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Mark Atwood
fallenpegasus
fallenpegasus
I need to keep telling myself this, as I start shopping for housing.
There is a very simple test of whether any price rise is realistic or a bubble. If people are worry about it being a bubble, it is not a bubble. If people say that the normal rules of economics do not apply to this particular situation and the price has still more room to rise, it is a bubble. link
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mothball_07 From: mothball_07 Date: February 27th, 2006 11:10 pm (UTC) (Link)
Most reasonable sounding guideline I've heard is this :

If you can't rent the house for the mortgage or better, it's likely a bubble.

Idea is : Rent doesn't inflate in the same speculative way as prices - people pay what it's worth for them to live in that area, and if they're willing to pay that, the prices aren't going to drop below that price point. It made sense to me.

There are also *always* micro-areas that are not inflating as fast as the nearby regions. Six months ago, Renton looked like a pretty good deal, with a good location poised for growth and some internal efforts to stimulate same, but still well under area prices. No idea if that will hold for the next couple of years, but those kinds of 'deal-areas' usually exist, as do individual houses that are a good deal for some reason. Mine was 10k under market, due to the extensive cosmetic fixing it needed.

Good luck! Remember, it's very hard to go wrong if you're buying for long-term. Prices have always risen over the decade-long view. It's those looking for quick investments, or buying over their heads, who are at risk.
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