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Are We in a Real Estate Bubble?

Cityboy

Banned
And is the bubble going to burst soon? Land and home prices around here have exploded. When I moved to central Ga. in 1996 from Atlanta, land could still be purchased for $1000 per acre and sometimes less in 100 acre tracts within about 50-75 miles of Macon. Closer in, it was a little more expensive. It is 16 miles from my carport to my parking space at work and only 12 miles for my wife, so I paid around $1800 per acre for my approximtely 35 acre parcel. At the time, I thought this price was really too high, but I figured it would be worth it in the long run. I proceeded to build a 2200 Sq. Ft. brick house on the same sized basement with 9' poured walls. With the land, and me acting as general contractor, the final price came to $210,000; which again, I felt was pretty pricey, but believed it would be worth it in the long run.

Well, fast forward to 2006. My neighbor with a 3000 Sq. Ft. log house on 35 acres, adjoining my property, just listed his house with a local realtor for $915,000! :eek: Holy smokes!

Small parcels of land now commonly sell for $10,000 per acre and up; yet there are thousands of acres of vacant land everywhere you look. This does not make economic sense to me.

I am seeing houses that sold for $175,000 five years ago listing for $400,000! Now, I am curious just how many people actually have incomes to pay these 400K to 1 million dollar notes on these homes? There is a neighborhood near me with homes from 4,000 Sq. Ft. to 10,000 Sq. Ft. with matching prices and people are steadily buying them.

Correct me if I am off base here, but I don't think incomes are rising as fast as home prices are. There has got to be a correction on the horizion, and it is going to have to be ugly.

Me and Citygirl are seriously considering listing our home and taking the money and running to somewhere like Kentucky or some other area that has not yet gone insane with property prices, and before the bubble here bursts. What do you guys think? What's going on with real estate prices in your area?
 

HGM

New member
Well, I'm not far from you and things are crazy here too... Wish I would have moved here a few years sooner than I did and bought sooner too.. I've watched prices double, tripple and then some here too.. My answer to the "where's the money coming from" kind of question is the 40yr and interest only mortgages.. Incredible to me, I couldnt even fathom the idea unless it was purely specluative.. For instance I'm considering a lake lot outside of Knoxville(or anywhere similar for that matter).. I may do an interest only or some other creative financing if available simply to get my name on it for a few years.. I figure if I could own it(pay on it) for 5-10yrs(obviously longer the better) I could sell it for an early retirement booster.. Real estate is the only decent investment. As for the bubble, yea, I believe there is one but we're nowhere near New England, South Fla, California, and places like that that are getting $1mil for a small condo on the beach... Did I ever mention the townhouse I sold in Weston Fla before moving here? I bought it in 12/94 for $80k, sold it in '00 for $130.. Today its going for $280+ ... Now, thats a 1100sq ft townhouse, with no yard... If you have ever heard an oldtimer(or anyone for that matter who remembers) talk about "I could have bought that for next to nothing 30yrs ago, but thought it was too expensive".. I do believe some areas will have dramatic shifts, but that will be because of people moving from the places I mentioned to places like Atlanta to get something for their money.. Selling a $1mil place in California can put alot of money in your pocket to buy one hell of a home in Atlanta.. Just my outlook on it, but I'm looking for the right investment... Sounds like you found it.. You may want to think about you particualr area, will Deltas troubles effect your area? How about Ford and GM plant closings? Some of those folks may be commuting to Atlanta, if they loose their jobs home values in the area may go down..Thats one thing that worries me in my area.. Peachtree City is about 15mi away and heavily populated by Delta employees, if it goes under prices will have to drop.. But again, I think they will come back..
 

Av8r3400

Gone Flyin'
Here is the "upper Midwest" prices are steadily increasing, but like your Kentucky example I don't think there is a 'burstable' bubble here.

Now where my sister lives in Danville, CA it's just stupid. Definitely going to pop soon there.
 

Grooming Snow

New member
Take the money and run, if you can find a job.If you can sell for $975,000.00 If you look at the rate of pay that you will make, $750,000.00 , that would be $37500.00 peryear income over the next 20 years :confused2: Not bad . I don't know what you may do as far as work . And don't have any thing holding to the place you live now . Jobs seems to be a big thing that is driving land price's. pat: I don't under stand what kinda of job people have to make that big of house payments . :tiphat: May have a very nice Banker :yum: Go west young man Go west !
 

BigAl

Gone But Not Forgotten
SUPER Site Supporter
California is starting to slow up . Price of a average home was 1/2 million but it has dropped to $450,000 in my county . Prices are indeed nuts . Take the money and run !!!
I just hope it last long enough to sell my place when the time comes . I was just told to look at a $$million plus when I sell . Good Grief!!! Who makes that kinda money ????
Idaho is growing too ,but you can still buy a great home with land for under $100,000. Indeed GO WEST YOUNG MAN ! GO WEST !
 

mtntopper

Back On Track
SUPER Site Supporter
The rise in home mortgage interest rates will dictate the direction of many home sales and prices, especially the higher priced properties. As interest rates rise, monthly payments will rise to a point that will limit the number of people that can qualify for the higher priced properties. Properties prices will either have to go down or the new style mortgage options come into play. Eventually the market must adjust if the demand for homes slows. Different areas in the country will see different adjustments and some will see less impact than other locations. When to sell and when to buy is a gamble. By educating yourself you can make some money if you do not have to carry a large high interest mortgage on purchased properties. Most working people in this country cannot afford to pay the $500,000.00+ price on many properties today with interest rates at 6.5+ percent even if they have the down payment of 20%. The higher priced properties are very slow to sell in many areas now with the higher interest rates of the past 6 months. Real estate (residential and commercial) is still one of the best and safest investments in my opinion if done properly.
 

LarryRB

Member
A lot depends on the area, job availability, and other factors. Just up the street from me is 7 or so new homes. All were asking 479,000 and up.. Some have sold, some are still for sale. Those still for sale are now at a snappy price of 459. These homes are in Holland MA, all with two acre lot. Just across the line in CT, we're required a 3 acre lot minimum and this probably will rise to 5 acres very soon.
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
I think there are "pockets" where the real estate is obviously overpriced. I just got back from a sleep coastal town in Florida. One of the few things I could do was look at real estate as we were shopping for a new condo or vacant lot to build a vacation house.

VERY SMALL lots, on the wrong side of the road, in private neighborhoods with beach access START in the mid 200's and climb to $400,000. Very small lots, in an ocean front community, but not with ocean views started at $350,000 and went up to $650,000 if you could see the ocean (just barely). Vacant lots on the ocean stated around $3,000,000.00.

We looked at a small house on the ocean, but it didn't have beach, it had a rock seawall. Price was $1.6million. We looked at several condo units (I want a condo with a garage) and those started at $500K and went up. For $500K you got about 1200 sq ft of "nice" but not luxury.

When we started going to this area of Florida it was not built up and we liked it. As we toured properties, we realized that it is started to get crowded. It still is not overly crowded, the college kids don't go there for Spring break, but it is twice as crowded as it was.

We decided that we are leaving. While it is growing, the prices are already crazy, and I think much of it is due to the low equity loans that are available. People are running up debt, getting loans that pull cash out of their homes, then go out and buy something else running up more debt. Something has to give!

Now all that said, where I live, we are not seeing wild appreciation in homes. So I think there are 'pockets' or perhaps 'regions' where there may be a R.E. bubble.
 

bczoom

Super Moderator
Staff member
GOLD Site Supporter
If you can sell where you are and move elsewhere where real estate is less expensive, it's worth serious consideration, but... I've looked at it a couple times lately but always found an issue (as it relates to my scenario).

Moving west for me isn't an option. Mrs. Zoom's and my relatives all live between 2-300 miles away. As they've (obviously) get older, they couldn't travel any further to visit. A trip to their location isn't a bad drive for a long weekend but if we went west, it would negate trips. When they have a need or get ill, it would be much more difficult to get to them. Also more difficult to visit for holidays as it would then require flying (which is getting pretty costly).

So, we need to stay relatively close. If I move into the middle of nowhere (central PA, NY, WV or OH) where real estate is cheaper, the non-real estate cost-of-living isn't much less then where we are, but there's a pretty substantial decrease in income (if you can even find a job in your expertise).

To stay in our general proximity and just decrease the size of the house, I ended up choking on what's available for somewhere around $150-200K. That'll get you a pre-fab home on a small lot. If the bubble does break, sure... you have a home that may be paid for but isn't worth what you paid for it.

There are some locations that you can get a decent deal on real estate but other factors may negate their value. Take W. NY as an example. Their real estate values have actually be going down. The taxes are so dang high that people are leaving the area. So are employers...

Ammenities & infrastructure of the targeted area may be something to consider. If you have children education should be considered. How close is an airport, hospital...

So, if you don't have kids or seniors to take care of and you can go west, you're on to something. For some of us, it's just not viable at this time.
 

Dargo

Like a bad penny...
GOLD Site Supporter
I'd be surprised to see any land for $1000 an acre anymore. Maybe in Montana, or underwater in the swamps down south. Still then, I'm not sure you can find land for $1000 an acre anymore. I bought about 200 acres a couple of years ago, and I wish I would have bought twice that. I don't know how many odd calls I've had asking me if I'd sell, or if I'd consider selling a portion of my property.

It's tempting to take the quick profit, but when I look at how I could replace it, I see that I couldn't unless I spent considerably more. Where I live, I don't think I could replace the property very easily either. I live on 11.87 acres that is 1/2 of a mile outside our city limits. My goal was to be as close to the city as possible, but not pay the city taxes or be subject to their rules and regulations. I also wanted at least a 10 acre yard. The closer you get to town, the higher the land prices. I haven't seen a 10 acre plot for sale within 4 or 5 miles of town in quite a while now. When I have, they have been extremely expensive. It seems that I'm not the only person who wants to 'feel' like I live in the country but not have the long drive to get there.

With more and more baby boomers pulling their money out of 401's, I see the prices just moving on up in the right locations. Also, it seems that other people have gotten tired of getting slaughtered in the stock markets and are now wanting to invest in relatively large plots of land. That keeps the prices of even land away from towns going up.
 

XeVfTEUtaAqJHTqq

Master of Distraction
Staff member
SUPER Site Supporter
When people say "go west" that is fine. But if you try to go too far west to within 100 miles of the coast then you will see the high prices again.

It's high everywhere that there is a "desirable" place to live.

The last time I checked they weren't making much new land anymore but they were making a lot more people. Good land will always be valuable.

Buy wisely.
 

Cityboy

Banned
Dargo said:
I'd be surprised to see any land for $1000 an acre anymore. Maybe in Montana, or underwater in the swamps down south.

Don't count on even getting swamp land in Georgia cheap anymore. There seems to be a mania to snap up Georgia and South Carolina land, even in what we call the "Low Country" these days. Land and timber companies are marketing this land as investment property to out-of-state hunters and other speculators. Drive down I-16 which runs between Macon and Savannah and you will see mile after mile of vacant land. It makes no sense at all. 20 years from now this land will still be in the sticks and these "investors" will be left holding the bag with no buyers willing to to pay more than they paid. Maybe I'm wrong, but this insane market has to have a correction eventually.
 
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