Housing Boom

[Steve Owen]

Here is an interesting article on what a lay economist (non-appraiser) thinks of the housing boom market.

http://www.msnbc.com/news/709330.asp

Food for thought.

Steve

 

[Pamela Crowley (Florida)]

I am very afraid this bubble really is going to burst. When you combine this 'intuition' with our knowledge of the very real fraud going on regarding artificially inflating the housing prices, this is looking worse and worse.

 

[The Bob]

When everyone jumps on the bandwagon, its probably time to get off. Everybody, and I do mean everybody, is touting real estate as the next sure thing. Been burned by the stock market? Just put your money in real estate. The other day I was walking out of the courthouse and they were having a foreclosure auction on the front steps. Nomally there would be a handful of people, this day there must have been 30. Turn on the TV and you will see at least 2 or 3 weekend infomercials on how easy it is make money in real estate. All bubbles end the same way. When everybody has bought, who you gonna sell to?

All the economists talk about the unmet demand for housing as being the driving force in prices. I think it may be more to do with low interest rates. I think this is a lot different than true demand due to new jobs or an increasing economy, or rising wages. Oh well, time will tell.

 

[Dan Leggett]

I remember back in the early to mid 1980's I spent a bunch of money to attend a seminar with William N. Kinnard, Jr. PhD, MAI, etc, etc, etc as the headlining act. Many of his projections came to pass ie: not only the S&L crash but the extent of the bailout, 6% mortgage interest rates, and our present day housing price run-ups to name a few. (bull's-eye 15 to 20 year forecasts in the residential markets are pretty good in my book.)

The most interesting projection was centered in the year 2010. By laying out the existing housing units, the increase in new units being built, the lack of population growth rate to absorb all the units, recession cycles, on and on and on, he showed where housing prices could plummet to what they were in the 1960's.

I know there are several of you folks, young and old, who know a whole lot more about this stuff than I do but I have ridden several up and down cycles in the real estate markets and I passed the 'this is unbelievable" stage more than a year ago. Maybe Kinnard's statements seem like a stretch right now but where and when do some of you see the "Big Wind Breaking"?

To touch on one of JimBob's statements I agree that the low interest rates are the driving force. People are buying an affordable monthly note, it really doesn't matter what the property value is.

 

[Larry Lyke]

Although The Twin Cities has historically been a very good market, the housing boom is being driven by the move-up Buyer and the true housing shortage, especially affordable housing.

Rents are so high, Buyers can still buy a house at their rent rates.

 

[Caterina Platt]

Larry,

You must have an incredibly strong employment market and wage base in your area. Hmm, could they use another appraiser up there? :lol:

My area tends to go thru the downturns and then the recovery a shade ahead of the rest of the country for some reason. Maybe it's our rather weak economy that is more vulnerable in the first place? All I know is that we're a rather poor state on the bottom of all the good lists. Education, best place to raise a child, etc. and at the same time we top the list in taxation as a ratio to per capita income, drunk drivers, teen pregnancy... Gee, I'm making it sound good, eh? Wanna buy a house? :lol: We've had an alarming increase in foreclosures for over 2 years. Construction has slowed significantly, with several builders pulling up stakes and leaving. Rental vacancies are higher, and prices have seemed to stabilize in the low to mid range values, while the high end softened several years back. The only things that have artificially saved our bacon have been the interest rates and the resales of the foreclosures. We have no new industry or job growth to speak of.

Inflation has driven up home, car, food prices on a continual basis since the early to mid '70's. Something's gotta give. I read posts from Austin and others in the area of our country that is heavily dependent on manufacturing and it's chilling. We have priced our labor and goods out of the global market. Remember back in the mid 80's when the rose colored glasses gang would tell us that 'it's just our economy moving into the information phase rather than being dependent on the production of tangible goods'? Hmmm, we can't eat, wear, drive or live in that 'information' we're producing. That bubble has obviously burst with the dot coms. We spend more of our disposable income on housing than ever, and we can't afford to buy what we're manufacturing here at home.

Bone up on your REO knowledge, and sit tight folks. It could get wierd.