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Thoughts on a housing bubble?


hundredwaters
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I live in Los Angeles with my wife and we have been wanting to move , but despite making a sizable income between the two of us I feel we are priced out of a better neighborhood/larger house...  I am hearing many realtors say housing here is looking like a bubble - also noted by Bob Shiller - and my wife is pressing to leave and rent, which would be a huge headache, but many blogs I read suggest otherwise and given several recent positive economic forecasts of low inflation/improving economy I have my doubts, at least for the immediate future... 

 

Just curious how the board is weighing on housing, at least in Southern California...?

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In my area on the beach in south orange county prices are still below the 2004 peak so it doesn't feel bubbleish to me but I have heard LA is a bit different. With affordability where it is given the fixed rate mortgage back at 4.2% and houses selling for less than the replacement value + land(in one new build analysis I did) I would disagree but real estate is always location, location, location.

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In diamond bar, chino hills area where we moved in 2011, we were able to purchase 3000 sf home about 625k price range. In similar neighborhood, one can buy 2000-2200 sf home today for similar price range.  Same neighborhoods during bubble were about million plus. Our criteria was to be In good school district,  safe neighborhood,  and be closer to LA  from what positives it offer , But farther enough to be in family oriented neighborhood.

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A theory I heard yesterday that seems plausible is that home buyers are speeding up sales activity because they expect rates to rise in the near term.  A lot of buyers are taking advantage of record-low 30 year mortgage rates - moving upmarket today while they can lock in at a competitive rate.

 

As the rates come up, the price rise should stall out, or potentially reverse.

 

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