US housing bubble

Liberec · #1 (**permalink**) 12-13-2006, 08:04 AM

US housing bubble' refers to a belief that there is a economic bubble in real estate in the United States. This follows the stock market bubble in the 1990s which was called, among other things, the dot-com bubble. A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid increases in the valuations of real property such as housing until they reach unsustainable levels relative to incomes and other economic indicators, followed by decreases that can result in many owners holding negative equity (a mortgage debt higher than the value of the property). Just like any type of economic bubble, it is difficult to identify except in hindsight, after the crash.

There are several factors believed to explain the US housing bubble. The Economist magazine said that ""the worldwide rise in house prices is the biggest bubble in history"" [1], so any explanation must consider global causes as well as those specific to the United States. US Federal Reserve Chairman Alan Greenspan said in mid-2005 that ""at a minimum, there's a little 'froth' (in the US housing market) … it's hard not to see that there are a lot of local bubbles."" Bubbles may only be positively identified by some in hindsight, after a market correction, and there is debate during the rise in prices about whether this is caused by a mania or sustainable economic reasons such as larger demand due to increased population and liquidity, and limited supply.

florida man · #2 (**permalink**) 12-13-2006, 01:17 PM

hi

Down here in Florida we have just gone thru a big correction in prices. According to info i read off zillow, and CNN money, Florida is off a whopping 9.0% as a whole in 2006.

We bought our property here in late 2005 for 262k and now its worth 280k.....down from 285k in june. This is in the Melbourne Palm Bay area.

But the folks who bought in the spring 2006 here have taken a LOSS.

The overheated areas are dropping like flies. This is probably why I have only done 3 purchases in my entire career. One of them was my own house.

I know that California and the east coast have taken BIG hits, and i fear for those areas tremendously in 2007. But who knows?.....

brendo927 · #3 (**permalink**) 12-13-2006, 02:23 PM

what goes up must come down and vice versa.......

jaybird · #4 (**permalink**) 12-14-2006, 09:09 AM

I subscribe to the Mortgage Market Guide and listen to Barry Habib quite frequently. He contends that there is no housing bubble, saying it's a myth perpetuated by the media who like to invoke fear into everyone. I tend to believe him. While I'm sure there are certain areas of the country where prices were overinflated at one time, people expecting the demise of the real estate industry are sadly mistaken. Just my two cents.