So when will the current housing bubble burst?

ajpa123

Platinum Member
Apr 19, 2003
2,401
1
0
Hey guys!

Just pondering the state of the economy.

House prices are just too high. I don't have the money to put down as a downpayment and have enough left in the bank to cover me if i am jobless for 6 months plus. In this economy, job security isn't there anymore, and house prices are high, so the mortgages are going to be high.

So, anyone have any insights, thoughts or links about the current real estate cycle and the house price bubble.

Anything would be appreciated,

AJ.
 

Lifer

Banned
Feb 17, 2003
1,948
0
0
repost
do a freakin search u nub
rolleye.gif
 

Do we have to go over this again?

If you live in California, your market does not represent the typical market at all.
If you can't deal with that, then move.

Otherwise, historically real estate has always grown. There is no bubble.
 

kranky

Elite Member
Oct 9, 1999
21,014
137
106
There most certainly is a bubble. Incredibly low interest rates are the reason.

A $50K income might qualify for a $200K mortgage at a 6% rate, but if rates rise to 8% that income would only qualify for a $160K mortgage. That is going to affect demand when that 8% rate comes along, but no one knows when that is going to happen. I feel certain that historically low mortgage rates are not going to continue forever.

The people who have ARMs are going to get hurt for sure. Also, the baby boomer population is getting older and will likely downsize their homes, putting a lot of expensive homes on the market. Where will the demand come from?

In the last seven years, the rise in housing prices has exceeded inflation by 30 percentage points, which has never happened before. In some areas, housing prices have gone up 70% over the last 5-6 years. In those areas like California, Seattle, DC, etc., I think the chances for the bubble to burst is very high.
 

ajpa123

Platinum Member
Apr 19, 2003
2,401
1
0
Originally posted by: kranky
There most certainly is a bubble. Incredibly low interest rates are the reason.

A $50K income might qualify for a $200K mortgage at a 6% rate, but if rates rise to 8% that income would only qualify for a $160K mortgage. That is going to affect demand when that 8% rate comes along, but no one knows when that is going to happen. I feel certain that historically low mortgage rates are not going to continue forever.

The people who have ARMs are going to get hurt for sure. Also, the baby boomer population is getting older and will likely downsize their homes, putting a lot of expensive homes on the market. Where will the demand come from?

In the last seven years, the rise in housing prices has exceeded inflation by 30 percentage points, which has never happened before. In some areas, housing prices have gone up 70% over the last 5-6 years. In those areas like California, Seattle, DC, etc., I think the chances for the bubble to burst is very high.

interesting,

thanks for taking the time to formuate a thoughtful answer !

Thanks to the other posters on this thread that had something thoughtful to say.

To the others.. get ur knickers untwisted

:) AJ.
 

johnjbruin

Diamond Member
Jul 17, 2001
4,402
1
0
Originally posted by: redly1
as a renter, I say "BURST BABY, BURST"

same here. houses here in LA are just too god damn expensive. waiting for it to burst here also.
 

StageLeft

No Lifer
Sep 29, 2000
70,150
5
0
I've read a lot about this issue back and forth and although I do think that houses are probably overpriced, I am now of the opinion that there will not be a burst similar to what we saw with the stock market - ie, it won't be catastrophic. I can't help but wonder how much bias my conclusions have given that we just bought a house this June, but I would guess that in the near future housing prices will basically flatline with minimal losses, at most. Who knows/cares about california - that place is frigged up anyway. :p

These low interest rates, which will go away, have definitely inflated housing prices, but all indications are that the economy is on a strong rebound and with that comes jobs, money, and demand for housing.
 

zephyrprime

Diamond Member
Feb 18, 2001
7,512
2
81
A $50K income might qualify for a $200K mortgage at a 6% rate, but if rates rise to 8% that income would only qualify for a $160K mortgage. That is going to affect demand when that 8% rate comes along, but no one knows when that is going to happen. I feel certain that historically low mortgage rates are not going to continue forever.

The people who have ARMs are going to get hurt for sure. Also, the baby boomer population is getting older and will likely downsize their homes, putting a lot of expensive homes on the market. Where will the demand come from?
Yeah, once inflation rates drop, the housing market will really tank. Housing starts have been so high that there's essentially full enployment among housing contractors & sub-cons. Housing growth has far exceeded population growth. Many retired baby boomers will move into retirement communities and assisted living communities further adding supply into the market.

Oh wait, I forgot to place my bet for when this will happen. Alright, the economy is picking up and Greenspan will have to raise rates by the spring of next year. But the thing that I have a hard time trying to figure out is how the falling dollar and foreign money inflows will affect all this. I guess if greenspan raises rates, the fall of the dollar will stop and foreign inflows will be restored and maybe help provide plenty of liquidity for the market thus cushioning any sort of crash.