Housing Truth from Main Street

Then by that definition we did not have a bubble in half the country. I will accept we had "bubblets"-- perhaps 25% of the country has had a bubble. But in comparison the stock market bubble hit the world everywhere and when it burst it was all at once.

First,

If you take the populations of all the states that would be part of that "bubble". CA, AZ, NV, NY, NJ, FL, OR, WA, ID, UT, DC on and on, you would be looking at about 75% of the country is part of that bubble. Sure, Iowa, Oklahoma, etc. are not going to "burst". Since your investments are in California and Arizona, two of the four most likely to burst, I would be concerned about the places you have investments in.

Plus not every stock went up in the late 80s early 90's. Not every stock goes up in a bull market, not everyone goes down in a bear market.

Jack,
Even the states you mention did not have a bubble universally. In California, the inland empire, San Diego and a few other places have seen a softening of home & condo pricing - NO BURST. Santa Monica has not gone down at all but things take longer to sell and the market will soften - NOT BURST. In Las Vegas, Nevada -- I have seen the Burst. It is like this everywhere, Sometimes a burst, sometimes a fizzle, sometimes prices are flat -- Only thing for sure, they have stopped going up and the trend is down. You cannot make the case that all of the States you mention are down everywhere.

Ha ha, Sheldon, you are banking on the old economy. Big mistake.

I grew up in Culver City and a family member still lives in the house my grandparents scraped for in Santa Monica during the depression. North of Montana. Paid off decades ago.

I was living near my job in OC and got sick of my boomer managers telling me I had to work all day at my job and then freelance enough at night to double my income, just so I could qualify for a loan for a crappy condo in Anaheim or Santa Ana. It makes no sense to work 16-18 hours a day for the privilege of sleeping in a prestigious ZIP code that you never see in daylight except from the crawl on the 405.

The answer? I quit my job and bought a home in BFE, Arizona. Not down in the Valley where your project is. I have a bigger home and yard than I could ever have afforded in SoCal, my office is a Macbook Pro and the people who pay for my work are still in SoCal. Meanwhile I have a much better quality of life with no commute, house payment that is 1/3 of my former monthly rent (plus mortgage interest deduction and equity I wasn't getting before). I bought in with 20% down and properties here are still going up. Why?

Because this sleepy little town is getting more people like me, who have fled the overpriced, overcrowded, overpolluted places you think will yield you profit.

If you think the household servants and service workers that serve the uber-rich and can't leave their jobs because you can't do someone's nails from a distance will be able to afford your properties, you are dreaming. Any sane information worker will eventually figure out they can live better somewhere else. In July, Forbes dubbed us "geographic arbitrageurs."

Having grown up and spent most of my life in LA LA Land, I can honestly say that all of SoCal is under the Hollywood spell that makes people want things they don't need. People are so caught up in keeping up with the Joneses on TV -- not even real Joneses -- that they scramble to get any loan to look like they can afford a life. The last figure I saw from CAR said 35% of loans in OC over the last five years originated under water. Not surprisingly, those people will take a hosing.

Now instead of listening to idiot managers who bought years ago and staring out a 6th floor window at another office high-rise, I can work from the solace of my garden. Four others from my office have followed my lead in the last year, albeit to other locales.

And it's not just the housing costs that are lower. No daily commute, so just as gas prices went through the roof, I only have to fill my SUV's tank every 6-8 weeks. No need for overpriced clothing or dry cleaning. The phone company offers bundles with unlimited long distance and DSL for less than anything in SoCal. I can spend my earnings to improve my personal environment or, heaven forbid, save for retirement.

OK, so it's true that we only have one 4-star restaurant in town. But I really don't miss overpriced sushi at Koi. And if I ever do, a plethora fancy restaurants are no further from where I am than LA is from where I was, only I can get there in 45 minutes instead of three hours. I can also go fishing or hiking 10 minutes from home, in the time I don't spend commuting to a crummy job.

With the exception of New York, which double-taxes telecommuters, all of those "superstar" markets (where my former employer has offices) will eventually be the most polarized in the nation. The uber-rich will own the good properties and decry how the other half lives on what they can make bussing tables or giving pedicures.

Wake up, people. In BFE, nobody needs a BMW or a boob job, and nobody has to pay half a million dollars for a decent place to live.

Hey Steve, why wait to get in on Sheldon's developments in a couple of years?

Real estate investors, take heed: if you play by the old rules that assume everyone has to be physically present to be on the job, you will ultimately lose. Those of us who can escape the (literal) sewers known as Santa Monica Bay and Newport Harbor will not stop at the mosquito-breeding swamp known as Lake Elsinore. We'll keep going to places we can afford a decent quality of life.

Just as technology has changed so many other markets, it will change the real estate equation. It may take a little longer, but if Forbes is already onto it, it can't take that much longer.

I have to agree with most of what GeoArb! says. I did almost the same thing. Cashed out in Arizona, bought a huge fixer in Texas, about 5 minutes from the beach. Now I have everything paid for, nice home without a mortgage in an area where real estate is moving up each year. I can manage my west coast investments from here and enjoy life.

I grew up in Southern California and most recently spent most of 2004 in the San Francisco area. It amazed me what people will do to buy a home in the bay area. Couples, both working 60 hours a week to qualify for a mortgage. Commuting 2 hours a day each way to work in the city.

All will be ok, as long as they can keep up with their ARM. But if one of them loses one of their jobs, family illness, earthquake, interest rates rise too high, there is just no margin for error. Seems like a house of cards waiting to collapse.

I have to say there seemed to be an endless line of people up there wanting to do the same thing. But what if housing prices fall like they did in the late 80's, early 90's in California?

Listening to all the negs and why is housing down its because you see it that way well I'm thinking if a better way of teaching our young of why it is inportant to invest in there home becase every dollar counts and renting and leasing is a total lost the housing market can and should turn around....JMO

Here's my take on this subject from a working stiff who hasn't missed a paycheck in 30 years. I don't argue about whether were in a up or down market. I just save money and wait until I can buy a property and rent it at a reasonable return. When it's time the numbers just work, but it's only because I've lived through several ups and downs. When I buy everyone is selling and people are scared to buy. I don't do this for a living but I buy, hold, rent, and do this every 4-6 years. For a guy that makes a reasonable salary I've become very wealthy just doing this every once in awhile. It's not rocket science. You just have to adopt the philosophy that pigs get fat and hogs get slaughtered.

Wake up my friend....your living in a dream world. Yes, we've been in a real estate bubble....and yes, its about to burst wide open. This will probably go down as the biggest real estate crash....ever! And why, because its been the greatest, unwarranted run up ever.....and,reaching totally unreasonable prices. I live in South Florida and I can tell you the number of condos built and under construction is beyond any ability for this area to absorb them. I predict prices will all a minimum of 50% and will take years for recover. Welcome to the real world.