Re: real estate questions....
 

You do tend to get a few of warning signs that real estate is overvalued, but as with all bubbles, the prices can keep going up anyway until a substantial minority realises that the game is over, for now.

My most dependable indicators are the relative value of property to local average incomes, (over 5.5 is bad)accounting for local wage inflation, the number of first time buyers entering the market, (less than 25% is bad) and the prospective relationship between maximum geared rental properties and rental incomes using 1 and 2 year treasury bond yeilds (less than 100% is bad). Average property selling times can also be useful, as can banks tightening of lending criteria.

When the grounds of Emperors palace in Tokyo was valued at more than the entire state of California in the Japanese boom, the warning signs were pretty clear. Having said that, I would definitely buy it today if I could.

Bingo

If You Want to Bet on Real Estate Crash
 

Hedgestreet

Check this site out. I'll tell you what though, when seemingly the most popular buzzwords about something are bubble and crash I'm fairly certain that it won't happen at least not soon. This is purely a qualitative analysis I admit. I remember when the hype about Japan was at it's zenith, I can't remember too much hype about real estate bubbles in Japan or the over valuation of the Japaneese stock market.

I think there are four factors affecting real estate prices alot, not necessarily in the order of importance.

One is of course the supply of desirable housing in desirable areas.

Second is the favored tax status of housing. Ray has stated that home owners should basically consider selling much more frequently than they do since so much of their profit is tax free. Of course the deductability of interest expenses help as well.

Third and this one is really a big factor IMO is that there is tremendous liquidity in the mortgage market i.e. there is a lot of money available for people that want to borrow money for a real estate. The mortgage backed secuirty market (MBS) is bigger than the treasury market and there are all kinds of bonds rated from AAA to junk that appeal to investors of all risk tolerance levels. Personally I trust the rating of MBS more than I trust the ratings of corporates.

Fourth is that interest rates are generally speaking low from a historical perspective.

I've read some horror stories about people who bought expensive real estate in SoCal where they had the price of their x million dollar home cut in half when builders came and built en masse. I'm sure there are disasters waiting to happen. Also all the things about the economy that people mentioned are relevant. I frequently go to open houses in the area where I live and can't believe what people are selling their houses for and getting. I mean I walk in, look around and see a lot of projects most of the time. So I understand a lot of the concern about prices as well. I'd also like to say that 30 year fixed mortgages and 15 year fixed mortgages don't suit everyones needs and I/O ARM type loans actually meet certain buyers needs very well.

Re: real estate questions....
 

Where is the best place in the southwest to invest in income property, I would love to retire there? I missed an opportunity a few years back to by some property in Las Vegas that would have doubled, and I love that area. But that area is just going crazy with housing prices. Is there anywhere in the southwest that is reasonable? I am looking for something around $150,000 that is not a dump.

Re: real estate questions....
 

[ QUOTE ]
Having said that, I would definitely buy it today if I could.

Bingo

[/ QUOTE ]

Real estate appears to be vastly overvalued by every one of the metrics you just mentioned. Your investment guru Warren Buffett just sold the Laguna Beach home he has owned for decades claiming that real estate in now ridiculously overvalued. What more do you need to convince you of a bubble?

Re: real estate questions....
 

[ QUOTE ]
[ QUOTE ]
Having said that, I would definitely buy it today if I could.

Bingo

[/ QUOTE ]

Real estate appears to be vastly overvalued by every one of the metrics you just mentioned. Your investment guru Warren Buffett just sold the Laguna Beach home he has owned for decades claiming that real estate in now ridiculously overvalued. What more do you need to convince you of a bubble?

[/ QUOTE ]

real estate is very regional. Just because it is way overvalued in Laguna Beach, CA (which I don't doubt it is), doesn't mean it is overvalued in other places.

Buffett still has vast RE holdings, BTW.

Re: real estate questions....
 

[ QUOTE ]
[ QUOTE ]
Having said that, I would definitely buy it today if I could.

Bingo

[/ QUOTE ]

Real estate appears to be vastly overvalued by every one of the metrics you just mentioned. Your investment guru Warren Buffett just sold the Laguna Beach home he has owned for decades claiming that real estate in now ridiculously overvalued. What more do you need to convince you of a bubble?

[/ QUOTE ]

Yip, he is a guru. I was talking about Japan tho...I would buy there. I think the US is in for several years of low growth to let the fundamentals catch up...cant see a bust though, just unpromising returns. I pass on US property for now.

Re: real estate questions....
 

I think you can say there is a real estate bubble in California when 1/75 people have a real estate license...

http://quickfacts.census.gov/qfd/states/06000.html
and
http://www.dre.ca.gov/stats04_05.htm
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