How are you personally dealing with the housing bubble?

It seems that quite a few people -- read the comments to the post just prior to this one -- are convinced that we are heading for a housing crash.

So my several-part question:

1. Do you own a house?
2. If so, are you planning to sell it?
3. And then buy back into the market after the crash?

What I am trying to tease-out is the degree to which people are willing to act on their firmly held beliefs.

•••

Another question which deserves some attention is the source of the sense of scarcity which motivate people into bidding wars. In Seattle, that is (and/or) has been fairly common in the mid-range houses. Why do people feel this sense of scarcity? Could it be there that are some good reasons? Like 'peak oil' for example and a limited supply of close-in single-family housing which does not require extensive driving? Sitting in Seattle, the huge run-up in prices -- and btw, this is the third such run-up in my memory -- doesn't seem totally bizarre at all. Our region has severe limits to the supply of land, hemmed-in as we are by rugged mountains and the Puget Sound. So when I look at the "housing bubble" in the context of Seattle, I am more amazed that anyone is crying catastrophe than otherwise.

Many years ago I remember speaking with a planner. he was one of the seniors in the bureaucracy in which I worked. And I remember him saying something like "Our problem is too much land. We can always just expand. That's one of the reasons Seattle is so sloppy. No  need to be neat." I was a bit shocked at that perspective. Too much land? But as I thought of that remark over the years, I see its intelligence and also that times indeed have changed.

Comments

[clew]

I can think there's a housing bubble without assuming I can *time* the housing bubble; also, I'm dubious enough about the rest of the economy that it isn't clear to me where we'd plant the money in the interim.

So we just make our house nicer to live in, and don't borrow to do so. Isn't that the reverse of your question? people who believe there really isn't a housing bubble should be mortgaged to the hilt?

[Murph.]

Well, kind of - my fiance and I (both grad students) currently rent, and have long chafed to be stable enough in location to buy, since we were both raised to think buying good, renting bad. Now that I'm a semester from finishing school and looking for a job, though (after which we'd presumably be static enough in location to buy), we're thinking about simply renting another year and seeing what the housing market does in that time.

Here in Ann Arbor, the rental market is stumbling - from what we've heard from a friend who works for a management company, we're expecting to be able to negotiate a 10-20% _reduction_ in rent if we renew our lease; the local for-sale market is cooling, but not to the point where prices are going down.

[Lisa Williams]

I'm unwillingly participating in the bubble. I live in a two family; our friend who lives in the other half is moving, and we're buying him out. At the same time I'm selling a rental property I own to consolidate our holdings.

Obviously there's a big switching cost in buying or selling a house, particularly if you're living in it. I probably would have stood pat if I hadn't been nudged.

[QuietStorm]

The transaction costs of two home sales makes your suggested strategy a loser even if you are fairly confident that housing is in a bubble.

As for the driving force behind the bidding wars, I'd say loose monetary policy is right at the top. That doesn't aim itself at Seattle in any way, but there are bubbles all over.

[Glen Raphael]

I owned a house for 8 years and sold it three months ago. Local housing prices got silly enough that I felt I was overinvested in real estate relative to my other investment opportunities, so I sold and am now renting. I expect a housing crash (in Silicon Valley) sometime in the next few years, after which I might consider buying back in - it would depend on my life situation at that time.

[Glen Raphael]

Though, as with the other guy, I wanted to sell for tax purposes anyway. The bubble just changed the timing of /when/ I sold.

[Randy Paul]

1.) I own a coöp apartment.

2.) In about five years.

3.) No, I plan on moving to a house my wife and I will own outright in Brazil and pocketing the profit on the difference. We purchased in 2001 and the market here in Jackson Heights was pretty soft. It's strengthened since then as Manhattan has simply run out of control.

[Brian Miller]

I purchased my townhouse in an outer San Francisco suburb (Solano County) 10 years ago. Even with the second I took to finance home improvements and my overspending (another topic. This ain't a psychiatrist's couch), it would take an amazing tumble in prices for me to be underwater. Still, our market is very over-valued right now. Solano County prices are still appreciating rapidly (it's a relatively low cost market-for the Bay Area).$450,000 for a 1500 square foot 40-year-old rancher on a block full of pit bulls and weed-choked yards and guys sporting stained wife-beaters and multiple tattoos? No thanks!

I take my house as more than an investment vehicle. No family, but multiple dogs make a rental situation very difficult. Besides, my payments are still well below market rents-and the apartments on the rental market here are severaly lacking in location and architectural quality compared to my townhouse.

[Lenny]

1. I own a house
2. No plan to sell
3. I live in a very happy, safe, boring suburb of Philly and the prices have not gone up insanely. No matter what happens you still need a place to live. If everyone is going to sell and rent then rent will go up since demand is higher and so your nest egg will be slowly reduced. Yes we have lots of land but, around here, that land is further from places to work. If gas continues up then commuting becomes much more of an expense and closer housing more attractive.

[Dave]

1. I own a house.
2. No plan to sell. I've got 12 years left on the mortgage and I'd rather use the money I'd spend on the note to travel. Houston's a nice place to live, if not exciting to visit, and I don't need a bigger or nicer house.
3. Say it with me: "It's not possible to time the market."

Houston is one of those cities with "too much land." We've got 200 miles before you hit Austin or Dallas. We have seen huge growth in inner-city construction (bungalow replaced with 3 townhomes, etc.) but 90% of the growth is still on the periphery. We're predicted to have another 3 million people in 20 years, so there's loads of demand. Inner-city houses are much more expensive on a per-square-foot basis, either the house or the lot, but there isn't that much of a "bubble" happening here. It's more like an ever-expanding blob.

[Jarrett]

Your mentor was right. It's only constraints on land that cause responsible and sustainable urban form. That's why I'd gamble on the future of cities that grew up in this constraint and never forgot it -- like Vancouver and San Francsico and, yes, Seattle proper, however regrettable some of its suburbs may be. Waterfront cities are also better off in the long run -- even neglected ones like Everett and Tacoma -- because of the natural density that occurs close to an amenity like the water or even its views.

Me, I'm actively postponing buying real estate in response to the housing bubble. Though I've never needed reasons to procrastinate, I'm grateful for this one.

peace, Jarrett