Are you asking if the analysis or the price of real estate in overvalued markets is a joke?

I agree with the analysis because being in California, I have already begun to see houses in my neighborhood (one of the highly overvalued ones) asking way too much money for what they are worth; houses which have been on the market for months already which have yielded no interest because of their poor appeal vs high asking price.

As for paying $329,970 for a cookie cutter POS on a landfill prone to liquefaction...yes, that is a joke.

This is a favorite topic of mine since I'm quite a pessimist about the American economy and how much of it rides on the rapidly rising values of suburban homes. Back that up against rising oil prices and I think we are tip-toeing very close to a dangerous edge.

In 2003 I was at a party in Ft. Lauderdale. It had a view of the intercostal and the atlantic. Very nice, but it was an old building and looked like a beat up apartment that was 20 years old. The host just paid $1m for that two bedroom apartment with a view. That's about when I formed my current view that we are in trouble.

The joke is that this phony boom on borrowed money has made many real-estate agents, brokers, and suburban home builders rich. All the while architects have seen little, execept for some new far flung big boxes and strip malls. Our wages haven't kept pace with rising home values mostly pricing recent grads out of the home ownership realm. And any deflation in the real-estate market has the potential to deflate the economy to the point where architects will be fighting over very little work.

For those of us who are priced out of the market a cooling off might not be such a bad thing. If prices stagnate for the better part of the next decade, maybe wages will finally start to catch up.

Something's gotta give. I have my masters and I'm making about the median American income yet even if I were married to someone with the same income, it would still be difficult to buy a decent property, let alone afford kids. We can't continue like that forever.

At least we are college grads...imagine what it must feel like for people who don't even have a degree. Goodbye middle class, hello poverty.

at least some of us... hello poverty!

what about those new loans everyone eats, they are gonna be screwed from what i can understand.

i don't want to buy a house until i can pay for it with the money i have. which might be never! but at least i'll try...

hues you mean pay off a house cash? that will be a while, especially if all the while you're throwing money towards rent instead of building equity. That's a really, really bad way to go about owning a home.

but it scares me to borrow more money, school loans are enough. you are right though, giving money to someone else so they can pay their home loan is not helping me any. i'll rethink that one, thanks! so wait until school loans are paid off then borrow more or borrow more on top of school loans? which way is best? also, move to another town where houses are not outrageous... that is my next move.

hues -- rule of thumb: it's ok to go in debt for education and house.

here's where most get it wrong: it is not ok to go into debt for a car a laptop, clothes, home stereo, vacation, etc although many do. if you can do that you got most beat.

Remember that most people that act like they have money, actually have none.

do not pay off your student loans first. if you consolidated them recently or can do so before intrest rates rise more, it would be insane to pay much more than the bare minimum you can get away with.

Well, yes, this may be best.

But Strawbeary's got it right - it is OK to go into more debt if the debt is a mortgage. And student loans don't *really* badly affect your ability to get a mortgage loan, assuming your overall credit is good. If you can keep your student loans in good standing while saving money for a house downpayment, you're better off owning than renting.

i would have to disagree about the car being one of the things not to go into debt for. most people couldn't come up with cash on the spot to pay for even a cheap car. the mistakes most people make are buying more car than they can truly afford, buying a car that won't last a long time, and not keeping their cars long enough.

bryan, i think those things you list are side effects of not paying cash for a car.

Hues, I wouldn't worry about having mortgage debt in normal circumstances, but in the inflated housing market we've got today I recognize your fear. Suppose you are lucky enough to take out a typical 30 year fixed rate mortgage with 20% down. Then suppose you lose your job, or need to move. Then imagine when that happens the market has imploded and your mortgage is 60% higher than the current market value of your house. You are screwed. Simply doing better than most doesn't mean much then.

I also agree, going into a debt for a car is stupid. I've always paid cash for my cars. They have also always been used cars. Thankfully there are plenty of suckers who buy new cars and sell me them for a 30-40% reduction in two years.

It's also very tough to simply move to a place where home prices aren't expensive. I'm sure there are plenty of homes in rural Kansas that are very cheap. Then again my income potential is probably porportinally that much less.

haha kansas, funny you mention it. there are many towns offering free land if you build a house on it, but yes, income is a problem... but i'd be closer to family which can be looked at both ways.

You're right, A - moving isn't *just* an easy answer. I moved to a market where residential prices are -5%. I was also lucky enough to have a job lined up before moving. Salary stayed the same.

But! cost of living is actually higher here than in the overvalued residential market I moved from.

I am worried, I admit, about a serious market setback. Architects I know who survived the slowdown late 70's/mid 80s say we kids have no idea how bad it can get!

yes, someone from the last firm i worked at told me how as graduates (was it the early 90's though) most were volunteering their services for experience so they might be able to get a paying job down the road.

just in case some of you are still feeling too optimistic about 006, check out the latest from kunstler...the man is such a wonderful buzzkill. actually, i find him kind of inspiring since things couldn't possibly be that bad, right?

liberty bell, the 70's/80's was tough, but a meltdown in the global housing market would probably be more on the scale of the 1930's era depression. i can't cite the article off the top of my head, but i read an analysis in the economist last autumn that said the amount of wealth that could be obliterated in the housing bubble would dwarf the amount lost in the 1920's stock market crashes.

still, if you act strategically, i think the future might be bearable...maybe even enjoyable (in a roller-coaster ride kind of a way)

Unfortunately, "thinking strategically" for me means my husband and I go back to waiting tables. Crap.

Here's my hope: I bought a house pretty much totally based on location. It's in a historic suburb, within walking distance of a small commercial area, bike trails, parks, etc. In fact a new organic grocery store opens six blocks away this weekend yay! Downside is school district is not great. But my hope is that the current interest in new urbanism ideas combined with high gas prices, my neighborhood will be a solid investment. The house, I'm slowly improving, using sweat equity and a lot of patience and of course my extraordinarly keen aesthetic sense ;-)

Kunstler is a buzzkill - and fun to read - but a bit of a hysteric, IMO, because that's what sells books. I think you're reading him properly puddles - things can't possibly be THAT bad! (I hope)

there's just something about kunstler's pompous self righteousness that i usually can't get past...and this is no exception. his writing is very emotional and he doesn't seem to let facts stand in his way, even when they'd support him. others have argued all his points more eloquently and with more academic rigor.

liberty - you are doing exactly what I plan to do. School district is the downer, and on my salary I don't see private schools in my price range. Still, as we are discussing Kunstler, I do like his idea of "walkable communities." If you believe all the peak oil hype, which I do in a less alarmist way, your historic neighborhood is right where you want to be. I hope to be there soon....once the right fixer-upper appears.

Liberty - sounds like a great location to me - as long as you're ok with staying there if necessary for the long haul I'd bet it's a good investment, esp. if you're fixing it up yourself, with your extraordinarily keen aesthetic sense :-)
We're pondering the school debate right now as we're about to have our first (as you know...), and if it makes you feel any better, my mom, who had 4 kids of her own and is a school nurse at an elementary school in a lower income neighborhood, thinks that for elementary age kids the school doesn't make nearly as much difference as the parents. Until junior high, you can teach them at home to supplement whatever they're doing in school, and as long as the facilities & neighborhood are safe she thinks the benefit of being close to the school (we're 1/2 a block from an elementary school that doesn't have the greatest test scores but is improving) outweighs a lot of other things. Her opinion is that even if the child is part of a small minority (racially, socio-economically, developmentally), at the elementary school age most kids will get along and make friends just fine. She even thinks there may be some benefit to a child being the most advanced in the class (if that is a concern for you... ). Anyways, just my mom's opinion, and of course it won't affect the resale value in terms of the crazy ideas people have these days about sending their kids to $20,000 a year private elementary schools, but it makes me feel better...

I was about to put basically what R.A. put.

My mother is also a teacher, going on 20 years in the public school district. She teaches high school, in a very mixed-income district with many schools where the majority of students are non-white immigrants. She has always maintained that the single biggest predictor of success in school are the parents. Not the income level, not the available resources, but parents. Of course, a kid that has to work to support his family after school will have a harder time of it, no joke. (As architects we don't really have to worry about that, thankfully.) But so will a kid whose parents are apathetic, or, most importantly, who did not a) read to them as children or b) travel with them, even to the next state. Mom says those two things make a huge difference.

Archis, all your kids will be fine. Just don't drink too much or beat them. :)

I spent Christmas in Merced where my project is under construction - there's always a shiver when I say that... I can verify that:

1. There are tons of houses for sale and under construction.
2. The quality of construction is garbage.
3. Asking prices are comparable to the Bay Area (way high).
4. I can't believe anyone would ever want to live there.

kunstler is an entertaining nut...;-)

i was here in japan during the bust that seriously mucked up the country in the 90's; the one alarmists are always comparing the current US market to. luckily i was not in tokyo then and didn't own property here cuz if i did i would have been seriously buggered. even in the countryside where i was living the effect was serious enough. my office had about 5 years grace period before the money for public projects went through the system and since then it has been a bit harsh. things are starting to get better now, 10 years later ( ! ), but it has changed the country and especially tokyo permanently.

for me one of the nice side effects is deflation and reduced rents. my flat was selling for half a million only 10 years ago and now is about a third of the value, which means i can afford to live in the city and pay for school for the kids and all the rest (school is never free here). luckily education is pretty good everywhere so it doesn't matter where i live so much. long as i leave japan before the kids enter highschool, and education turns stupid... ;-)

another nice bit is that the government has relaxed bureaucratic regulations for companies, to encourage new business start-ups;so making an office has become much easier, less capital required up front and all that. very nice.

the insanity is starting to get a hold of the real estate market though, which is worrying. when i look at properties for sale the info sheets are not emphasising yield (based on rents) as much, but rather the price per m2. the realtors are clearly expecting investment to be based on property value escalation. i think it is a kind of cultural amnesia.

same in california i suppose...hopefully it won't be as bad for yall as it was here.

thank you so much for all your comments, it means a lot to me...

i read some kunstler, whew, i don't know, i'd like to think it isn't going to be that bad. actually, i have to admit, it scared me a little so i only read one entry.

Ah, don't run off just yet, Hues -- Debbie Downer and Eeyore should be checking in here shortly for some comic relief.

I've been looking in the LA market for about 6 months now. Now that's a joke. I can get a garbage *%# cookie cutter, beige carpet, standard 1br/1ba, 8' ceilings, 1 of 182 unit condo, in Culver City or Westchester or Torrance for how much??? Oh ok - a third of a mil? Sure, let me get my check book. I'd rather keep renting or move.