The news today is that housing prices continue to increase rapidly in the United States. Supply is tight and the public seems to think that the prices will continue to fly into the sky with apparently limitless potential. The optimism, as one report notes, is very similar to what people were feeling in 2005 right before the housing market crashed back down to earth:
The level of optimism is edging closer to the 70% of adults in 2005 who said prices would continue rising. That, of course, was less than one year before the peak of the housing market bubble in early 2006, which was largely fueled by a wave of subprime lending. (Roughly one-quarter of respondents in both 2005 and 2018 said they believed house prices would remain the same.)
Fears of a 2008 housing crash though are tempered with data that screams, “But it’s different this time!” For example, during the housing crises ten years ago, in Tampa Bay, Florida, 43% of homes were “seriously underwater,” with owners owing at least 25% more than the home’s value on their mortgage. Today, 9.4% of homes with mortgages fall into the “seriously underwater” category.
On the other hand, in an interview with the Tampa Bay Times, Daren Blomquist, senior vice president of ATTOM Data Solutions, said that “evidence anecdotally is the return of subprime mortgages, which they are now calling ‘non-prime’ mortgages, and I think more companies are doing them.” Blomquist also said that “On the grapevine, we’re hearing a little more about people interested in mortgage-backed securities. That’s one of the hallmarks that helped inflate the housing bubble last time around.”
Meanwhile, the Dallas, Texas, housing market, that has been burning hotter than the flames of hell in recent years, seems to be “leveling off.” According to Melissa Hailey, President of the Collin County Realtor’s Association, “We’re definitely still seeing buyers and sellers with lots of new listings on the market and lots of homes going under contract, but the prices are definitely holding more steady then they have been.”
Meanwhile in Laguna Beach, California, long-time locals seem to be growing disgruntled at how local housing prices have sky-rocketed into outer space. Advertisers, who forget that some long-term residents bought before all the homes in the area became multi-million dollar cribs, send out ads that some residents are finding annoying.
One ad summed up the housing situation in Laguna Beach to a “T”.
“Original Greenwich Village artist loft for sale: 20-foot ceilings, north facing windows with a large entertainment area. $5,295,000.” Just like the situation in Laguna; there aren’t a lot of artist’s left, only expensive artistic housing selling at inflated prices based on a branding concept that no longer has any basis in reality.
The market on the lower end (“entry level”) continues to suffer from supply shortages and too many potential buyers. On the luxury end of the market, things are very different. In fact, New York’s most expensive listing (an $85 million penthouse) has been sitting on the market for five years. The motivated seller has tried to sweeten the deal with three luxury cars and a yacht, but no dice. Now the seller is throwing something else in: a free trip to outer space.
“Someone not from New York can [move here and] have a New Yorker’s lifestyle and point of view,” Neiditch told the Post. “In a way, I’m offering my lifestyle.”
But local real estate professionals aren’t buying it, “People only pile up giveaways when they won’t reduce the price. It has never made a lot of sense to me,” an unnamed Manhattan broker said. The Real Estate price boom appears to be the free trip to outer space people in all economic classes can experience. Enjoy the ride.