The money mavens at CNN seem to think so.
I’m not sure I’d classify a 6.6% year-over-year increase as “cooling off”, especially when inflation is less than 3%. No, I’d put it more into the category of another irrational jump in a real estate market that’s already every bit as crazed as the NASDAQ composite at the turn of the century.
The inflation number is something I’d take issue with, actually. This 3% nonsense is insulting. There are so many caveats, exclusions, and astrisks attached to the Consumer Price Index that it might as well be tracking prices on Fantasy Island. It doesn’t include real estate, energy, food, college tuition, certain taxes, and automobiles. Think about how much of your income goes toward those items.
The CNN article was accompanied by a fascinating chart entitled “Hot Housing Markets”. Orange County was number five on the list, with a 21.2% year-over-year gain. It doesn’t look as extreme when compared to the nearly 30% gain experienced by those living in the nine-oh-nine.
Until you look at the median prices, that is.
Orange County’s median home price is now $526,800. Or should I say, that’s what it was in December. It’s probably closer to $550,000 now. Compare that to a national median of $171,600. It’s the highest on the list. In fact, it’s the highest in the nation. Our real estate prices now make New York and San Francisco look cheap.
I would love to explore the thought process of those who are forking out $1 million for a small condominium. Even mediocre properties in a bad part of town are selling before they can make it into the MLS system. Mark my words, this is going to end badly for a lot of homeowners in Orange County. Shades of what happened in the late 80’s.
I don’t see how it can go any other way. Check out some of these comments.
My LTV ratio is down around 35%, yet I refuse to consider taking any cash out. Perhaps I’m just too conservative, but we live in an severely leveraged society, my friends. It’s unhealthy. One thing I know about markets is that they tend to return to equilibrium. So I’m taking my cue from the generation of Americans who remember the Great Depression. They are nearly gone, and Lord how it shows. Interest-only and negative amortization loans are but two examples of a real estate world gone insane.
Stay tuned. It’s gonna get interesting.