LAT: California, U.S. in a Housing "Bubble," UCLA Forecast Says

[DeepModem Mom]

California, U.S. in a Housing 'Bubble,' UCLA Forecast Says

Building will slow in '05, hurting the nation's recovery but the state's not as much, an analysis says. Housing industry experts disagree.

By Bill Sing, Times Staff Writer


Economists at UCLA have invoked the B-word again.

In an outlook to be formally released today, forecasters say California and the nation are beset by a housing "bubble" that will depress construction next year, slowing the nation's economic recovery....

***

Although UCLA economists have raised the specter of a housing bubble in previous reports, they are now identifying it as the biggest risk to the U.S. economy.

"The housing sector's high and unusual contribution" to economic growth "is not going to continue in 2005," said Edward Leamer, director of the forecasting group and author of its national outlook.

The less-than-upbeat analysis is sure to raise plenty of eyebrows because the UCLA group was among the first to foresee the 2001 recession as well as slower growth earlier this year.

For all that, though, many experts inside and outside the housing industry reject the notion that there's a bubble waiting to pop....


http://www.latimes.com/business/la-fi-uclaecon8dec08,0,158730.story?coll=la-home-business

[ecstatic]

1. I'm in the process of buying a home

and I just heard the term "housing bubble" for the first time a few days ago. I'm looking all around for a site that really breaks down what a housing bubble is, and the consequences to homeowners if/when the bubble pops.

[Pulse]

2. Housing bubble

This might help. http://www.washingtonmonthly.com/features/2004/0404.wallace-wells.html

I was thinking of buying a house instead of renting but if the bubble's about to burst maybe I'll wait until next summer.

I did a google search to get that first article. I typed in housing bubble. There are lots of articles for that search.

[ckramer]

10. Thanks for the link.

This is a good article. I just read it.

So should all future home buyers wait for that 10 - 20% home price drop next year?

[WCGreen]

3. The best place to id a bubble area is look at how fast the valuation

of houses in the gerneral vicinity have gone...

Also, see if can't get a handle on how these homes are finances. If they are finnanced on the no money down model, then they are vastly overrated at this very moment.....

Look at the community, see the taxes, rate the shools even if you don't have chilfren....

Then pick an area that is not all new. Look to something five to ten years old...

That;s what I would do...

That or rent.....

[Gregorian]

39. I just put my house up for sale today.

One thing that might be good to know is that the location has a lot to do with the "bubble". If the property is in demand, the price will not fall like a bubble bursting. I have a place in Humboldt county in California. I don't expect to see prices crashing here because it's still just beginning to experience the growth that other places have. But if this were a tract home in an already inflated area, I'd be nervous.
It's not that simple. I just know that demand is one of the big factors. Many other things including just plain feelings are part of the whole picture.

Best of luck....

[The Backlash Cometh]

4. If you're in a housing bubble that affects construction of new

houses, does that mean that your own property's value will go up as there are fewer new houses to compete against?

[KingChicken]

5. Housing bubble is indicitave of an unsustainable market value

This means that the housing needs a big correction to consolidate it's gains and remain healthy. The only difference here is that the housing market is one of only a few things keeping the U.S. economy alive, without it I don't think we can keep up the powerhouse. Standards of living will decrease as a result and land values will go down.

The housing market must and will take a fall, but the question is, can the U.S. sustain another major blow?

[fertilizeonarbusto]

13. No, it can't

Get ready, folks, the Great Depression is going to look like a picnic soon. And no FDR in sight.

[LibDemAlways]

6. When the bubble bursts here in So. Cal

things are going to get ugly for people who've bought in the past couple of years. Prices have gone through the roof - $600K and up in my neighborhood for 25-year-old small tract homes that wouldn't have sold for $350 three years ago. And people are mortgaged to the hilt. A home like mine sold for full asking price of $599 a year ago and the people took out a first and second - no down. They - and many like them - are on the verge of losing a bundle.

The low interest rates have lured many people into making similar bad investments they will regret bigtime when rates rise, prices fall, and they are left holding the bag.

[yorkiemommie1]

7. i'm in south bay

have been fighting overdevelopment in my area. have seen bidding wars in my tract, too.

[Megahurtz]

18. Good God,

My dad used to try to fight overdevelopment years ago in a beach area in So Cal where I grew up.

The corporations won.

With this administration and Arnold in charge, good luck.

[yorkiemommie1]

45. the company that bought the mall here wanted to build

917 condos on the land also. boy that woke the population up! after a huge groundswell of anger (and a coalition of homeowners' associations that honed their message, stayed on topic and reached out to all of the people in the city) the mall owners backed down. i'm sure they still have something up their sleeves though.

it was really something to see all of those people come to meeting after meeting...mostly very senior citizens.

ps. our mayor is an arnie-buddy. there is a recall effort against him. our city is quite conservative but enough hackles have been raised that people don't care if he's arnie's buddy.

thanks for the good luck wishes, we need them.

[nothingshocksmeanymore]

8. Lots of people paying interest only..it's the hot product at B of A

Hell my neighborhood is over 40 years old and houses are 600K...it'll drop to 400 when this is over

[yorkiemommie1]

46. that's how it is here in my neighborhood

so if they are paying interest only, is that how they can afford their lexus and mercedes SUVs? me not being a financial whiz at all.

[SKKY]

28. You must be talking about San Diego...

...Oh lord things are going to get ugly when the Bubble bursts. Average price went up last month to $490,000 for a 2 bedroom 950 sq foot home. Unbelievable.

[neuvocat]

38. So does that mean the prices will go up?

I'm a little confused. Thanks.

[SKKY]

42. Well, I would think it would be just the oposite...

...all these people shelling out ridiculous amounts of money for crap houses are going to lose a bundle.

[nothingshocksmeanymore]

43. I'm predicting at least a 20% collapse and my friend in banking

estimates 30%. Many of the people have arms or are making interest only payments. When they start foreclosing, it will create a buyer's market..it's been a seller's market for close to 3 years

[rustydad]

9. My first house

I bought my first home in the early 60s. A four bedroom tract house of dubious construction. The rule of thumb then was to limit your mortgage and tax payments to around 25% of household income. So I wonder how many folks could meet that test today? By the way I paid $18,000 and sold a few years later for $22,000. Same house today is over $1,000,000. Bob in SoCal

[ckramer]

11. Wow, don't you wish you could keep the house til today?

[Tracer]

12. Not really!

I paid $24,500 for my house and could sell tomorrow for $500,000. But then what?

I'd have to spend $750,000 on a replacement, or move so far out into the boondocks that it wouldn't be worth it.

[SoCalDem]

19. The only way to "cash out" in California

is to have bought a house YEARS ago for cheap, and then sell that 750K house...pure profit... BUT then you must MOVE to a cheaper part of the US.. say New mexico...Tennessee, Kentucky, Kansas..ect..

You can then buy the "house of your dreams" and have plenty of cash left over...BUT you will nto be in California anymore.

My husband and I are kind of in that boat.. Our house,(only worth about 300K.. we paid $82 in 1981) we have been in 23 yrs, so we are nearly paid off, and I would dearly love to sell it and move away...pay cash for something smaller, and just have to worry about yearly taxes and insurance, but My husband does not want to move..:shrug:.. so here we sit...on tons of equity (and we do NOT want a reverse mortgage)..We are aiming for a retirement for him in about 6 or 7 years with no monthly cost for housing.. We can handle the rest..

[Megahurtz]

21. I agree

and California is not a good place to stay, you know, nice place to visit but wouldn't want to live here? I'm stuck here for now too.

If I were you I would convince my husband to move elsewhere to a better place. You can get more for your money elsewhere and have a better quality lifestyle.

[One_of_8]

23. Why wouldn't you want to live in CA?

Megahurtz,

Just curious, why do you think California is nice to visit, but wouldn't want to live here? I was born and raised in northern California. Sometimes I think about moving someplace where the cost of living is lower, but every time I do, I get all emotional thinking of the beautiful place I would be leaving, lots of liberal thinkers, georgeous scenery, San Francisco an easy drive away, Lake Tahoe as well, not to mention easy accessibility to fresh organic produce and products.

Re housing: I bought a one-year old mobilehome nearly 2 years ago, for $120K. It's 3 bedrooms, 2 baths, and just about the right size for me, as a single mom, to maintain. I was lucky, because my sister and parents are my two mortgage companies - so I've got a low interest loan locked in. Buying a mobilehome was the absolutely only way I was able to get into a home of my own, here in California. I agree that housing prices are simply unreal and I don't know how people can afford to pay half a mil for a "starter" home.

[Megahurtz]

25. It's a zoo here

too crowded for me (among other things) I was born and raised in So Cal which is very different from Northern Cal. No wide open spaces anymore, a very right-winged county, not much for liberal thinkers, and I am not happy with the legal system here.

Recently I was defrauded of a large sum of money by a corporation (of course) and the CA Attorney General consumer section will do nothing about it because "they're understaffed" They can't even enforce their own laws! The truth is that they pick and choose who they want to help or not. My "nest egg" is gone and I have no money for a lawyer, let alone other things. There is just NO HELP here.

I've realized that the present GOP administration has set the stage for corporate fraud to be acceptable, which is why I have come to this board.

This is not the only unjust situation that's happened for me here, there is more, which is the reason I got dragged back down here a few years ago (used to live in Oregon, Washington, and Canada) I guess I've become very jadeded (and somewhat bitter)

I have been in other places which have a better quality of life than this smoggy, very expensive place. I would like to move, but my boyfriend's kids are here, living with their mom, so I don't know how he would feel about moving very soon, and my kid has made friends here. I would like to get out of Dodge.

The only chance I would ever have to buy a home would be somewhere less expensive. I wouldn't want to buy anything here in concrete land anyway. I enjoy nature, the outdoors, and much cooler weather. Here I'm like a fish out of water.

[SoCalDem]

27. Google housing in Belen, New mexico.. (we used to live there)

jobs are scarce as hen's teeth, but the climate and housing prices are great..

Our problem is that we have no family to speak of, and our 3 grown sons are west-coasters.. Seattle..Concord, CA, and a few blocks from us here in "MaryBonehead Land".. (Riverside county:puke:)

Housing prices are high everywhere that is even remotely near to our kids:(..so we are kind of stuck :(

[Megahurtz]

30. Ugh, and Riverside yet?

I feel for you.

And I know what it feels like to feel stuck.

[not fooled]

41. ooh, crapside county?

You really have my sympathy. The armpit of Southern California.

[L.A.dweller]

31. So Cal's population is growing

I feel the same way that you do: it is way too populated here.
It's like a living in a rat cage.
And I can't stand the abject air quality.
I hate driving down the street in a 40 mph zone with a large
truck agead of you, blowing exhaust fumes everywhere,
which seeps in to your air vents, causing you to not
want to breathe to deeply.

Things are going to get worse here so I'm heading to Oregon.

[Megahurtz]

33. I think heading North is

an excellent idea. I'm going to try to make that one happen sooner, than later.

[not fooled]

40. yeah, unfortunately, now with the boobengrabber in charge...

...CA is poised to become more 'puke (i.e. go down the crapper). Ahnuld is floating the idea of calling a special election to basically re-district the state in order to get more 'pukes in the State Assembly.

As it is now, there is a solid Dem majority with safe seats. So, the thugs realize that the only way they can really run wild is to seize control of the state legislature. Hence, the probable election on re-districting.

Unfortunately, the voters may be stupid enough to go along. Ahnuld has already successfully induced morans to cut their own throats by voting him in, as well as voting down several pro-consumer initiatives in the last election. And, because he has been stymied by Dems, the populace doesn't have a clue how pro-business, anti-consumer their favorite steroid-pumped egomaniac really is. Just wait until he gets control of the leg. This state will tank, bigtime. I plan to get out as soon as I finish grad school.

[SKKY]

44. 120K for a Mobile Home????

Just to stay in California. Man, you people sure are loyal. For 120K you could get a great starter home in a decent place like San Antonio, Nashville, Louisville, or even in some parts of Florida. I don't like it here in California that much, so I don't understand the willingness to shell out the money people do.

[yorkiemommie1]

47. i think my friend paid more here in socal beach area

she has an unobstructed view all the way to the hollywood sign....but she also has an 800/month space rent. that's what gets me. even if you own the mobile home free and clear most places around here you have a huge space rent. down in san pedro it's around 1200/month.

here we will stay. it's close to everything. i can walk to the market, and to that dratted mall,and medical facilities and we have close friends here. and our kid is here.

we've had parents who moved far out only to find themselves at a disadvantage when it came to hospitals etc. it would be worse moving back to my native hawaii.

[PurityOfEssence]

14. I'd bet the L.A. area is in for more of a deflation than a pop

Yes, homes here are radically overvalued, but land is dear and everything's been built up. Here in Silver Lake, things are moving slower, but they're still moving.

When the correction comes, it'll be because of interest rates going up. Prices will then fall, and a little more inventory will come on the market, but houses are still inherently very valuable: lots of people live here, and lots want to.

Of course, if we have some serious inflation, the selling will flatline and there will be many foreclosures due to adjustable rate mortgages skyrocketing. Personally, I think that people looking to buy here should do so now: the fixed rates are still reasonable, and some cooling's already occurred in prices. Most scenarios that have prices correcting even more are ones where interest rates cause it, and that will be a huge headache when shopping for a mortgage.

Both times I've bought in this market have been horrible times (December '90 and December '03) but over the long run, it'll probably be fine. Our last place certainly appreciated a lot, although much of that was my sweat equity and carpentry.

Prices around here are astonishing, though, and for those of you looking, I can only send you my good wishes: it's exhausting and incredibly stressful, even if you have a realtor doing much of the legwork for you.

[Bono71]

15. A developer I know in San Diego just slashed prices on

3000 (!) homes. I think we are in for some "shrinkage." How much, who knows?

Moreover, its impossible to say whether or not the "burst" (if there is one) will affect the entire country or not. Real estate is about local markets (and submarkets). What happens in one section of a state, city or locality may be the exact opposite of what is going on somewhere eles (maybe even down the street).

[Shakespeare]

16. Gee, I only saw that coming two, three years ago....

It's going to be ugly in CA, but hopefully my husband and I will finally be able to buy a home when things "shrink" a bit. The runaway housing prices here are just beyond ridiculous. No way on earth to justify those kinds of prices.

[Bono71]

20. They are sky high...but it certainly is not clear that they will

"shrink" to figures below what they were 2 or 3 years ago.

[Shakespeare]

24. Um, yep....don't believe I said they would.

We're just waiting for the runaway prices to moderate a bit. I refuse to pay $500K for a shitbox that wouldn't bring $100k anywhere else in the country. It's outrageous.

[abelenkpe]

29. same here

we have to stay in LA because this is the only place where we can find employment (other than India) but have been waiting for prices to become more reasonable. While I do hope for significant shrinkage it makes me feel like a vulture. At this point I would be happy with a more reasonable deal on rent and to buy elsewhere.

How do you think the housing bubble pop will effect rent in CA?

[Shakespeare]

32. Well, rents are already starting to go up.

And they'll go up even more if the bubble bursts. Kind of a catch-22, isn't it? :-(

[Barkley]

17. "Bubble Trouble" for state and local budgets.

If housing prices do indeed deflate and foreclosures increase, I can't see how that might not adversely impact state and local fiscal budgets.

There's also a "wealth effect" that may dampen consumer spending.

Economic theory predicts that when people's real wealth declines (do to falling housing prices in this case) they spend less money on consumption; even if they keep the same house and same jobs with the same income.

[Delphinus]

22. I'm trying to sell mine

at a true price, not marked up. What are my chances?

[haele]

26. Pretty good...

You might want to advertise by word of mouth, as building contractors, consortiums, and agents are always looking to buy, then resell at the marked-up price - especially in high cost areas.

You'll easily find some middle-income family wanting to start out that will be eager to buy your place at the true cost - and either you or someone you know probably already know that family.

Just be aware that you'll be responsible for anything that needs repair on the property when you sell.

Haele

[Delphinus]

35. Thanks, Haele.

The house is in great shape, so that shouldn't be a worry. But houses here in IN just don't seem to be selling.

I'm hoping that the housing bubble for moderately priced homes is a boost, instead of a bad thing.

[Bragi]

34. Bush wants an "ownership society"...

He just forgot to mention that banks would do most of the owning.

- O

[ramapo]

36. North Jersey's not much better

Prices here are insane. Homes that were ~$125-150K 15-20 years ago are now $500K. A million dollar home is nothing special. $300s are cheap.

Add in property taxes which are equally outrageous (hey the bills have to get paid) and people are paying unfathomable amounts monthly.

I don't know how families are financing these houses but they must be living on the edge.

[lovuian]

37. When people are out of work they can't buy 600,000 homes

thats a Depression with the administration we have in place do you have any doubt a Depression is not on its way

:nuke: Housing watchout!!!