Is the Bubble Going to Burst in Sacramento Housing Market?

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My kids (and adults alike) love these huge bubble makers – they are awesome!  It seems like the public feels the same way about the real estate market.  One investor, friend of mine, who has been in business since the early 70’s – yes, 1970’s) is very skeptical.  He says, “Maybe it’s just the old guy in me talking [kind of sounds like my dad], but I’m sure if this appreciation in the market is real or manufactured?”  He went on to say that with the government backing so many loans at 3.5% down, so many home buyers are instantly upside down in their home after they buy it, as it takes about 8-10% to sell it.”  I’ve never really looked at it like that before. My response was, “but hardly any other buyers are able to even get an offer accepted, let alone close on a home, due to all the investors gobbling up the inventory with cash!”  My seasoned friend mused on, “Even with unemployment going down, I wonder how many of these new jobs are substantial… solid jobs – ones where people are making a good living and able to buy or invest with confidence.”   I left that conversation thinking:  1) The market will keep going up as long as there is demand, and I know with my list of buyers, there is HUGE demand.  And, it will keep going up as long as there is a perception of health in our economy – that seems what everyone wants to feel, even if it’s just a perceived reality.  How long will it last?  Or, at what price are these home unattractive to both investors and buyers?  2) Especially for investing… proceed with caution.  Another friend at the table said that he will only invest if he knows that he can get out safely within 6 months.  It’s interesting to hear seasoned investors say they are unsure and don’t know, especially when the wisdom of the day is to make certain proclamations like, “We got 2 years of appreciation!” or “Once the unemployment rate falls to ____, then interest rates will go up.”  Some of these statements have truth embedded, but beware of those who “knows for sure.”

Another respected voice, Jed Kolko (Cheif Economist) says in a recent article, “that the next housing bubble is probably just a matter of time. But, as Trulia’s Bubble Watch shows, that time is not now.”  See this interesting article HERE.

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4 responses to “Is the Bubble Going to Burst in Sacramento Housing Market?

  1. First Time Buyer

    I read Mark Hansons Mortgage blog and he’s of the opinion that there are too many underwater “zombied” owners for this market to be sustained. Also, I see prices all over the map like shopping for car insurance. I just saw a REO fixer upper being offered by Homepath for $328sq ft!! Really, an REO fixer upper for $328 sq ft. I was looking back when the tax credit was being handed out and there was a spike and high demand and then guess what – prices came back down and much lower too. If it’s one thing we have alled learned of late it’s that YES home prices do go down, and perhaps more likey too as interest rates are most certainly going to rise. I’m a first time buyer and back on the sidelines until the next bounce down and better homes trickled onto the market. Most I see have been in bad hoods or on corners and busy streets, etc. Also, I can throw a rock and hit four vacant homes from where I live and have to wonder why they remain vacant for years, let alone all the folks living mortgage free daring the banks to take it back. It’s all kinda whack out there. High risk low reward.

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  2. Guitarpix54321

    I’m a first time home buyer as well and would just like to situate in the area without driving my bottom line out of the comfort zone.

    I have been looking for 6 months, bid often, and i can tell you one thing for sure … feels like a black friday craze when i’m shopping for a home.

    I see the same stuff, over inflated egos of owners and realtors plugging the same lines as in 06 … it is going to continue trending up.

    Fascinating fact: Real wage has DECREASED 12% in the past 3 years, not increased. Also goods are getting a little more expensive.

    I Fully Agree… the big risk is introduced and lower returns everyday … hang in there and good luck!

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