Dr. Housing Bubble 03/30/14

[Crewleader]

In California buying is about timing and speculation: Since 2000 the California housing market has experienced more dramatic booms and busts courtesy of speculation, investors, and new financial products.

California’s housing market is a boom and bust machine tuned to attract the masses. Timing matters in a state where speculation is rampant. Since 2005 California home owners have received over 2,000,000+ foreclosure notices. Of course this goes into the graveyard of foreclosure information that we seem to forget each time the market booms. Since 2000 with shady mortgages, Wall Street financial shenanigans, and the Fed’s low rate policy the housing market in California has only entered into a more pronounced boom and bust carousal. People go into a deep herd mentality that fails to acknowledge even recent history. If you timed the market say two years ago and went with the record low rates at the time plus lower prices, then does that mean prices today are too high at 20 to 30 percent increases with interest rates 100bps higher? That $500,000 home probably worked at low rates but what about it at $650,000 with higher prices? Incomes certainly did not keep pace. Investors are still buying roughly 30 percent of inventory. This group is also slowly pulling back and it should be no surprise that inventory is rising and prices are actually stalling out. Since 2000, the California housing market is a wild ride of speculation. Buying and selling is a matter of timing, luck, and larger macro forces at work. We acknowledge this and for most, buying or selling is a decision that needs to be made in real-time. Is it a good time or bad time to buy today based on my specific factors? Yet let those 2,000,000+ home owners who got a taste of the foreclosure process serve as a warning that not all purchases are golden in the Golden State.

Going crazy after 2000

People have a hard time understanding the insanity of prices starting in 2000. The groundwork was laid for this in the 1990s as the mortgage market opened up to all sorts of nonsense products that masked stagnant income growth. Once this was unleashed, you also had in early 2000s the Fed stepping into their era of low interest rates. One of the results was massive housing bubbles across the nation. In California the bubble went Hollywood:

http://www.doctorhousingbubble.com/california-boom-bust-timing-real-estate-california-real-estate-cycles/