-craphole ones. We saw a 1200sqft house listed for over half a million. The listing stated that prospective buyers couldn't go inside b/c the property was condemned due to toxic mold. Still, plenty of bids and it sold for only marginally less then similar homes in the area.
posted by Hairy Lobster at 7:22 PM on December 29, 2015 [1 favorite]
posted by Hairy Lobster at 7:22 PM on December 29, 2015 [1 favorite]
I imagine you buy the craphole cheap, fix and upgrade it, sell it for profit.
I've met several people in my area, especially professional handymen, who augment their earnings by buying rundown houses (which around here can go for maybe $50K or so), renovating them, and then selling for a $20K-$30K profit. I'm generally leery of the results, though.
posted by thomas j wise at 7:39 PM on December 29, 2015
I've met several people in my area, especially professional handymen, who augment their earnings by buying rundown houses (which around here can go for maybe $50K or so), renovating them, and then selling for a $20K-$30K profit. I'm generally leery of the results, though.
posted by thomas j wise at 7:39 PM on December 29, 2015
Five years ago I would have been defending Pittsburgh's honor but seeing how many people have been moving here from places like Brooklyn and SF lately and driving up home prices, I'll just reassure you that it's still totally a post-industrial wasteland where there's nothing to do but hunt deer and watch football games. Seriously, don't move here, it's awful and you totally can't get great cocktails at metafilter meetups.
posted by octothorpe at 7:51 PM on December 29, 2015 [20 favorites]
posted by octothorpe at 7:51 PM on December 29, 2015 [20 favorites]
I'm not entirely sure this is true. The deregulated "bad" lending was systemic
My sense without doing a deep dive into the numbers right now is that while it might not be correct to say that the majority of the bad loans, dollar volume wise, were given out to minority borrowers (minorities are minorities, after all) it's definitely true that minority borrowers were far more likely to be offered subprime loans. The banks themselves were quite explicit about this at the time; the whole point of subprime was to go after communities that weren't getting conventional loans, and minority communities were a big segment of that.
Subprime was the crux of it. Those were the rot at the core. The foreclosure crisis itself was a broader, deeper, nationwide affair, because once the crash hit and the economy went south people who had lost their jobs or suffered a personal crisis suddenly found themselves underwater and unable to sell. A huge number of foreclosure a fell into that bucket. But the worst of the worst, the stuff that lingered and took years to resolve and got tangled up in court and led to urban blight -- a lot of that was the subprime stuff, the loans that were never properly documented and should never have been made in the first place. Those were more likely to have been offered to minority borrowers and the subsequent problems to play out in those communities.
posted by Diablevert at 8:10 PM on December 29, 2015 [6 favorites]
My sense without doing a deep dive into the numbers right now is that while it might not be correct to say that the majority of the bad loans, dollar volume wise, were given out to minority borrowers (minorities are minorities, after all) it's definitely true that minority borrowers were far more likely to be offered subprime loans. The banks themselves were quite explicit about this at the time; the whole point of subprime was to go after communities that weren't getting conventional loans, and minority communities were a big segment of that.
Subprime was the crux of it. Those were the rot at the core. The foreclosure crisis itself was a broader, deeper, nationwide affair, because once the crash hit and the economy went south people who had lost their jobs or suffered a personal crisis suddenly found themselves underwater and unable to sell. A huge number of foreclosure a fell into that bucket. But the worst of the worst, the stuff that lingered and took years to resolve and got tangled up in court and led to urban blight -- a lot of that was the subprime stuff, the loans that were never properly documented and should never have been made in the first place. Those were more likely to have been offered to minority borrowers and the subsequent problems to play out in those communities.
posted by Diablevert at 8:10 PM on December 29, 2015 [6 favorites]
What is interesting about the Pittrlsburgh graph is that there was apparently no decline at all after the subprime crash. Slow and steady goes the penguin!
posted by grumpybear69 at 8:22 PM on December 29, 2015
posted by grumpybear69 at 8:22 PM on December 29, 2015
So Zillow's regional housing prices track Case Shiller, I assume. But where are they pulling rent data from?
posted by pwnguin at 8:41 PM on December 29, 2015
posted by pwnguin at 8:41 PM on December 29, 2015
I guess the question I have is this: with real wages essentially flat for decades, the "relaxation" in lending standards that indirectly led to the economic collapse of 2008 made sense, as that was the only way for bankers to make more money.
What is driving a rebound in housing prices now?
posted by Automocar at 8:43 PM on December 29, 2015
What is driving a rebound in housing prices now?
posted by Automocar at 8:43 PM on December 29, 2015
Argh, this situation makes me so viscerally mad, I can't even compose a coherent comment. I'm seeing people who want to buy into a hot market getting $300,000 from their parents' retirement savings to do it. I'm seeing friends retiring and making more on appreciation than they ever did in 30 years of working. I'm seeing friends who are moving to the hot markets, sometimes 1 or 2 a month, because that's the only way they can advance their careers -- and that's causing utter havoc in their personal lives. I'm seeing other friends who had the opposite timing get wiped out completely and have to declare bankruptcy before the age of 30.
The house you buy should be a big deal, it's the biggest thing you'll ever buy, but housing prices shouldn't absolutely and completely dominate your life and take precedence over your career decisions, your family decisions, and dictate your overall happiness. But the kind of crazy variability in housing prices over the last 10 years is causing that the be the case.
posted by miyabo at 9:22 PM on December 29, 2015 [6 favorites]
The house you buy should be a big deal, it's the biggest thing you'll ever buy, but housing prices shouldn't absolutely and completely dominate your life and take precedence over your career decisions, your family decisions, and dictate your overall happiness. But the kind of crazy variability in housing prices over the last 10 years is causing that the be the case.
posted by miyabo at 9:22 PM on December 29, 2015 [6 favorites]
But even if they do stand firm, who wouldn’t prefer a small slice of San Franciscan silicon over a rusting lump of Pittsburgh steel?
I’ve never been to Pittsburgh, but I’m still pretty sure that would be me. I can’t see anyway SF and LA aren’t going to have a housing crash again soon. I know, that won’t happen because they’re too special. Everyone always says that right before it happens.
There’s this weird thing people do, where they know the housing prices up to 08 were a bubble, but ever since then have talked about nothing but when prices are going to get back to where they were. Somehow they don’t seem to realize or care that if they do we will have a crash again. I know why investors don’t care, but ordinary people tying their lives up in that is crazy.
posted by bongo_x at 9:59 PM on December 29, 2015 [2 favorites]
I’ve never been to Pittsburgh, but I’m still pretty sure that would be me. I can’t see anyway SF and LA aren’t going to have a housing crash again soon. I know, that won’t happen because they’re too special. Everyone always says that right before it happens.
There’s this weird thing people do, where they know the housing prices up to 08 were a bubble, but ever since then have talked about nothing but when prices are going to get back to where they were. Somehow they don’t seem to realize or care that if they do we will have a crash again. I know why investors don’t care, but ordinary people tying their lives up in that is crazy.
posted by bongo_x at 9:59 PM on December 29, 2015 [2 favorites]
For the majority of people, buying a house should be seen as a hedge, not an investment. It means you're committed to going for the ride, for better or for worse. It's a smart decision for many: since housing costs are a significant portion of your lifetime expenses, it can make sense to lock in a price you feel is affordable. Locking in a hedge like this means that you're protected from any upward movement in price, but you give up any gains you might have gotten from a downward movement in price. Look at a hedge like this as an insurance policy against future price rises.
Complaining that house prices have dropped after you bought it is like complaining that you didn't get sick after buying health insurance.
posted by xdvesper at 10:02 PM on December 29, 2015 [13 favorites]
Complaining that house prices have dropped after you bought it is like complaining that you didn't get sick after buying health insurance.
posted by xdvesper at 10:02 PM on December 29, 2015 [13 favorites]
If y'all want to see house pricing stupidity, hit mls.ca and look at Canada. FFS, how in gods' names can a shitbox in a shittown in shitty interior BC demand hundreds of thousands of dollars? It is beyond stupid.
posted by five fresh fish at 10:13 PM on December 29, 2015 [3 favorites]
posted by five fresh fish at 10:13 PM on December 29, 2015 [3 favorites]
If y'all want to see house pricing stupidity, hit mls.ca and look at Canada. FFS,
We only know from watching Canadian home shows and spending some time in Vancouver, but we are of the idea that Canada must operate on a completely different economic model, because it’s just impossible to understand how people can afford that shit.
posted by bongo_x at 10:19 PM on December 29, 2015 [4 favorites]
We only know from watching Canadian home shows and spending some time in Vancouver, but we are of the idea that Canada must operate on a completely different economic model, because it’s just impossible to understand how people can afford that shit.
posted by bongo_x at 10:19 PM on December 29, 2015 [4 favorites]
How is real estate not the biggest scam ever? The properties which can be counted on to consistently increase in value are (not surprisingly) the same properties which only a tiny percentage of Americans can sniff on. For everyone else, the available market is an emotionally draining, life sucking, crap shoot. You might as well be gambling on football.
posted by Beholder at 11:48 PM on December 29, 2015 [2 favorites]
posted by Beholder at 11:48 PM on December 29, 2015 [2 favorites]
You want a real scare? Check out Sydney, Australia real estate prices. A million will get you an unassuming suburban home. I.. am going to be renting all the rest of my days, seems like..
posted by Philby at 11:48 PM on December 29, 2015
posted by Philby at 11:48 PM on December 29, 2015
The properties which can be counted on to consistently increase in value
There can't be any such properties because no place can be guaranteed to rise, not least because the system we're in is obviously unsustainable.
This doesn't help much during the bubble, but the earlier the bubble pips the better for everyone, and no individual wants to be the Last Fool. Spread the gloom!
posted by clew at 12:47 AM on December 30, 2015 [1 favorite]
There can't be any such properties because no place can be guaranteed to rise, not least because the system we're in is obviously unsustainable.
This doesn't help much during the bubble, but the earlier the bubble pips the better for everyone, and no individual wants to be the Last Fool. Spread the gloom!
posted by clew at 12:47 AM on December 30, 2015 [1 favorite]
St. Alia of the Bunnies, could you please elaborate on your Desirable Craphole statement up thread? Very curious as to your perspective there- is it a case of investors buying up for cheap, slapping some paint and duct tape hither and yon and flipping it for a tidy profit? Or do people actually end up living in said Craphole, which they are able to get on the cheap on account of Craphole, then do it up (or not) as and when they're able?
Sadly enough hereabouts in the Antipodes.. I fear no such bargain Craphole exists any more. Even $350k will barely get you into the game, an hour plus commute from metropolitan Sydney and in a state of near condemnable disrepair..
posted by Philby at 3:10 AM on December 30, 2015
Sadly enough hereabouts in the Antipodes.. I fear no such bargain Craphole exists any more. Even $350k will barely get you into the game, an hour plus commute from metropolitan Sydney and in a state of near condemnable disrepair..
posted by Philby at 3:10 AM on December 30, 2015
Perhaps the least sane market is Miami, where properties have any value at all. The ocean is rising. The city is going underwater. It already has streets that flood at high tide. And yet properties continue to sell. Guaranfreakingteed to be underwater within decades. Bizarre!
posted by five fresh fish at 4:22 AM on December 30, 2015 [3 favorites]
posted by five fresh fish at 4:22 AM on December 30, 2015 [3 favorites]
grumpybear69: "What is interesting about the Pittrlsburgh graph is that there was apparently no decline at all after the subprime crash. Slow and steady goes the penguin!"
There was no bubble here in the 2000s so there wasn't anything to burst but I'm a little afraid that we won't be as lucky the next time.
posted by octothorpe at 5:06 AM on December 30, 2015 [2 favorites]
There was no bubble here in the 2000s so there wasn't anything to burst but I'm a little afraid that we won't be as lucky the next time.
posted by octothorpe at 5:06 AM on December 30, 2015 [2 favorites]
I'm in one of those insanely-paced housing markets (Boston), in a condo in a triple-decker. My upstairs neighbor sold her place earlier this year, six years after she bought it, having done zero work beyond fixing the water damage from when the roof leaked. I went and did the math. If that condo had been working 40 hour weeks since the day she bought it, it would have earned a hair over $16 an hour. She sold it right at the height of the minimum wage protests, wherein large swaths of humanity tried (and largely failed) to convince the legislature that their labor was worth $15 an hour.
I'm not really sure what my point here is, but housing prices are wack, yo.
posted by Mayor West at 5:19 AM on December 30, 2015 [10 favorites]
I'm not really sure what my point here is, but housing prices are wack, yo.
posted by Mayor West at 5:19 AM on December 30, 2015 [10 favorites]
The pernicious idea that a house should be primarily an "investment" and not "a place to live which cannot be unceremoniously yanked out from under your feet at the whim of a landlord*" is part of the problem. It is in the interest of REITs and large-scale real estate management syndicates to remove home ownership from the equation since, aside from renting-vs-flipping being a better long-term revenue stream, it also, absent very strong renter protections, makes it easier to reconfigure populations to their liking via evictions and rent hikes. So taking the stance of "well buying housing is akin to betting on football so what's the point" is really feeding right into their agenda.
I don't know of a place where people are currently not complaining about the crazy prices of real estate. Seattle, Portland, Vancouver, SF, Pittsburgh, NY, Boston, Chapel Hill, Sydney, London, All Of Canada. This is not a local phenomenon. Part of it is surely that buyers are always unhappy with the price of real estate, but one need only look at the average income compared to the average home price to know just how real the problem is, and how similar in appearance, if not in underlying mechanism, this seems to the subprime boom.
* though there's always title theft, eminent domain and shady bank practices, of course.
posted by grumpybear69 at 5:45 AM on December 30, 2015 [4 favorites]
I don't know of a place where people are currently not complaining about the crazy prices of real estate. Seattle, Portland, Vancouver, SF, Pittsburgh, NY, Boston, Chapel Hill, Sydney, London, All Of Canada. This is not a local phenomenon. Part of it is surely that buyers are always unhappy with the price of real estate, but one need only look at the average income compared to the average home price to know just how real the problem is, and how similar in appearance, if not in underlying mechanism, this seems to the subprime boom.
* though there's always title theft, eminent domain and shady bank practices, of course.
posted by grumpybear69 at 5:45 AM on December 30, 2015 [4 favorites]
St. Alia of the Bunnies, could you please elaborate on your Desirable Craphole statement up thread?
Does nobody watch HGTV? There must be 10 shows on the network dedicated to following the exploits of people that buy crapholes, fix them up, and make a tidy profit.
And for only $599 for their 1 day seminar, they'll teach you to do the same!
Seriously, is fixing up crapholes a bubble in itself? At some point won't we have fixed almost all of the crapholes, leaving no stock to feed this market?
posted by COD at 6:20 AM on December 30, 2015
Does nobody watch HGTV? There must be 10 shows on the network dedicated to following the exploits of people that buy crapholes, fix them up, and make a tidy profit.
And for only $599 for their 1 day seminar, they'll teach you to do the same!
Seriously, is fixing up crapholes a bubble in itself? At some point won't we have fixed almost all of the crapholes, leaving no stock to feed this market?
posted by COD at 6:20 AM on December 30, 2015
Regarding crapholes-remember, I sell VA foreclosed houses which means VA sells at cheap prices. Investors and/or prospective homeowners with CASH (that last is important, these houses won't finance in their present condition) buy these, renovate, then either flip, rent or live in them.
If a house is nice enough that it only would need a couple of lender required repairs, investors aren't that interested.
posted by St. Alia of the Bunnies at 6:25 AM on December 30, 2015 [2 favorites]
If a house is nice enough that it only would need a couple of lender required repairs, investors aren't that interested.
posted by St. Alia of the Bunnies at 6:25 AM on December 30, 2015 [2 favorites]
HGTV is fiction, btw.
You can always tell when a buyer has watched too much of it.
And as long as there are foreclosures there will always be crapholes. One leaky roof that sits there for a year or two can do a lot of damage. One house I have right now sat for THREE years before it wound up on our plates.
posted by St. Alia of the Bunnies at 6:28 AM on December 30, 2015
You can always tell when a buyer has watched too much of it.
And as long as there are foreclosures there will always be crapholes. One leaky roof that sits there for a year or two can do a lot of damage. One house I have right now sat for THREE years before it wound up on our plates.
posted by St. Alia of the Bunnies at 6:28 AM on December 30, 2015
Grumpybear, it's all about inventory. My market has a lot of it, so prices are low comparatively. When you have too many buyers competing for too few homes, what you describe is what happens. Of course there are a lot of things that influence inventory.
posted by St. Alia of the Bunnies at 6:30 AM on December 30, 2015
posted by St. Alia of the Bunnies at 6:30 AM on December 30, 2015
> If y'all want to see house pricing stupidity, hit mls.ca and look at Canada.
People have been saying this for well over a decade now, but I still feel like the real estate situation in Canada is going to end in tears. A lot of people in my neck of the woods (Toronto) are still huffing the "our house is going to make us rich" fumes, but over the past year or so I've noticed more and more articles like this popping up. I think people are starting to realize things are out of whack but there's a lot of denial because Canadians have so much of their net worth tied up in their houses (sound familiar, our neighbours to the south?).
posted by The Card Cheat at 6:38 AM on December 30, 2015 [3 favorites]
People have been saying this for well over a decade now, but I still feel like the real estate situation in Canada is going to end in tears. A lot of people in my neck of the woods (Toronto) are still huffing the "our house is going to make us rich" fumes, but over the past year or so I've noticed more and more articles like this popping up. I think people are starting to realize things are out of whack but there's a lot of denial because Canadians have so much of their net worth tied up in their houses (sound familiar, our neighbours to the south?).
posted by The Card Cheat at 6:38 AM on December 30, 2015 [3 favorites]
Seriously, is fixing up crapholes a bubble in itself? At some point won't we have fixed almost all of the crapholes, leaving no stock to feed this market?
Around here almost 10% of the housing units are vacant(pdf) so there's not going to be a shortage of crapholes to renovate any time soon.
posted by octothorpe at 7:24 AM on December 30, 2015
Around here almost 10% of the housing units are vacant(pdf) so there's not going to be a shortage of crapholes to renovate any time soon.
posted by octothorpe at 7:24 AM on December 30, 2015
The properties which can be counted on to consistently increase in value are (not surprisingly) the same properties which only a tiny percentage of Americans can sniff on.
The rich get richer, income drives towards the top and the rest of us watch it whiz by.
posted by soelo at 10:07 AM on December 30, 2015
The rich get richer, income drives towards the top and the rest of us watch it whiz by.
posted by soelo at 10:07 AM on December 30, 2015
But even if they do stand firm, who wouldn’t prefer a small slice of San Franciscan silicon over a rusting lump of Pittsburgh steel?
I tell this story all the time because it delights me so ...
My brother went to college in Morgantown, WVa. Pittsburgh is the nearest big city, and he and his pals spent a lot of time there. After he graduated, I flew him out to visit me. I lived right next to UCSF at the time; breathtaking views of the Golden Gate Park, the bridge itself peeking through the trees in the distance, fog rolling in, classic SF.
My brother beheld all this. And then, around a mouthful of shiro maguro, he said, "It's nice enough, but it's no Pittsburgh."
(On a related note: my husband flew from SF to Pittsburgh to attend a friend's wedding. All weekend long, I got texts all, "SELL THE HOUSE WE NEED TO MOVE HERE." City of steel, the secret of your charms has made its way west!)
posted by sobell at 10:41 AM on December 30, 2015 [6 favorites]
I tell this story all the time because it delights me so ...
My brother went to college in Morgantown, WVa. Pittsburgh is the nearest big city, and he and his pals spent a lot of time there. After he graduated, I flew him out to visit me. I lived right next to UCSF at the time; breathtaking views of the Golden Gate Park, the bridge itself peeking through the trees in the distance, fog rolling in, classic SF.
My brother beheld all this. And then, around a mouthful of shiro maguro, he said, "It's nice enough, but it's no Pittsburgh."
(On a related note: my husband flew from SF to Pittsburgh to attend a friend's wedding. All weekend long, I got texts all, "SELL THE HOUSE WE NEED TO MOVE HERE." City of steel, the secret of your charms has made its way west!)
posted by sobell at 10:41 AM on December 30, 2015 [6 favorites]
Pittsburgh is gorgeous! It is also cloudy and rainy for a majority of the fall and winter, horribly muggy in the summer and adjacent to exactly zero other desirable urban areas.
posted by grumpybear69 at 11:02 AM on December 30, 2015
posted by grumpybear69 at 11:02 AM on December 30, 2015
So it’s the Seattle of the Northeast (except for the muggy summers, I guess)?
posted by mbrubeck at 11:06 AM on December 30, 2015
posted by mbrubeck at 11:06 AM on December 30, 2015
I'd take Olympia over Monroeville any day of the week.
posted by grumpybear69 at 11:08 AM on December 30, 2015 [1 favorite]
posted by grumpybear69 at 11:08 AM on December 30, 2015 [1 favorite]
Yeah, <= ~3 hours driving from Seattle gets you to Portland or Vancouver, while <= ~3 hours driving from Pittsburgh gets you to... Cleveland or... Columbus? Erie? State College? Yikes. That said, the cost of living difference leaves you a lot of money for tickets to wherever you'd like to travel.
posted by tonycpsu at 12:04 PM on December 30, 2015
posted by tonycpsu at 12:04 PM on December 30, 2015
adjacent to exactly zero other desirable urban areas.
There’s an east coast vs west coast point of view if I ever heard one.
posted by bongo_x at 12:05 PM on December 30, 2015 [1 favorite]
There’s an east coast vs west coast point of view if I ever heard one.
posted by bongo_x at 12:05 PM on December 30, 2015 [1 favorite]
Philly, Baltimore and DC are all easy weekend trips from Pittsburgh and New York or Toronto are doable for a long weekend.
posted by octothorpe at 12:19 PM on December 30, 2015 [2 favorites]
posted by octothorpe at 12:19 PM on December 30, 2015 [2 favorites]
5+ hours driving each way is a weird definition of an easy weekend trip. I have done it a handful of times because my in laws live in Pittsburgh but that much time in the car is not at all pleasant for me.
posted by nolnacs at 12:30 PM on December 30, 2015
posted by nolnacs at 12:30 PM on December 30, 2015
I don't know, I fairly routinely drive to Massachusetts for long weekends but YMMV (literally in this case).
posted by octothorpe at 12:59 PM on December 30, 2015
posted by octothorpe at 12:59 PM on December 30, 2015
Pittsburg is a bargain. So are Columbus, Cincy, Cleveland, Erie, Youngstown, and a host of other cities are that capable of delivering solid quality of life to just about anyone, But many people derive their perception of their own status from the city they live in. The whole country is filled with lovely little mid-sized cities, where houses are very, very cheap. I've lived in both big cities and small. And I know that part of the value of living in Manhattan, or Boston, or Washington is the knowledge that you are part of the history and grandeur of the place, that you actually live your mundane life in a place that is an object of fantasy and tourism. To know that you are envied simply because of the place where you live. There's that thrill of knowing that your destiny is unfolding in one of the epicenters of your era. That can be worth a lot of money. On the other hand, in our networked era, you can participate in our time as fully from a renovated victorian in Erie, Pennsylvania (purchased for $130,000 or so), as you can from a $2,000 a month studio on the Upper West Side. The trade offs are a lot smaller in our time.
posted by Modest House at 3:59 PM on December 30, 2015 [4 favorites]
posted by Modest House at 3:59 PM on December 30, 2015 [4 favorites]
And I know that part of the value of living in Manhattan, or Boston, or Washington is the knowledge that you are part of the history and grandeur of the place, that you actually live your mundane life in a place that is an object of fantasy and tourism.
True. You also get "center of the world" syndrome. It’s kind of unavoidable even if you are aware of it (weirdly, this is even worse if you were born and raised there). But most people I’ve known in LA, NYC, etc. are positive that they are in the center of the world, everyone else really wants to be there, and if they leave they will miss something. This is especially hard to overcome when you’re young, but it’s an all ages thing.
Someone told me many years ago that living in NYC they were so excited because they were always doing something, running around, non stop action. Then they realized that most of that was that it took all day and was a major campaign to go to the grocery store, and that the only real thing they did most of the time was struggle to make a living and the mundane things everyone does everywhere, only it was a lot harder and more time consuming. LA was a slightly less drastic version of that for me, only with car time instead of subway time.
posted by bongo_x at 6:53 PM on December 30, 2015 [1 favorite]
True. You also get "center of the world" syndrome. It’s kind of unavoidable even if you are aware of it (weirdly, this is even worse if you were born and raised there). But most people I’ve known in LA, NYC, etc. are positive that they are in the center of the world, everyone else really wants to be there, and if they leave they will miss something. This is especially hard to overcome when you’re young, but it’s an all ages thing.
Someone told me many years ago that living in NYC they were so excited because they were always doing something, running around, non stop action. Then they realized that most of that was that it took all day and was a major campaign to go to the grocery store, and that the only real thing they did most of the time was struggle to make a living and the mundane things everyone does everywhere, only it was a lot harder and more time consuming. LA was a slightly less drastic version of that for me, only with car time instead of subway time.
posted by bongo_x at 6:53 PM on December 30, 2015 [1 favorite]
And I know that part of the value of living in Manhattan, or Boston, or Washington is the knowledge that you are part of the history and grandeur of the place, that you actually live your mundane life in a place that is an object of fantasy and tourism.
Or you're gay and want to have a social life.
posted by sevenyearlurk at 7:42 PM on December 30, 2015 [2 favorites]
Or you're gay and want to have a social life.
posted by sevenyearlurk at 7:42 PM on December 30, 2015 [2 favorites]
And I know that part of the value of living in Manhattan, or Boston, or Washington is the knowledge that you are part of the history and grandeur of the place, that you actually live your mundane life in a place that is an object of fantasy and tourism.
Eh, I guess if that does it for you. I mean, my family goes back in NYC for almost 300 years so it's literally my ancestral homeland but it's more important to me to able to buy a $200K house in a great neighborhood in the middle of a city and to have enough to left over to hit both of our 401K maximums every year.
posted by octothorpe at 8:42 PM on December 30, 2015 [2 favorites]
Eh, I guess if that does it for you. I mean, my family goes back in NYC for almost 300 years so it's literally my ancestral homeland but it's more important to me to able to buy a $200K house in a great neighborhood in the middle of a city and to have enough to left over to hit both of our 401K maximums every year.
posted by octothorpe at 8:42 PM on December 30, 2015 [2 favorites]
They're not making any more land? Ever seen the volcanoes in Hawaii? I'm not sure this puts any significant downward pressure on Hawaiian real estate values, though.
I know it's a bit of a clever joke, but Hawaiian volcanoes (or any other geological events) don't "make" land in downtown Honolulu (or Manhattan). The residents are probably thankful for that.
It's the combination of the "location, location, location" adage, plus the not making any more land that makes prices rise.
posted by theorique at 3:09 AM on December 31, 2015
I know it's a bit of a clever joke, but Hawaiian volcanoes (or any other geological events) don't "make" land in downtown Honolulu (or Manhattan). The residents are probably thankful for that.
It's the combination of the "location, location, location" adage, plus the not making any more land that makes prices rise.
posted by theorique at 3:09 AM on December 31, 2015
People like to live in cities because for multiple reasons. You all can act like Cleveland or Chapel Hill or Cincy has the same amenities but really they don't or don't have as much. When I changed jobs last year the choice was between a job in Atlanta or St Louis. I checked each city to see what bands were coming through in the fall. The difference was 4 for St Louis and 10 for Atlanta (only bands that I would be interested in seeing). St Louis is cheaper and I'm sure has other things going for it but that was a pretty easy decision for me. I can get more of what I like in the major city. If what you like is not living in a major city then that decision is pretty easy for you too.
posted by LizBoBiz at 8:59 AM on December 31, 2015 [1 favorite]
posted by LizBoBiz at 8:59 AM on December 31, 2015 [1 favorite]
And I know that part of the value of living in Manhattan, or Boston, or Washington is the knowledge that you are part of the history and grandeur of the place, that you actually live your mundane life in a place that is an object of fantasy and tourism. To know that you are envied simply because of the place where you live. There's that thrill of knowing that your destiny is unfolding in one of the epicenters of your era.
Honestly if I could live my mundane life to the same degree in another city that I live it in Washington, I would. I don't assume my living here is a thing to be envied. That didn't factor at all into my decision to move here (which was made for a bunch of mundane reasons having to do with things like job opportunities in both my day job and the thing I actually majored in, plus a preference for nonstop flights from the local airport(s)).
Also, yes: buying a house is a hedge. Rent here is out of line with the cost to own, more so when the tax incentives of ownership are accounted for. What convinced my wife that we could even think about owning was pointing out that we could own at least a two bedroom house for the cost of renting our one bedroom apartment, and we'd be protected against rent increases and earn equity in the process. Ownership puts a drag on mobility (I didn't even interview for a potential job that could have been a perfect fit because it would have required relocation not even two years after we bought our house) but on the other hand I don't really want to think about moving because I happen to like living here, so the hedge has (so far) worked out for us.
posted by fedward at 11:45 AM on December 31, 2015
Honestly if I could live my mundane life to the same degree in another city that I live it in Washington, I would. I don't assume my living here is a thing to be envied. That didn't factor at all into my decision to move here (which was made for a bunch of mundane reasons having to do with things like job opportunities in both my day job and the thing I actually majored in, plus a preference for nonstop flights from the local airport(s)).
Also, yes: buying a house is a hedge. Rent here is out of line with the cost to own, more so when the tax incentives of ownership are accounted for. What convinced my wife that we could even think about owning was pointing out that we could own at least a two bedroom house for the cost of renting our one bedroom apartment, and we'd be protected against rent increases and earn equity in the process. Ownership puts a drag on mobility (I didn't even interview for a potential job that could have been a perfect fit because it would have required relocation not even two years after we bought our house) but on the other hand I don't really want to think about moving because I happen to like living here, so the hedge has (so far) worked out for us.
posted by fedward at 11:45 AM on December 31, 2015
In 1993 I bought a house for $106K. My mortgage was about 25% higher than my rent had been before buying, but the owned house was much nicer and my rent was going up about 5% per year. It didn't take long for the owned house to get cheaper than rent would have been. It needed some work over the years but not as much as the rentals had always needed, and since landlords won't fix those things if they don't need a new tenant, I figure I spent about the same on repairs to the house I owned, as I would have spent on moving every two years just to get working heat. Moving is expensive!
My part of the country didn't get much bubble but we sure got the crash. I sold that house for $120K. I suppose I could have gotten better returns on almost any other investment, but I can't live in some other investment. Home ownership has worked out pretty well for me.
posted by elizilla at 3:19 PM on December 31, 2015
My part of the country didn't get much bubble but we sure got the crash. I sold that house for $120K. I suppose I could have gotten better returns on almost any other investment, but I can't live in some other investment. Home ownership has worked out pretty well for me.
posted by elizilla at 3:19 PM on December 31, 2015
Another financial aspect of home ownership that doesn't apply to most other investments [1] is the relatively high leverage. Nobody will lend you $100,000 to invest in tech stocks if you put down $10,000, but that's a fine down payment for real-estate. Since most people are going to have a monthly payment anyway - rent or mortgage, take your pick - many people figure, "might as well get into the property market". Potentially adverse factors are transaction costs (high) and maintenance (no landlord fixing things).
[1] F/X is a notable counterexample for some reason - leverage of 100x is not unheard of. Perhaps because the intraday movements tend to be relatively small. But big currency swings are not impossible, and can happen very rapidly, leading to big losses and margin calls.
posted by theorique at 6:03 PM on December 31, 2015
[1] F/X is a notable counterexample for some reason - leverage of 100x is not unheard of. Perhaps because the intraday movements tend to be relatively small. But big currency swings are not impossible, and can happen very rapidly, leading to big losses and margin calls.
posted by theorique at 6:03 PM on December 31, 2015
What it’s like to house-hunt in Silicon Valley, the nation’s priciest market
The situation in Silicon Valley has long been a full-blown affordability crisis for teachers and construction workers, anyone who draws a paycheck without stock options. Even doctors and lawyers find themselves priced out of popular areas, according to real estate agents.posted by cynical pinnacle at 6:55 AM on January 1, 2016 [1 favorite]
[...]
Boyenga recalled spending weeks showing homes to a client from North Carolina who had just sold his company to eBay, based in San Jose, and planned to move to Silicon Valley. His budget was $6 million. But he decided after weeks of looking that it was cheaper to stay on the East Coast and fly out a couple of times each month.
[...]
DeFilippo, their (real estate) agent, used to work as a lawyer. But two years ago — when she moved from Atlanta to Silicon Valley, in part to be closer to her sister, an Apple executive — she became fascinated by the local real estate market. So she switched careers. Now, she is making more than she ever did as a lawyer.
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