Tilted Forum Project Discussion Community - View Single Post - 31% of U.S. housing market "extremely overvalued": new study

Rodney · 08-27-2005, 07:25 AM

I live on the California coast and yes, I'd say that housing is 'way overvalued. My backfence neighbor just put her 2 BR, 1000 square foot home on the market for near $700K. She bought it for $180K five years ago and probably sunk about $100K into improvements plus a lot of her own work; it _is_ a cool house. But I suspect that for a lot of you, even the $180K for a 1000 square foot house would be considered obscene even now. A nothing-special 30-year-old 3-br ranch house here has gone up from the low 400s to the low 700s in five years.

See, we're just over the hill from San Jose in a resort community, and the easy money from the dotcom boom ran up prices in the late '90s. And just as prices started to fall, the low interest rates arrived, fueling speculation again. And a lot of Silicon Valley types switched their investments from stock to real estate.

We own our house outright, and could make a killing if we sold and moved. But we're rooted here; we'd have to move 150 miles or more to find houses that aren't overvalued by some standard. There are cheap houses in new developments out on the hinterlands of the SF Bay Area, but one of the reasons they're cheaper is because they're a 50-mile commute to where most of the jobs are. And most of the buyers are commuting those distances. If commuting costs rise, the desirability of those houses will fall.

It's all mucked up. Our house currently would sell for perhaps four times as much as we paid 15 years ago. If the market price drops by half, we're still all right, and still living in a community that is very desirable and will continue to be even in hard times (we're a beach town with a big public university). Easy come, easy go.

On the other hand, we know a couple nearing retirement age who need to sell their very desirable house to fund their retirement years, pay for medical care, and so forth. They're selling their house right now and moving directly to Portland. Even though Portland is overvalued, it isn't anywhere near as overvalued as our area. And they'll trade down from their large house to a nice condo in a good neighborhood. So they should still clear a good chunk of change on the deal after all the properties have been sold and bought.

08-27-2005, 07:25 AM	#17 (permalink)
Rodney Observant Ruminant Location: Rich Wannabe Hippie Town	I live on the California coast and yes, I'd say that housing is 'way overvalued. My backfence neighbor just put her 2 BR, 1000 square foot home on the market for near $700K. She bought it for $180K five years ago and probably sunk about $100K into improvements plus a lot of her own work; it _is_ a cool house. But I suspect that for a lot of you, even the $180K for a 1000 square foot house would be considered obscene even now. A nothing-special 30-year-old 3-br ranch house here has gone up from the low 400s to the low 700s in five years. See, we're just over the hill from San Jose in a resort community, and the easy money from the dotcom boom ran up prices in the late '90s. And just as prices started to fall, the low interest rates arrived, fueling speculation again. And a lot of Silicon Valley types switched their investments from stock to real estate. We own our house outright, and could make a killing if we sold and moved. But we're rooted here; we'd have to move 150 miles or more to find houses that aren't overvalued by some standard. There are cheap houses in new developments out on the hinterlands of the SF Bay Area, but one of the reasons they're cheaper is because they're a 50-mile commute to where most of the jobs are. And most of the buyers are commuting those distances. If commuting costs rise, the desirability of those houses will fall. It's all mucked up. Our house currently would sell for perhaps four times as much as we paid 15 years ago. If the market price drops by half, we're still all right, and still living in a community that is very desirable and will continue to be even in hard times (we're a beach town with a big public university). Easy come, easy go. On the other hand, we know a couple nearing retirement age who need to sell their very desirable house to fund their retirement years, pay for medical care, and so forth. They're selling their house right now and moving directly to Portland. Even though Portland is overvalued, it isn't anywhere near as overvalued as our area. And they'll trade down from their large house to a nice condo in a good neighborhood. So they should still clear a good chunk of change on the deal after all the properties have been sold and bought.