Housing Euphoria

For some1 who bought in 2007 peak, the current euphoria feels very close to 2007 peak.
Any1 in the market then feels the same?
In 2007, I sense bad thing would happen because of barclay bankruptcy (I think is 6-12 months before Leyman’s brothers). Any1 detected any shaky pillars?

Unwinding of QE?
Unexpected announcement of bankruptcy of UBER?
Credit freeze because of wide spread ID theft from the breach of Equifax?
Sudden big surge of oil prices?
North Korean accidentally drops a real nuke on South Korea?

Unwinding QE --> they are doing that only because economy improved, so can’t be the reason
Bankruptcy of Uber --> not likely to happen and if it did is probably a result rather than a cause
ID theft --> would not make/break economy
Oil prices --> oil will play a much lesser role in future due to newer tech to use more environmentally friendly form of energy
North korea --> never was an important player and never will be

In short, I don’t think any of the above would cause a disruption. I don’t know what would either. So, I think the euphoria is going to continue for the time being… :slight_smile:

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Unexpected announcement of bankruptcy of UBER? ==> Not a major impact, VCs will suffer !

Credit freeze because of wide spread ID theft from the breach of Equifax? ==> Not a major issue except for equifax.

Sudden big surge of oil prices? ==> Very unlikely happens unless US_North Korea fights which is very unlikely.

North Korean accidentally drops a real nuke on South Korea? ==> Unlikely. However, Trump is unpredictable like stock market, any time any thing can happen !

Source: https://www.wsj.com/articles/leveraged-loans-are-back-and-on-pace-to-top-pre-financial-crisis-records-1506250800

Lending to the most highly indebted companies in the U.S. and Europe is surging, a development that investors worry could pressure financial markets if the global economic expansion starts to fade.

Volume for these leveraged loans is up 53% this year in the U.S., putting it on pace to surpass the 2007 record of $534 billion, according to S&P Global Market Intelligence’s LCD unit.

In Europe, recent loans offer fewer investor safeguards than in the past. This year, 70% of the region’s new leveraged loans are known as covenant-lite, according to LCD, more than triple the number four years ago. Covenants are the terms in a loan’s contract that offer investor protections, such as provisions on borrowers’ ability to take on more debt or invest in projects.

Unwinding PE & Rate Hikes will blow up this economy even though FOMC says Economy is doing good. What FED says that economy is robust enough to shoulder the financial stress now ( meaning of Economy is doing good), but they never say economy is not going to undergo stress !

Like you and me see the crazy prices are back in 2007 level, FOMC sees the issue and trying to fix it with unwinding and rate hikes.

Recently, Janet Yellen - as per FED estimates - indicated that Stress period is likely during 2019-2020. FED statement inference “Unemployment expected to increase slightly during that period”.

BTW: FED or FOMC never openly say we are going to stress the economy or it is going to be bad. They always say positive about economy, we need to infer from the messages.

You listen 1 hour Janet Yellen recent conference, you will come to know what they expect.

Every bubble in history is from easy credit. I thought oil prices tanked would screw the economy because of all the shale debt. They managed through it some how.

Recessions happen once rates are increased by 2.75-3.25%.


Oil prices affected heavily Russia, Canada and Gulf Countries. USA Inflation is not increasing as a result of oil prices. In fact, oil price drops helped economy except few states/places like Alaska & Texas.

I was more worried about corporate defaults causing banks to fail. Most shake projects were funded assuming $80/barrel to make money. Oil has been below that for a long time. The companies adjusted and got their production cost to under $40, so they could survive.

Literature always says stock market leads RE market and economy.
For the 2007-2008 financial crisis,
Did the stock market led RE market?
Did the stock market led the economy?
Did the RE market led the economy?

RE market is sticky, appreciates but slow to decline in prices. Usually, prices won’t bulge unless some1 have to sell quickly for whatever reasons. If I’m reading correctly, the forum opinion is houses are bought by strong holders which are unlikely to sell even if economy goes to recession and/or stock market crashes. I also sense a rise in debt and leverage by certain bloggers through the use of things like portfolio margin. Can any1 dream of some possible reasons that a group of people could be forced to sell?

In Austin, except for a few very hot neighborhoods where houses are flying off, the general trend is houses are getting longer to sell compare to the same period since 2012 (Austin rally starts later than SV) and rents are softening (some predicts would drop 10-15%).


Stock market did not lead the economy in 2008. Some homes in BA already falling hard before Lehmen bankruptcy.

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Sample of one is too small. Go out and look for some bigger dataset.

Lending standard is still tight by historical standard, but getting looser over time. There can’t be housing bubble without a lending bubble.

There is also the street test. Does your barber or gardener talk about flipping houses? Are they talking about hot stock tips? I remember seeing some stats saying retail investors still not going that deep into the stock market. Neither the housing or the stock market give me any sense of euphoria.

The only bubble right now is bitcoin.


The next shock is likely coming from a foreign source. Something like the 1997 Asian financial crisis, that briefly knocked us down in the US as well. So better have a global perspective and look at things globally.

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HGTV is producing more and more house flipping shows. That’s a sign we might be nearing a top. Homes can only appreciate faster than incomes for so long.

A pamphlet we got in the mail recently said that a house in Millbrae had “sold for $308,000…
over asking price”. The first half of that sentence would make sense in most of America. Here it’s used as a funny marketing ploy…

Also, when I see well dressed people driving nice cars waiting in line by the Millbrae Safeway to get cash for aluminum cans, it shows people are probably stretched out a little too thin… they don’t strike me as tree huggers that will donate the proceeds to the Sierra Club

It seems to me that a lot has to do with foreign cash buyers. Any disruption to that flow would be bad for the Bay Area (and NYC from what I hear)


Although, the following does not identify & seggregate “cash” & “foreign” however investor numbers seem currently stable especially when compared to historical monthly average.

Additional San Francisco Bay Area Highlights for July 2017:
► Absentee buyers, mostly investors, bought 15.9 percent of all homes sold in July 2017. This was down from 16.3 percent in June 2017** and up from 14.2 percent in July 2016. The absentee buyer share peaked at 28.4 percent in February 2013, and the monthly average since 1988 is approximately 15 percent.

I wish it were a bubble, but I don’t think the market is going to significantly cool until around 2020. Even if it does, desirable areas in the Bay Area will not be that affected. 1+ mil homes is the new norm I’m afraid.

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[quote=“Roy321, post:13, topic:3146, full:true”]

The interesting question is if property owned by absentee landlords turns over at the same rate as non-absentee landlords. If not property is accumulating in one of the either and we have to also consider the impact of the chronic under building in the bay area.

Anyone have stats on how much of the existing housing stock is owned by absentee landlords vs primary residential owners?

Well, this report from Core Logic mentions the % of absentee buyers at least…


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2017 is more like 1999 or 2000. We have 7-8 years to enjoy slow appreciation, just like the years of 2000-2007.

Wait for 2018, it will be much more than 2017 until we end up…

Come on. Stop guessing already. Your crystal balls are not that telling… :rofl:

Market can stay irrational longer than we can stay solvent :joy:

According to Sereno group, inventory in the valley is crazy low, now look at the data:

In January of 2000, right before the NASDAQ peak, there were just 943 active listings in the county
… this August stood at 954, the lowest month since January 2000.

Rephrasing for impact: Inventory is at crazy low of 943 at the point of NASDAQ peak in 2000. We are now at 954.

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