"According to DataQuick, compared with the first quarter 2012, sales prices for the 1st quarter of this year have jumped 26 percent in East Palo Alto, 28 percent in Antioch, 34 percent in Union City and a whopping 51 percent in East Oakland."
That's in a 12 month period.
If that stat doesn't conjure up the word 'bubble', we're not sure what will..
It is abnormal for home prices to increase 26 to 34 percent in a one year cycle, much less 51% increase.. Those values occur based on speculation and flipping.
A person who bought the home in 2002 for $108,300 and put down a deposit of $25,000 with the rest as a 4% mortgage for 30 years ended up making monthly payments of $349.95
The person who bought the same home 3 years later after those G-D flippers spiked the home value to $208,200, based on the same $25k down and the same 4% mortgage ended up making monthly payments of $874.62
And who do you think is more likely to default on their mortgage-- someone paying about $350/month or someone paying about $875??
Of course that mindset can be quite naive.. As if the inflated home prices only work to benefit sellers and when one becomes the buyer, suddenly they're immune to the price gouge.
Everyone wants desperately to believe its 2005 again..
No one wants to remember 2008..
No one wants any reality or Truth to get in the way of their single-minded pursuit to make as much money as humanly possible while on their short time on Earth before God calls them away and leaves everything hoarded behind for tax collectors to sift through.
Its both funny and maddening.. Home prices back in the peak of the last popped bubble were overall inflated by 30-50%. They weren't the Real market values.
But people didn't like seeing the drop.. Didn't want to acknowledge the reality that the home prices of 2001 which post-bubble dropped back down by 2011 were the accurate valuations.
So they now celebrate the re-emergence of the housing bubble as if it will raise prices back to where it once was and should have stayed rather than seeing the truth that it never should have risen that quickly in the first place!
There will always be home sales.. No matter how good or bad things are; Always be buyers and sellers.
True story... We knew someone who back during the Bush years was heavily into buying and 'flipping' properties. And this individual truly believed the increasing home values would go on forever.. For privacy sake we won't mention the person's name, age or even their gender..
But suffice to say, when the bubble 'popped' this individual was woefully unprepared for the consequences.. Ultimately the only option was filing for bankruptcy.
We were told by this person that at the time of filing, this poor soul had possession of 5 homes-- one of them was that individual's legal address and the other 4 were homes purchased with the intent of flipping. We found out each home had been bought with merely 3% down and the other 97% mortgaged.
So between the four homes, it would be a fair estimate to say banks were on the hook for at minimum half a million dollars ($500k) they'd never recoup from the mortgagee, but would have to hope to get some percentage back during the foreclosure and re-sale process.
And this acquaintance was not exceptional in any way shape or form
This person was the Norm.
Because the Federal Government and the Fed refuses to allow the banks to take losses and allow home prices to naturally fall to pre-2002 levels, you now have a repeat of the mid 2000's both for professional vultures and for everyday folk..
It always happens-- greedy people who aren't content or fulfilled living a comfortable life, seeking greater fortune and thinking they know it all, then crying the loudest when it goes belly-up..
Always forgetting economics work in cycles.
Call it Economic Gravity.