Housing Bubble

[Markainion]

I just want to see if anyone one got a good educated guess on if or not American is currently in a housing bubble.

Based on some data that I have collected according to the National Associate of Realtors 1 out of 3 home bought in 2004 were second homes or investor’s purchases. Twenty three percent were investor transactions bought by investors only for the purpose of making money.

Link
http://housingbubble.blogspot.com/2005/03/investors-second-home-buyers-are-huge_13.html


Other data that I collected says that housing prices have increased 48% since 1999, A much higher gain than both income and population growth from the same period. Last year the national income in median housing prices increased 15.5% the largest increase since 1980. While this year housing prices have continued to surge and the median price for a house nationally is now over $200,000.

Mean while the last report on foreclosures rate on homes in the United States says that it has jumped 57% from last year, reporting 28,000 foreclosures form March this year from 18,000 in march last year.

Link
http://www.wsws.org/articles/2005/jun2005/home-j13.shtml


My question is this: My brother is getting married this September and is planning to buy a new home around this time. Does anyone think that this is a good idea? Personally I think that the United States is either close to or currently in a housing bubble. Can anyone make a counter argument against this?

Currently the Median Housing Prices in the United States has been accelerating. The link below give a monthly chart of by how much prices have changed in the last year.

http://www.nahb.org/generic.aspx?sectionID=131&genericContentID=3323

 

[inventorthief]

I'm 26 and I'm buying a house right now. I think it depends where you live. Do you see a lot of people buying houses in your area, or selling them. What is the condition of the area you live in? Is your area a buyers market or a sellers market. If there are more houses than jobs available, then most likely the value of those homes may go down. Even if the bubble was to snap due to massive foreclosures and bankruptcies, you could still make money. Hint, buy cheap so that if your investment falls, you can still have some equity to borrow against and find a great deal on a foreclosed home to add some income to your cash portfolio.

 

[Markainion]

I'm 26 and I'm buying a house right now. I think it depends where you live. Do you see a lot of people buying houses in your area, or selling them. What is the condition of the area you live in? Is your area a buyers market or a sellers market. If there are more houses than jobs available, then most likely the value of those homes may go down. Even if the bubble was to snap due to massive foreclosures and bankruptcies, you could still make money. Hint, buy cheap so that if your investment falls, you can still have some equity to borrow against and find a great deal on a foreclosed home to add some income to your cash portfolio.

From what I have read the housing market is hot in most counties in the US right now, a few area prices in houses are declining in most area housing prices are increasing. Some areas housing prices have soured. You can look up your own area home prices and recent changes in prices fairly easily on the internet. My brother has been looking for a house for a few months now and he has seen a major increase in prices the last few months. As my data given from the original post shows.

As for as buying a new home, it really depends on the your situation versus alternatives. You most likely will either see your home price go up dramatically the first year or two, or stay the same for a long time. Alan Greenspan made a comment on the housing market recently; all he said is housing prices rarely decline in value.

 

[menewa]

If the economy dips and a lot of people start forclosing on these homes, prices will probably lower when lenders suddenly have a bunch of houses to get rid of.

However, I don't know if the economy will start failing soon. CAFTA is in the works. Why its passage will harm the economy in the long run, it will give it a boom in the short.

Also, investment will remain high due to the tax cuts, another thing that gives short term booms, but has the potential to temporarily cripple us in the future.

Also, the war rages. This war in Iraq appears to be another short term boom for the economy. The constant billions pouring into defense companies will also keep the econmoy strong for a bit.

In conclusion, the price of houses will fall, but don't hold your breath. Better to buy now. Just remember to shop wisely.

 

[Huckleburry]

The housing bubble is the biggest financial bubble in history. Rents and mortagages are way way out of line with the latter being much more then the former. The Economist has been publishing on this subject for the last year or so and the most recent article was the cover. My sister was thinking of buying somthing in the DC area (the hotest market in the country) and I told her to wait. Most experts are prediciting a leveling off or fall within the next two years. In the mean time your brother can use the money he saves by not paying rent to invest in other securities. Mr. Bushes new tax program will make the two nearly equivlint tax wise and the ROR (if he your brother is diciplined) will be much greater and safer if it placed in other securities. To read more about this visit The Economist's web site. Fuck all the other sites you run across. These guys are pros and they are very rarely wrong on these kinds of issues. Personally I also say...Wait.

 

[NoLabel]

Like any good real estate agent will tell you, Location, Location, Location.

One thing is certain, there is just so much land available for housing.

While long term interest rates are remaining low, I invested in a new home four years ago, and think it was a good investment.

 

[rtwngAvngr]

This may come true now that the SCOTUS has rendered real estate an unsecure investment.

 

[Annie]

Well I'm living in an area that has been pretty high end for many years. Keep in mind that in Chicago the 'mid-range average condo' is selling for $385k:

http://www.chicagotribune.com/business/chi-0506240097jun24,1,1701341.story

`Bubble' in housing not inflating locally
State nears record in home sales with 6% rise over past year, but experts see area as safe from feared bust in real estate

By Mary Umberger
Tribune staff reporter
Published June 24, 2005

Home buyers snapped up condominiums at a blistering pace in May, pushing the state's overall home sales toward a possible record and continuing the debate over whether the nation's housing market is bubbling toward a pop that would send prices spiraling down.

May sales figures released Thursday by the Illinois Association of Realtors showed that home sales were 6 percent higher than a year earlier. Condos far outstripped single-family sales, which generally were flat or down slightly, the association said.

Condo sales jumped by double-digit percentages throughout the seven-county Chicago metropolitan area, with some counties seeing sales surge 54 percent. Statewide, condo sales climbed 18 percent.

Prices, overall, were up too. The median price for a single-family home in the Chicago area increased by about 9 percent in May; condo prices were up by 7 percent.

"It's a strong market, and it continues to be so," said Realtors spokeswoman Mary Schaefer. "But there are some pockets that are weaker than others."

In the Chicago area, the weaker--or less hot--areas are single-family homes in DuPage County My County, Lake County is also very well-to-do and both have had a huge increase in 'knockdowns' and rebuilds. If that is 'down' lord help us. One of the younger teachers at school just sold her 'starter home' which she paid $180k for 2 years ago, for $300k and the builder is going to knock it down! (down about 5 percent for the month and 3 percent year to date); Lake County (down 4 percent for the month and 3 percent year to date); and Cook County (down 0.3 percent for the month and 2 percent for the year.)

Schaefer said such dips are "actually pretty level, pretty even," considering they're being compared to 2004's record pace.

On a national level, existing-home sales are on track to finish the year at the second-highest pace on record, though they slipped slightly less than 1 percent in May. Prices climbed, however. The median-priced single-family home cost about 13 percent more than a year ago.

This unending drumbeat of higher house prices feeds the debate over whether they're approaching unsustainable levels that could cause the long-running market to stall or fold--the dreaded "bubble" whose existence is hotly debated by housing-industry analysts.

Bubble proponents generally say the most endangered areas are on the coasts, where prices have ventured beyond torrid. Florida cities lead the nation's price parade. In May, for example, statewide prices there climbed 27 percent from a year ago.

But even if there were such a bubble, Chicago would stand to be fairly well insulated from it, according to numerous analysts, who describe the area as "steady" or even "boring."

"You're fortunate to be in the steady Midwest," said David Berson, chief economist at Fannie Mae. "Even though prices have increased in recent years, and in the last year quite a bit more rapidly, [Chicago's are] still less rapid than the national average."

New reports from Fannie Mae, the Federal Deposit Insurance Corp. and Merrill Lynch have added to concern that the sheer numbers of overheated housing markets could act collectively to put the national economy into a swoon.

The FDIC report suggests that 22 metropolitan markets with the fastest-growing house prices account for more than one-third of the value of U.S. real estate, though they're home to just one-fifth of the nation's population.

The report, which doesn't include Chicago in the list of 22 fastest-growing markets, suggests that housing is acting less like a collection of separate markets, as economists have tended to view them, and more like a national one, with a greater cost to pay should prices hit the wall.

"I'm still trying to digest that proposition," said Chris Huecksteadt, who heads the Chicago office of Metrostudy, a national firm that analyzes home-building data. He says that because the FDIC data go back to 1995, they don't provide enough historical perspective.

"The entire housing economy is going through a turbulent time," he said. "But we [in Chicago] are not a boom-or-bust market, and haven't been for the last 10 years. We're slow and steady."

Huecksteadt said that in contrast to the idea of the nation's housing moving in a unified way, the Chicago market may be doing the opposite.

"It's hard to talk about a Chicago housing market anymore. Chicago is made up of a lot of very little housing markets, and they could be affected differently by changes in the overall market," he said.

According to the National Association of Realtors, Chicago-area home prices rose 6.9 percent in the first quarter of 2005 from a year earlier, compared to year-over-year run-ups of 40 to 46 percent in parts of Florida, which is setting the pace for fevered pricing.

Stephen W. Baird, president of Baird & Warner Real Estate in Chicago, says those Chicago prices match what he's seeing.

"I've been keeping track of this for 25 years, and our company's average sales price has never gone down," said Baird. "It's been flat for two or three periods, and it has never gone up more than 10 percent, except for a couple of times in 1999 and 2000.

"In Chicago and the Midwest, it's a consistent line. Don't listen to that bubble stuff."

But many are listening, as reports pump up the bubble scenario, which would leave buyers with homes that sell for less than they paid for them.

The Merrill Lynch report did put Chicago high on a list of cities where home price increases are outpacing income and suggested that local markets are moving "systemically." It said U.S. economic growth could slow by 1 percent next year if home prices flattened in the major cities.

"I might take issue that rapid price growth is evidence of price-correction risk," said Richard DeKaser, chief economist for National City Bank in Cleveland. "But I do agree that a significant number of U.S. housing markets are overvalued and risking a price correction."

Last year, DeKaser studied 99 metro areas and has nearly completed an update of the report. "Chicago was overvalued, but not egregiously so," he said. "We consider `extreme' to be 20 percent or more overvalued, where a significant risk of price correction comes into play.

"Chicago would be the most overvalued metro area in the Midwest, but it isn't in the highest tier of overvalued markets."

 

[softwaremama]

This may come true now that the SCOTUS has rendered real estate an unsecure investment.

Yes, lots of people turned away from the stock market to real estate to make money by rehabbing, flipping, or selling teardowns. You know the liberals hate to think of people actually making money! Sux, huh? Kind of scary to see the SCOTUS treading in jackboots on the American Dream.

Looks like the lib activist SCOTUS judges thought they needed to put the fear o' God into everybody. Frightening day for all. Everybody needs to note who the dissenting justices are.

 

[Annie]

Yes, lots of people turned away from the stock market to real estate to make money by rehabbing, flipping, or selling teardowns. You know the liberals hate to think of people actually making money! Sux, huh? Kind of scary to see the SCOTUS treading in jackboots on the American Dream.

Looks like the lib activist SCOTUS judges thought they needed to put the fear o' God into everybody. Frightening day for all. Everybody needs to note who the dissenting justices are.

Yep, the libs went for big business, the conservatives for the little guy. Kinda freaks everyone out! :fifty: At this point in time, Bush must really hold to constructionists. He can afford to. Write your Congressmen/women and your leading newspapers. Make your voice heard beyond this little forum.

 

[menewa]

If anybody's on this saturday morning, tune into CSPAN's Washington Journal now. A housing expert is explaining this topic in detail. Plus, you can call in and ask questions.

 

[Huckleburry]

Paranoid!!!
I do not even agree with the decision but it is harldly the death of property rights.
PS. I was living in New London

Yes, lots of people turned away from the stock market to real estate to make money by rehabbing, flipping, or selling teardowns. You know the liberals hate to think of people actually making money! Sux, huh? Kind of scary to see the SCOTUS treading in jackboots on the American Dream.

Looks like the lib activist SCOTUS judges thought they needed to put the fear o' God into everybody. Frightening day for all. Everybody needs to note who the dissenting justices are.

 

[ScreamingEagle]

Paranoid!!!
I do not even agree with the decision but it is harldly the death of property rights.
PS. I was living in New London

Guess it depends on WHOSE property rights you are talking about.

 

[softwaremama]

Yep, the libs went for big business, the conservatives for the little guy. Kinda freaks everyone out! :fifty: At this point in time, Bush must really hold to constructionists. He can afford to. Write your Congressmen/women and your leading newspapers. Make your voice heard beyond this little forum.

A puzzling decision from SCOTUS; I agree it's freaking people out.

I'm going to read the decision and dissent for myself and write a scorcher to Durbin and Obama. Kathianne, should we abandon ship for a red state?

Even the thought of writing to our fine Senator Durbin gives me a pain. Need a Tums now.

 

[Annie]

A puzzling decision from SCOTUS; I agree it's freaking people out.

I'm going to read the decision and dissent for myself and write a scorcher to Durbin and Obama. Kathianne, should we abandon ship for a red state?

Even the thought of writing to our fine Senator Durbin gives me a pain. Need a Tums now.

I already wrote and called Durbin's office after his stupid rant. As for this, well I guess it's really a national issue, thanks to SCOTUS. I must admit, the breadth of this blows me away.