California housing, recovery or bubble?

Published on OC Housing News, by Buena Park News, Nov 21, 2013.

Are we witnessing a new sustained housing recovery in California, or are we witnessing a new housing bubble? Some housing bulls postulate the dramatic increase in prices springs from sound fundamentals. Rents and incomes increased, unemployment dropped, and distressed property sales returned to pre-crisis levels. Some housing bears posit the dramatic increase in prices feigns the signs of market health while the patient is still very sick.  

Prices moved up far faster than rents and incomes (nearly 10 times faster), unemployment lingers, distressed properties lurk in the shadows temporarily removed by lender can-kicking, and the demand depends on fickle investors and artificial government programs and federal reserve stimulus, both temporary measures.

Debates concerning fundamentals aside, whether or not you consider current market action indicative of a recovery or a bubble depends largely on what yardstick you use to measure value. The reports I generate use current owner cashflow and a comparison to current rents to establish value. This number incorporates real estate prices, rents, and most importantly, interest rates to establish value. It’s susceptible to swings in financing costs, and it can be distorted by manipulative federal reserve interest rate policies. Another method of valuation considers historic relationships of price-to-income and price-to-rent. Those measures fail to consider the impact of interest rates on affordability, so when interest rates are low, these measures claim prices are overvalued when in reality, the market may be at an equilibrium with current costs … //

… (full text and a graph).

(see also Report: Homes Looking Overvalued in Coastal California, on OC Housing News, by Nick Timiraos, Nov 6, 2013).

Links:

10 Reasons It’s A Terrible Time To Buy An Expensive House, on Patrick.net, by Patrick Killelea, Nov 21, 2013;
see also his Mortgage Calculator, on Patrick.net;
linked with Charles Hugh Smit’s website: Of Two Minds;

Money, It’s a Human Right, on Dissident Voice, by John Andrews, November 20, 2013;
writing about: [KR526] Keiser Report: Bitcoin is Beautiful, 25.46 min, on Max Keiser.com / RT, by Stacy Herbert, Nov 21, 2013;
see also: Cyprus University world first to accept bitcoins for tuition, on politics for the 99%, Nov 22, 2013;
and also on YouTube;

Border Patrol International, the American Homeland is the Planet, on ZNet (first on TomDispatch), by Todd Miller, Nov 20, 2013;

The many ways realtors educate us with false information, Nov 19, 2013;

JPMorgan Chase pays largest penalty for mortgage misdeeds, on Central Valley Business Times CVBT, Nov 19, 2013;

PAH Platform for the Mortgage affected: It is possible! on xpressed, by SOFIA TIPALDOU, Nov 12, 2013;

Comments are closed.