Tuesday, March 25, 2014

I think it's going to get bumpy real soon.

October definitely was the top of the real estate market. Prices every month since then have declined. I'm glad I decided to put a renter back in the crapshack and not sell, because it's not a small change.

About a month or two ago I think I started reading stuff from San Diego where the prices were falling quite precipitously. An average house was having about hundred thousand dollars shaved off. I thought to myself - I hope this doesn't spread. But it looks like it has. It takes a few months to see if it's a blip or a trend, and it definitely looks like a trend. Even Calculated Risk has an article talking about it.

It's quite hard to figure out the market right now. Interest rates today are as cheap as they were in November. Almost cheaper. I refi'ed at 4.25, and it isn't that hard to get a loan in the 4.12 rage right now. Interest rates are not causing this problem.

New Mortgage rules did take affect Jan 1. You basically can not spend more then 43% of your salary on a mortgage. Which is quite strict actually. In California, for as long as I've been a rent paying adult, the standard was pretty much 50%. For rent/or mortgage. Prices will have to come down to accommodate for this.

The Fed is signaling they are going to stop buying bonds. Well.... good luck with all that. Stagnant wages, and job creation are not good enough to sustain a healthy market.

The other thing is - I think for the most part people are pretty locked in to where ever they are living. If you managed to save your house, likely you are paying something in the rage of 4.50% interest or less. That makes you not want to move as quickly. No one on this earth ever thought they would get a mortgage that low. It takes very bad times. And 20% of people ARE still underwater. It makes for a very stuck market generally. Since it's still pretty hard to get a mortgage the rental market is also pretty locked up.

It will be fascinating to see what happens to rents. They have gone up quite a lot. However, through the whole deepest parts of the recession, prices only fluctuated 5% up or down. They were remarkably stable.

2 comments:

Anonymous said...

I'm putting my place up for rent, but am going after a niche. Instead of traditional renters I'm looking for people out of state who have sold their homes and are moving to the bay area. The first step was adding two shipping containers to the back yard, now I need to fix it up and furnish it, then presto 3 times normal rate. If you have a family and a household of goods, it doesn't leave many options and with storage onsite it offers an amenity that orhers can't. If I have success, then I can replicate all over the bay and if not I can pull the ad and live there instead. DF

she said: said...

I hope you have luck with that. People from out of state are pretty shocked at our rents. Why wouldn't they just try to rent a place that has a garage?