bubble?

Question

Does anyone think we are heading towards another bubble like 2008?

Mike H. · Answer

There's always the chance at a pricing bubble. But its not a 2008 bubble.

2008 occurred because you had people that simply couldn't afford their mortgage. They lied to get their loans. Or else they couldn't qualify for regular loans so the banks gave them subprime stuff where the rates were so silly there was no way they were ever going to be able to afford the payments when the teaser rates reset.

And once all the defaults started, they stopped doing the crazy loans and now you basically dumped a ton of product on the market and eliminated a large swath of what were potential buyers.

Perfect storm for a crash. And then the job market went to heck and a handbasket and the snowball started rolling down the hill.

To me, I'm seeing very positive news on the job market. And I am not seeing any crazy loans any more. So people that have borrowed to get a home can actually afford to make the payments as long as they have their job - which they should because the job market is so strong.

So do I see a crash like 2008 being possible? No way.

Do I see a price correction in some markets? Not in my area. But in some of the areas north of me, maybe. And based on some of the posts I've read on here in some of the other areas, maybe so as well. Or maybe just some price stagnation in some of those markets until incomes and the like catch up.

I do believe that the lack of new construction during this bust has definitely affected the supply which would make sense why the prices have shot up in some areas and may have created a peak.

But I don't see enough new construction homes by me, anyway, to suggest that there is anything in the foreseeable future that is going to correct that supply situation so I don't see how the demand will be lessened any to bring prices back down. I'm seeing more people from out of state call me about rentals because they're moving here for jobs too.

So for me, I don't see prices going down any time soon.

But overall, I don't see this being anywhere near a bubble like 2008. That was a perfect storm type of event. I'm sure there will be another crazy thing like that in our lifetime. But I just don't see that there's any possible way it can occur again in the foreseeable future based on lending guidelines, job markets, and simple laws of supply and demand because of the lack of new construction during the bust.

And yet, I'd always add that only a handful of people ever thought the bust in housing would occur in 2008 so my 2 cents on the matter is worth about as much as you'd think - 2 cents. :-)

Evan Wiesner · Answer

@Rashad S. like 2008? No. There isn't nearly as much sub prime debt out there as there was in 2008.

Are we headed towards a bubble? I think so. I don't know the depth or breadth though. I'm guessing it looks more like a market correction and in some markets it may just end up as sustained stagnation in values.

The rapid appreciation over the last few years is not going to continue so playing the game for appreciation is dangerous. But smart decisions and calculated investments should keep good investors in the money.

Scott W. · Answer

no bubble in our are IMO. appreciation is next to nothing. worse case scenario, prices remain flat.

it's all about job/wage growth.

Rashad S. · Answer

Excellent feedback.  Yes 2008 had a lot of factors that played roles in that crash that simply are not existent now.  So I should not have put it that way.  But yes, I'm here in Atl Ga and I'm just curious because it sure does feel like we will reach a bubble

JD Martin · Answer

Read a book called "Foolproof". It talks a lot about the 2007/08 meltdown. When you hear the facts you realize that the actual losses from that period were a couple of pennies on the dollar, and for most portfolios was less than one percent. Perception is reality, as they say.

As for a bubble, man in some ways I sure hope so. It is getting difficult for me to buy new inventory at a price where I can still make money. But markets are local. My market didn't do anything in 07/08, because you can't get cold if you're not very hot.

Darwin Crawford · Answer

This came through my news feed at work the other morning: https://www.scribd.com/doc/315050553/David-Rosenberg-Slides

bubble?

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