Is The Housing Bubble Going To Pop???

U.S.A. California

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All I've heard is that the cali housing bubble will pop eventually. I heard that it already has in sanfran. do any of you know about this likelihood? especially in either ventura or San Diego area? I still have a little time before i move out there so my hopes is that it does burst! For me & many others. Also, if the bubble does pop does that mean the prices will just stop rising or will they start going down at all?

My credit score was 772 when I purchased my first home in Bakersfield. On a $130,000 mortgage I was paying $110 per month in PMI. It might not sound like much to some people, but for me it was a pretty penny to spare each month. My property taxes were only $1,800 per year.

Interesting. I too have had a little over $100K in mortgages but my PMI was never over $40 a month. For whatever reason, this PMI calculator doesn't mention credit as a criteria so ... who knows?

http://www.goodmortgage.com/Mortgage_School/MS_alternatives_to_PMI.htm

Although they also have a PMI versus piggyback loan calculator so, maybe you could best estimate the pros and cons that way.

http://www.goodmortgage.com/calc_PMI_or_piggyback.htm

Since the property tax rate is about .0125 percent it makes sense that your tax would run about $1800 a year with a cheaper home. But if you had paid $400,000, the tax would be a lot higher at that same tax rate.

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People can buy nice houses in Fresno, Bakersfield, Victorville, Barstow, Delano, Porterville, and other rapidly developing cities for under $300,000. The job market in these cities might not be up to par. In addition, the summer weather is brutally hot in the aforementioned places (which further reduces the desirability).

This is a good point. If you take Victorville and Barstow as an example ... you can see how the market dynamics change ... both for jobs and housing. Victorville is a 45 minute drive to tons of good paying jobs. With Barstow you add another 45 minutes so, you're job options are going to be much more limited because the commute gets really long. A lot of people who live in Barstow actually commute to Victorville to work.

Consequently, Victorville is going to be more expensive than Barstow, at least until business relocation and development moves out farther towards Barstow. As another point of comparision, Victorville has three hospitals in the area with two planned for the future. Barstow only has one hospital and none planned as far as I know of.

So ... while Barstow housing is cheapest, the pay, benefits and job options are also a lot lower. Victorville is better. Driving into the San Bernardino area gets alot of better. But, you pay a lot more for houses the closer you want to move in. And, of course, there's sky high gas prices to consider the more you commute.

Personally I've found the commute to be worth it from Victorville, mostly because the pay and benefits so much better -- even despite higher gas prices. But, if I was living in Barstow, it probably wouldn't be worth it ... no matter how much you would save on housing costs. The commute would be too long and the gas costs would probably wipe out the housing savings. And, of course, living in a one hospital town really limits your job options.

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If you are buying real estate for investment purposes, you should worry a great deal about the real estate bubble bursting. If on the other hand, you are buying a house you really want to live in for a long time, it might not matter if the "bubble bursts". If I can put down a decent down payment and can make the payments on a traditional fixed mortgage, I might not care where the market is going. No matter what happens, I am slowly paying down the mortgage, and I am getting a tax write-off. Eventually I will own the home outright, and since I want to be there long term, I likely will see many ups and downs in the market. I would be very cautious before trying a "gimmick loan". ie: interest only, ARM's, Zero down, or my all time favorite the negative amortization loan ( the numbskull who invented this option should be prosecuted).

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Specializes in LTC, Psych, M/S.

Correct me if I am wrong on any of this, but to my understanding, for RN's in Cali starting pay is 25-30 dollars an hour. People must consider this pretty good since they are flocking to get into nursing school. However, it seems on this board that many RN's do not consider themselves making enough to own a home, or to cover cost of living. So what type of jobs do people have out there that give them such a high income to enable them to afford these homes? Also, in a previous post someone said that only 1 in 7 households are able to afford a home. Does this mean that many, or most households just have the 'interest-only' loans or ARM's? How do other professionals, such as teachers, police officers, make it then?

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Specializes in Public Health, DEI.
Correct me if I am wrong on any of this, but to my understanding, for RN's in Cali starting pay is 25-30 dollars an hour. People must consider this pretty good since they are flocking to get into nursing school. However, it seems on this board that many RN's do not consider themselves making enough to own a home, or to cover cost of living. So what type of jobs do people have out there that give them such a high income to enable them to afford these homes? Also, in a previous post someone said that only 1 in 7 households are able to afford a home. Does this mean that many, or most households just have the 'interest-only' loans or ARM's? How do other professionals, such as teachers, police officers, make it then?

That 1 in 7 figure only refers to new homeowners. Many other professionals have owned homes for years and ''buy up'' with their capital gains from each prior purchase.

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Specializes in Case mgmt., rehab, (CRRN), LTC & psych.
How do other professionals, such as teachers, police officers, make it then?
Many schoolteachers in California are married to educated professionals. Assume you're a schoolteacher who earns $57,000 yearly after ten years working for the same school district and married to a chemical engineer who earns $70,000 yearly at a factory. The combined income is $127,000 per year, which is enough to qualify for a mortgage in California.

Many police officers have spouses who are middle income earners. Assume you're a cop who earns $48,000 yearly and married to a payroll accountant who earns $60,000 yearly. The combined income is $108,000 per year, which is barely enough to qualify for a mortgage for an average California home.

Unmarried cops and teachers would find homeownership difficult, if not impossible. However, married cops and teachers who have middle income spouses can find a way to realize the dream of homeownership.

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Speaking of bubbles ...

The April numbers are in. Looks like the market is slowing down even more:

http://www.dqnews.com/RRSCA0506.shtm

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That 1 in 7 figure only refers to new homeowners. Many other professionals have owned homes for years and ''buy up'' with their capital gains from each prior purchase.

Yeah, but you can still lose money. We bought our house for $150,000 and (at least for now) it's worth $300K. If I put that equity into a $400 or $500K house that's closer to coastal areas, my mortgage would still be higher than what I'm paying now. A new loan isn't cheap either, and moving can cost a lot also. Plus, your property taxes would be much higher.

If we ever move again and buy another house in California, we'd have to do what we did last time ... do a lot of research to figure out what the next cheap boom town is going to be. That is ... if you want to come out ahead financially.

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Rent or buy? Try the CEPR housing cost calculator:

http://www.cepr.net/calculators/hb/hcc.html

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Specializes in Emergency, Trauma, Critical Care.

Housing bubble totally popped. They're selling brand new homes in our area (inland empire) what we bought a fixer upper for. The only thing that reassures us is that we have a bigger yard!

But we bought a 3 bed/2 bath on quarter acre with original hardwood floors for 260k. (I don't think that's expensive) considering together we make 90k a year. (I'm an LVN btw) so an RN would fare much better.

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Specializes in Case mgmt., rehab, (CRRN), LTC & psych.

I returned to my former city of residence last month, which happens to be in the Central Valley. My parents live there, so I was visiting them for 10 days. Back in '05 and '06, you could not find a decent home for under $250,000 in this particular city. Now, I am seeing billboards that advertise new homes for $190,000 and up. Also, I saw a whole bunch of foreclosure signs as I was driving through the different neighborhoods. It's really a sad situation.

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