In regards to housing the average home today is over 2,000 square feet compared to 1200 feet in the "old" days. Yes mortgages are higher because people today purchase larger homes. How many people are in south dakota,, 750,000?
There was an interesting article on this recently. The real per square feet cost of housing has decreased due to economies of scale but the builders are marketing ( and have been very successful at it) larger houses to protect their profitability by adding larger bathrooms, bedrooms and so on.
Perhaps this is true on a nationwide basis because of the price stability of areas like the mentioned South Dakota, but housing markets when viewed on a more local area can and do crash. Metro areas like Boston, San Diego, Los Angeles, Dallas, and many other population centers have historically seen a price pattern of two steps forward, one step back for decades and this has had ruinous effects on hundreds of thousands that bought near price cycle peaks. Or is it different this time???
Yes, but those areas you mentioned have higher wages. Look guys, it's a very efficient market. Those areas that are most desirable to live, will have higher cost of living. Warmer areas will close more then colder areas, areas with high paying jobs will be more expensive to live in then area with lower paying jobs. Areas with an abundance of cultural activities will cost more then areas with not as much cultural activities. I don't understand what the controversy is here. Those of you that are idiots to live in New York, Boston, LA, San Fran, yeah you are going to have unstable housing markets. But you know what, when I lived in NY, I knew bartenders that made 50k a year. Try finding a bartender that makes 50k a year in South Dakota. I think that idiots that buy the top in a housing market deserve what they get. Just like those that bought QCOM at $1000 a share in 2000 deserve what they got too. What I am suppose to feel sorry because some moron bought QCOM after it was up 2000%. Or I am suppose to feel sorry for someone that buys a house in an area that has seen 200% appreciation in 3 years. People, you have to exercise some level of intelligence.
I agree with absolutely everything you say. But I also think it is possible to time a real estate purchase in these high volatility areas of the country and end up with a good entry rather than chosing to live other areas of the country. I love South Dakota, but I am not sure I want to live there.
Yes, I agree with you. I know many people that have bought property in NY and CA at very high prices that have done really well mainly because they were able to buy into emerging areas and or find special situations. Yeah, I think it can be done. But most people I talk to that live in areas with high cost of living tell me that they don't mind paying that high cost of living because they love where they live. Same goes for those that live in South Dakota. They wouldn't trade in their house in Sioux Falls for a one bedroom on the upper east side in Ny for anything. Which again leads me to ask the question, what is the controversy here? You get what you pay for. Very simple.
They might do it somewhat differently, but they do collapse. I could name you half a dozen real estate markets that have fallen 50% or more, some that have fallen 75%, and loads that have fallen 25-30%. Given that most property speculators operate on a 25:75 equity/debt ratio, even a 20% fall is enough to completely wipe them out after transactions costs. If they can't maintain positive cashflow, then they are busted.
I would beg to differ with the "sweeping" generalization that was made regarding real estate markets "crashing". The bottomline is that high prices of real estate are largely supported by the high income levels of the residents of that specific demographic area, relative to other areas. You can tell me that South Dakota has a Citicorp credit card center, a Wells Fargo credit card processing center, a couple of medical associations, John Morrell Meat Processing and some retail businesses, but the fact of the matter is that the median income for a household in South Dakota is $44,736 ( National Average is $36,766 ) and the median income for a 4-person family is $35,205 ( figures as of 2000 U.S. Census ). Thus, it doesn't come as any surprise that the median home price in South Dakota is $122,000. It's all relative!
Btw you can get houses in Canada for $15-20k CAD. Or you can just buy an acre of trees, cut them down a build a log cabin for peanuts. Ok so it's cold and in the middle of nowhere, but ithe crime rate is low and you won't get bothered by noisy neighbours.
During one of the worst "white-collar" executive recessions in quite some time, in which advertising and media budgets were slashed to almost nothing, Wall Street investment banks trimmed their payrolls dramatically, airline business travel was cut in half, and tourism and retail trade declined due to lack of discretionary income and issues regarding security and travel, Fairfield County Connecticut, an executive suburb of New York City still saw an increase in home prices. The same could be said of the 9 Bay Area Counties that make up the San Francisco Bay Area, even though Silicon Valley went through a punishing retrenchment in demand for technology. In fact, the average home in the San Francisco Bay Area still saw an increase of roughly 15% during 2003.