Tuesday, September 13, 2005

Is the Real Estate Bubble About to Burst?

In an article titled Is the Real Estate Bubble About to Burst? the author basically argues there will be a soft landing.

Another part of the answer is in the fact that the real estate bubble is extremely localized - and it's localized in some of the larger media centers around the country. Massachusetts, New York, Florida, California - those states are seeing unprecedented rises in housing and real estate prices

The real estate bubble is not extremely localized. It has spread from the major bubble cities ( LA, San Fran, Miami) and invaded smaller urban areas and even rural areas. Places like Flagstaff (up 65% in 5 yr), Fresno (123%) , and Fort Lauderdale (115%) have seen huge price appreciation. There are a tremendous number of bubble markets that contain a large percentage of the population. Sure some markets have no bubble ( Dayton, OH), but the bubble is NOT 'extremely localized' as the author says.

It means that the foreseen losses are more likely to be smaller profits rather than actual losses. To quote a Florida economist, "The people who think it's a big bubble see a big crash. We just see deceleration. You don't have to worry about house prices going down."

Wrong. In many of the markets that have seen huge price appreciation in the last 5 years, there will be actual price losses. The housing market has become a speculative episode in many markets.

And all the naysayers and panic mongers can stop predicting the resounding crash of the real estate bubble falling to earth.

We are not 'panic mongers,' but rather realists. We base our predictions on looking at the whole picture and comparing it to history. The speculative episode is mortgaging the long term for the short term. It is a destructive phenomenon, and needs to be stopped sooner rather then later. Yes, prices will decline significantly in the bubble markets.

Like my mentor, Ben Jones, I consider myself an economic activist' and will continue to battle this speculative episode.


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  2. avid, they all want a soft landing- and then what? 10-15 years of NO appreciation? C'mon from what I have been reading here and at Ben's blog of what is going on in the central valley of California, Florida NV and AZ- a soft landing sounds to me like Adventures in Utopia.

  3. Wait a minute! Doesn't that author Andrew also profit from selling homes: Take a look at his article's end:
    Is this a good time to buy a house? Andrew is the web owner of "Home Buying Tips: How to buy a house". Find the answer at his website: http://www.buy-and-sell-house-fast.com/."