Best & Worst: 'Real Estate Bubble' or 'Housing Slowdown' -- this buzzword hits too close to home

You don't really expect NAR and David Lereah to openly state that there is a house bubble do you? Everyday is a good day to buy a house according to those guys, because they make commissions and their livelyhood depends on sales every day. Wait until all those adjustable loans reset next year and the year after, and adjustables go out of vogue and you will see these overpriced houses sit for years, not just months.

Gary's points are dead-on. One can not look to the NAR for objectivity anymore than one can look for objectivity when dealing with the used car dealer. The reason that prices got so out-of hand is that a hugh number of people went to risky mortgage products (ARMs, neg-am, etc ...) to make those purchases at inflated prices. Next comes the "margin call" (i.e., the payment increases) on those loans. Something rational must support the price levels and crazy loans aren't it.

As inventory of existing homes is slowly taken off the market, prices will solidify in California. Now is the time to buy when prices are negotiable and rates are low. There is only so much land in the best state in the greatest country. People who cry when prices go up and do cheers when they stabalize or go down are the same people who usually get nothing accomplished. If you need a house... buy it, if you don't, then don't buy it. RE is a long term investment that you live in. It's not a piece of paper with a seal on it. Real Estate will go nowhere but up in long term. Stop crying and go outside and do something. Leave the pessimism for for unproductive people

I am a realtor in the West Ga. area and the problem is not a bubble here, the problem is people have refinanced 100% of the homes value and they still want to cash out again at closing and walk away with thousands of dollars more. Lenders fail to explain that when you get your home appraised for a refinance it does not go through the scrutiny that an appraisal for a purchase does. Our market has undergone an average of 4% - 6% per year inflation and that is also based on maintaining the house. When you buy a home you have to realize that Real Estate is local. When you buy a home or are selling you need to factor what your neighborhood is doing and look at it objectively as if you were a buyer, and remember that just because your neighbor has set a price for their home does not dictate that's what the market will bring. Real estate is based on selling price.

Chris there was only so much land in Japan as well. Even greater density and more wealth than So Cal. Yet Japan crashed. To say that Orange County, where I met my wife, cannot crash is absurd. And as Larry says, loose lending can destroy the market, with people cashing out of their equity, even in non bubble areas. Just think of what this behavior could do to a bubble area. I hope we don't have a horrific crash, but I would do whatever is necessary to protect oneself against the possibility.

The price of existing homes has been shored up by the soaring price to replace them. Construction costs have been impacted by huge increases in raw materials. Much of this is due to the increased cost of energy. Copper, steel, PVC, concrete, brick,lumber, treated wood, roofing, labor, insurance and more have all gone skyward in price. This has raised the replacement cost of existing structures to the point that it keeps the prices of existing structures from being truly subjected to a bubble that may pop!

That was a very good analogy by John when he indicated that there will be a Margin Call sometime in the future of real estate financed by adjustable mortgages. I think, however, that the margin call will occour when the owner attempts to sell the real estate after the adjustment in the mortgage rate and is unable to do so because of the value of the property has declined as a result of everyone else attempting to bail out at the same time.

I think you are wrong Jim. It is true that prices have gone up for commodities. However, there are safety valves that people have as more and more cannot afford to buy that house. They move to mobile homes, they rent, they room together, and pool resources, etc. It is not a foregone conclusion that people will continue to buy at inflated prices just because it costs money to make the product. As baby boomers retire to less congested areas, you will see less demand, and house sales are based upon demand. If there is no more artificial demand from speculators, demand will dry up and houses will not sell, which is NAR and Lereah's greatest fear, a decline in transactions.

Here is what I tell eveyone...that RENTs instead of buying.... Rent is Equity but Not to the Tennant
so what if you only make 4 or 5 %... it's better than pouring money into the landlord's pocket. I have never lost money owning property...

The housing bubble is not just local to US, but is present throught the world and in places like Japan, Netherlands and UK it had already burst within the last decade. Now, the developing countries like India and China are following the path of US.

The basic problem is that people forget that before any investing they have to calculate estimate returns and P/E, regardless of whether it is stock or real estate, and base their buying on informed judgements based on estimated interest rates & rent growths, and capital appreciation should not come into the calculation at all.

Read More on housing bubbles:
http://balajiviswanathan.blogspot.com/2006/12/worldwide-real-estate-bubbles-dumb.html

Ms Bower, many are losing money in real estate. Many will continue to lose. If you are so sure that everything is ok in real estate land, then why are you bothering to post here? You are afraid of a crash just like everybody else. Why don't you tell us how you make money, and exactly what you have done so that we can see if that is even doable now in the new environment?

Gary Anderson said: "As baby boomers retire to less congested areas..."

I think it's more likely that the opposite will occur: aging baby boomers will ditch their suburbian McMansions and move into urban condos. To live in suburbia you are absolutely dependent on your car to get anything done. Once the boomers are too old to drive safely, their options are
1. Make their kids drive them everywhere
2. Try to drive anyway
3. Move somewhere where they can have a real life without a car

I'd bet that the prices on urban property are going to stay high even if the general market deflates.

Baby Boomers drive the economy and have for 30yrs. 77 million of us. There is no larger group of folks behind us to fill this void. When we decide to liquidate(stocks and Real estate), downsize, retire, and collect Social Security (if it is still around) there will be a huge sell off over the next 30yrs. Simple supply and demand economics....I hope the immigration into this country will provide us with plenty of quailified buyers(those making over 100,000 a year) because no other group will be able to fill the void.

The housing BUST is well under way in San Diego California with many areas seeing a drop in value well into the double digits!

I've found the best source for the real facts about the San Diego housing bust to be a local real estate brokers blog at:
http://www.brokerforyou.com/brokerforyou

THERE IS DEFINITELY GOING TO BE A REALESTATE PULL BACK. BEING IN THE LENDING BUISNESS FOR 13YRS I'VE NEVER SEEN THE CREDIT CRUNCH I;M STARTING TO SEE. LENDERS ARE GOING TO TIGHTEN UP LENDING STANDARDS AND BORROWERS ARE GOING TO PAY ALOT MORE FOR MORTGAGES GOING FORWARD. I'M ALSO SEEING DECLINING CREDIT IN THE SUBPRIME AREA. HSBC JUST PUT ASIDE 10 BILLION TO HELP COVER THE 20% DELINQUENCY'S THEY ARE EXPECTING FROM SUBPRIME MORTGAGES OVER THE NEXT 2 YRS. SELL NOW RENT FOR A YEAR AND THEN BUY.