Well now I'm really disappointed. Our house only went up $295/day (for the past 72 months).
Of course our house is overvalued. There's a housing bubble pretty much everywhere.
Just remember, "If something can't continue, it will eventually stop."
House price
- Thread starter CourierDriver
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Of course our house is overvalued. There's a housing bubble pretty much everywhere.
Just remember, "If something can't continue, it will eventually stop."
My theory is that excessively low interest rates are a big part of the problem. Combining them with a "how much house can I buy if I can pay this much a month" attitude has lead people to pay really big prices for houses.
If mortgage rates go up to 5% or even 7%, you're going to see people bailing out (or at least trying to bail out) of monster houses left and right. Those rates are not unrealistic either. Our first house had an 11% mortgage. Try paying a $1,000,000 mortgage at 11% ($9166/month for interest alone).
I understand that a big difference in the US this time is that you now have recourse mortgages. We always have in Canada. You can no longer leave the keys at the bank and walk away owing nothing. Now you will owe the difference between the balance on your mortgage and what they can get for your house.
If mortgage rates go up to 5% or even 7%, you're going to see people bailing out (or at least trying to bail out) of monster houses left and right. Those rates are not unrealistic either. Our first house had an 11% mortgage. Try paying a $1,000,000 mortgage at 11% ($9166/month for interest alone).
I understand that a big difference in the US this time is that you now have recourse mortgages. We always have in Canada. You can no longer leave the keys at the bank and walk away owing nothing. Now you will owe the difference between the balance on your mortgage and what they can get for your house.
Don't forget about the large aircraft industry. That's just a memory in California. Boeing, General Dynamics Convair, Lockheed / Martin are all gone. Except in a very minor capacity. No large aircraft are being built in California any longer. The C-17 was the last. All of their major manufacturing has moved to non union, free states. They used to employ thousands for decades.
It was the last bastion of good, high paying union employment. The government train wrecked it with too many expensive regulations, (much like they did everything else there). And the workers all helped put the noose tight around their own necks, with all but never ending strikes for pay and benefit increases. Just like the steel workers did in Indiana and Pennsylvania. And the auto workers in Detroit.
Yeah, their housing market is still going great guns for the time being. But how long can that possibly last with minimal, to non existent job growth? And the jobs are in fact diminishing. And with that happening, how long can they demand $650K+ for a 60 year old, 1,100 sq. ft., chicken wire and stucco, 1 bath home with a 1 car garage? Sooner or later that rubber band is going to break.
With the exception of a few resort and retirement communities, a great housing market needs a an equally supportive job market to sustain itself. California is sorely starting to lack one to support the other. And they're not alone. A lot of Midwestern cities are beginning to experience much the same, after decades of success.
California is not homogeneous in its real estate and job market. In theory what you said make sense, but in reality a few factors are at play here:
1) New industry pops up to replace the old dying industry. Defense is gone all over the US, you can blame that on the fat pork trying to shove expensive stealth fighters, weapon system, wars down the tax payers' throat and the tax payers fight back (via elections).
2) Inflation is rampant, sure the same 650K 60 year old house is no longer worth the same after 60 years adjusted to inflation, but the debt is fixed and as long as the owners didn't lose the job it will not depreciate more than its residual loan, they will be fine as owner occupancy. This is especially true in places where inflation means heafty investment in future companies and jobs (tech, finance), instead of places where income and jobs are steady regardless of inflation (defense, manufacturing).
3) Yes, there are dying cities in California that turns into slum, in former industrial and naval towns. Mountain View used to be a scary place, now they turn around due to new industry. East Palo Alto used to be a gang zone and people get drive by shooting wearing the wrong color clothings (gang symbol), now the high rent is driving the gangs out and tech workers move in. The key to revitalization is new industry, new jobs, although some of the older workers in old industry has to move or find different jobs, that's the reality in the job market. Without doing that we will have small town relying on one industry and then the town die with the industry.
4) I can only speak for the large cities with high cost of housing, they tends to be near area with existing limitation (mountains, oceans, bays, etc) that they cannot build new homes and offices but they already have established growing industry. This leads to people paying more than other area but they are able to get higher income eventually due to abundance of jobs and companies to switch around. The pricing is baked in so your 2.5M house there is probably going to worth 1M still even if it is torn down, yet a 650K house in the middle of midwest is probably worth $80k because the land is not worth much (old dying neighborhood with no point of rebuilding like in an urban area), and it was the construction cost that makes up the house and it is used up like a worn-out used car.
5) I can only speak for the tech industry in Silicon Valley, there's a huge startup culture and venture capitalist ecosystem here, how long will it stays here I don't know, but people tends to take foreign money to bet on risky idea for high reward. Yes, 9/10 of those startups fail, yet they still provide jobs, still grow future companies that will grow into the next generation of tech giants. I wish this culture is in more places and all over US, but the culture across US can vary widely and the priority of each location can be different. I see Seattle and NYC doing this, maybe Austin and San Diego doing this, but I do not see Detroit, Florida, Idaho, etc doing this yet (maybe eventually).
A lot of people in those high paying union jobs in defense, went to work in the tech industry and regular non defense manufacturing jobs, their children of course didn't enter the same companies but they are still in the area, working typical jobs that sustain their lives, most likely not union. I know at least 2 of my friends in the engineering program were children of satellite industry, they weren't feeling bad for their retired parents (they made enough from their home appreciations) and them not going into aerospace (they pay like 80k when other industries pay like 150-200k).
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I do have a feeling that we are following either similar patterns of roaring 20s or dot com boom right now. New industry-transforming what is worth how much, low interest rate, major event preventing politicians and policy holders from raising interest rate, massive inflation, population spending habit and consumer behaviors are rapidly changing. Starting to see companies cannot grow further despite cheap money and the will to expand.
I don't think the collapse will be in the housing like 08 this time, but rather in the crypto and unicorn tech stocks. It may burn into other industry but it is hard to tell who will survive and who will die like the 2001 time.
Corporate America moving good blue collar union jobs off shore has been the downfall of the middle class all over greed .
There are still good jobs here and entry level that would be the "union worker" of decades ago.
Those jobs just shifted from the repressive business states of the North and West to the far more friendly states of the south. Good paying jobs, incredible benefits.
The largest exporter of American made automobiles and hundreds of smaller independent businesses that support it as just one example is right here in South Carolina.
They are constantly hiring, recruiting and they are good paying jobs, more so when you look at the cost of housing, quality of life, cost of taxes. That company is BMW. I know, my son works for them. Its their largest automotive plant in the world cranking out up to just shy of 1000 BMWs a day and the majority being sent overseas. They constantly vote down the union.
Many other companies of similar tales in TN and Alabama and that is the tip of the iceberg.
Other examples for South Carolina and again just the tip of the iceberg is the new Volvo plant that recently opened up and how about the Boeing now building aircraft in South Carolina too. Who would have ever thought Boeing could pull off manufacturing airplanes from the repressive environment of Everett Washington to Charleston SC. Never mind all the supporting industries related to those plants.
Companies flee the West Coast and Northern states because of repressive regulations stifling business, so they either move south or like ALL/most of the the west Coast tech companies they have their products built overseas.
Its not greed (no politics in this forum) but look to the business friendly policies of the other states and other countries.
BTW - I was born, raised, spent most my adult life on the South Shore of Nassau county as well as all my siblings and parents. Oh my god, it was a great place for boating, dad had me on a boat almost the day I could walk, at 18 I bought my own first boat. Spent 1000s of hours in my life on the great South Bay and in the ocean off Long Island. It is one thing I miss.
It was a GREAT place to grow up but now an overblown repressive over taxed substandard of living as far as I Am concerned and after moving here/liviing here for 15 years now in the south, I can say its true.
I live in a home most Long Islanders can only dream about and instead of my property taxes being $25,000 a year they are $3,500 (yes, that's right, three thousand five hundred) in one of the states best school districts of which my daughter graduated, then attended a great college here at Clemson and now works in a great job in the up and (*LOL* its ridiculous her job is so good but she is a hard worker/good at what she does) coming Charlotte NC two hours away.
Ok, on to the West Coast, I see another conversation by some regulars in here. Yeah, sure no question Silicon Valley is the tech center of the world, one just needs to remember that Detroit used to be the automotive center of the world.
The difference between the two is nothing is manufactured in Silicon Valley, the cost would be prohibitive. So I look at many (NOT ALL) of the big companies like Apple (one example) who are more like the middle man now, middle men at some point lose their business. With no production there, there is no "stickiness" to be forced to stay if they do not want too. BTW we are officially an Apple family now so I have nothing against Apple and I have been computing for over 25 years. I love their products.
Apple designs the product but its manufactured in other countries, this goes for almost any tech item coming out of CA and if its made in the USA, its not made in Silicon Valley. So what I am saying is its a lot more easy as technology advances to cut out the middle man and you can expect some day, maybe not in my lifetime but most likley in my lifetime a paradigm shift that blindsides them/didnt see it coming in Silicon Valley.
Texas is another example, just took how easy it was for Elon Musk to move his headquarters, yeah, he left his plants behind, he had a product that is produced here in the USA. See the difference? You cant just pull up a factory but you can replace Silicon Valley since nothing is produced there. The greed is in the voters, they install the "system" that makes it impossible to compete on a world wide scale from where that are but there are other places in the USA.
You cant really believe that China with billions of people that there isnt a grand design one day to be the next Silcon Valley or any other country in the world for that matter after all, nothing is made in the valley, its just a think tank/design center. Also the more advanced Silicon Valley helps the world become, the less people will be needed in the valley, AI will be developing the products if the valley survives which I think they will, just like Detroit has, which is much smaller than it used to be.
California unemployment rate = 6.5%
New York unemployment rate - 6.2%
South Carolina unemployment rate = 3.5%
(todays thoughts, first cup of coffee before the gym)
Have a great day! This post is not intended to ruffle feathers. One important lesson in life is just because something is as it is today, dont ignore signs and discount what one think won't happen.
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That's exactly what's going on in AZ.Billt you know our problem is rich Californicans coming here and paying too much for houses. Simple as that, no need to over think it.
No it's not. The problem with working in the trades is the cyclical nature of the work. People want stability over having to file 5 different W2s combined with stint on unemployment every year. Always worried about where the next job will come from. Plus the work can sometimes be ridiculously hard. Want to work as a roofer your entire life? How about a framer? Want to put up sheetrock and breath in that dust every day? How about a pipefitter working in refineries/chem plants in the hot Texas sun?
I have read your posts on this subject. You seem to look down on people "swinging" a hammer.
A lot of kids are spoiled by parents who do not want their kids "swinging" a hammer like they did.
Doesnt make much sense huh? Long Island was pretty much built by laborers and companies like that. World War 2 vets ect. Long Island turned into the darling of the country but now on a decline because they are all office workers now, no longer producing a product, when you dont produce a product you are easily replaced or relocated.
People are in for a rude awaking. You cant not produce a product and have job security.
Lets face it, New Yorkers are fleeing the state, factual information. Many more would like too but afraid.
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I was a senior in HS when BMW announced they were going to build a plant in upstate SC. It was huge news and people were excited. I occasionally meet a couple of German nationals who are on rotation through the SC plant. In any case the biggest difference between the North and South is that local/state govt employees have vastly different salary/pension plans. Those plans have a outsized impact on the amount of taxation.
There has been plenty of "greed" on both sides of that counterfeit coin. The union workers have done a pretty good job on their own. Pricing themselves out of the job market, with unreasonable demands for both pay and benefits.
California union aircraft workers, and Detroit union auto workers are now some of the highest paid unemployed people in their professions. Most have only themselves to blame for it.
The tradesmen I know are all turning down work. And have been for years. They're working as much overtime as they want. Most in the rust belt are moving to places here, and in Texas, where their labor is in even higher demand. As are their wages. I moved here in the 90's from Chicago, and enjoyed an immediate pay increase when I did. That span is even broader now. There's never been anything "cyclical" about it.
It's the white collar people waving their degrees at every company they can find, that are on the unemployment line. It's exactly as alarmguy said...... When you don't produce a product, you are easily replaced or relocated. People are in for a rude awaking. You can't not produce a product and have job security.... He is correct.
You are seeing the results of that being played out daily in many parts of the country. This idea people have had, that a college degree guarantees you job security is not playing out well for them. They're finding out by not only being jobless, but unable to pay back their student loans as well.
One thing I notice about houses being built in Sussex County Delaware is that only a few are using the best building practices, they look like they just want them built cheaply. One thing that easily stands out is the use of the green Zipboard system for exterior sheathing. Most houses use some kind of Tyvek wrap, but the Zipboard system is significantly better in reducing air movement and building a tight house. I would guess if they skimp on Zipboard they are skimping in other areas also.
There's high demand in some fields due to labor shortages.
Producing stuff is no guarantee either. A company can move a factory which btw has occurred numerous times throughout US history where entire regional industries were gutted OR a company will layoff a huge swath of people and re-hire them as contract employees (ex BMW-Greer circa 2008).
Btw..I wouldn't disparage white collar jobs. Many of those jobs fund or create ideas for projects which in turn generate blue-collar jobs. You can't have one without the other.
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That's everyplace. That's one reason I like older houses better. No OSB in my house, it's all hardwood.
Zip-sheathing is no better or worse than OSB w/housewrap. ZIP is OSB with a WRB (weather resistant barrier) applied on one side. It's an all-in-one product so although it's more expensive than OSB w/housewrap savings should be found in the labor. There are two problems with ZIP sheathing. First is that the tape must be applied correctly with the appropriate J-roller against clean seams and the nailing schedule must be followed with NO overdriven nails. The system fails when the tape has sections which are "fish mouthed" and collect water or let air through or where over driven nails let water through and let me tell you there are plenty of instances where both have occurred.
It may be easier to hit an air tightness number with ZIP but it really depends on how skilled the framers are because it can be done with OSB/Housewrap. The workers just have to want to do it and have the proper tools.
Through out history that is what people have done. . My grand parents move from Italy to the U.S A for the opportunity to improve their lives before WWII. Why are the homeless homeless is what we need to ask. in 2011 I had a rental application and the credit check showed the people lost the home they owned for 14 years. Every two years the did a cash out refi to buy vehicles and owned a house boat with dock storage fees and a ski boat.
Living in Chattanooga for past 9 years. Huge growth, fast internet and a developer friendly Mayor. Problem is, every road in the area needs resurfacing (either potholes, sink holes, large cracks just a mess), no new roads being built or widened, 4 new subdivision have gone up near me in past 5 years, no road enhancements, sewers overflow in many areas of Chattanooga when it rains heavily (like all winter) (multiple EPA fines and issues) Within 10 years we will have Nashville and Atlanta traffic issues. All the leaders care about is growth, no infrastructure. My advice, unless you need a job here this will not be a great place to live in 10 years. Yes, no income tax, sales tax is 9.25% on everything. Plus, TN Governor is nuts!!!!!!!!!!
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