Re: Housing bubble. Where? - Posted by John Corey
Posted by John Corey on May 02, 2006 at 10:09:41:
The US housing market as a whole as not seen a down year since WWII. There have definitely been areas that have seen massive changes in value (up and down). Some areas did ‘crash’ or otherwise have a nasty correction. For most people who continued to live in their home, drive to work and get on with their lives they did not recognize the change in value. Over the long term all they know is they made a profit.
Predictions of a bubble in Australia and the UK were announced some time ago. Both experienced a correction of sorts. Australia first and then the UK. The US market is further behind the other two (rise was later and the predicted fall is still to come). In both Australia and the UK there was no meltdown.
Bronchick explains why the bubble conversation is overblown. There is definitely specific markets or specific borrowers who are exposed or over stretched. Hence one person might crash and burn while the owner next door notices very little.
Employment levels, interest rates and the overall supply/demand drive prices.
In the condo market or Miami there is a glut of condos given the number of short term speculators compared to the number of people who are looking for a long term hold. There is an imbalance and the price are soft. In much of the Midwest (and TX?) there are people wondering how a bubble can burst when they are still trying to figure out why appreciation is under 3%-5% for the last few years.
Read Bronchick’s article.
Also understand that in the US the % of fixed rate mortgages is something like 45%. That number varies based on the market as the high priced coastal regions do have more ARMs and other solutions.
PS. I am fine with a slow down or a more traditional rate of appreciation. Rapid appreciation prices people out of their own area in that they can not afford to move. It also wipes out the key workers (UK term for police, fire, nurses, teachers, etc) ability to live in the local area. Over enough time you hollow out the community’s ability to function if the income levels and the prices are too far apart. An investor in Naples FL says they are having problems there finding people to do the service jobs. A restaurant in HI was half closed because the could not afford the wait staff even though there were customers asking for a table. Prices rising in line with wages is a good thing.