Housing Bubble Chat

[Cary F.]

I'm curious to hear what people have to say. As an economist/risk professional in the banking space, I feel that I have decent insight into the industry. 

Those of you warning of a housing bubble...  I just don't see it.

• There's a large shortage in the housing market as housing starts are at HALF the rate of what they were pre-bubble  (950,000 per year vs 2,000,000 per year)
• HELOCs from 2006-2007 show pressure, but equity increases in a good market are allowing home owners to refi second mortgages
• Rates will remain low for the foreseeable future
• Low rates and climbing prices create incentive to enter the housing market
• Bank regulations are preventing the reckless lending practices that were driving the last housing bubble

I say we have at least 5 more years or nice appreciation and low rates. 

What do others in the community think? Thanks! 

-Cary

[Keith Goodwine]

For those that fear a bubble, I always ask if they think "timing the market" is a sound investment strategy.  It almost never is.  

We don't know when the next economic downturn will be.  It could be next week, next year, or five years from now, as @Cary F. says.  Two people could look at the same measures, and rationally argue whether they indicate the market is undervalued or overvalued.

The key is looking for an under-market deal. Buy deals in your area that are under median price range, and have potential for future growth. This is why fix-and-flips and BRRRR are lucrative, no matter the market conditions. Buying high and hoping for higher is not a smart play, no matter the market conditions.

Even if the market tanks, it's up to you to choose how you react.  You can choose to pack up and go home.  "I tried and it didn't work, I got burned, it's over," say those types.  Or you can choose to retool.  For those that think there is no money to be made during a recession, look no further than John Templeton.

In the words of Jim Rohn, "The next 10 years will look about like the last 10 years - opportunity mixed with difficulty."