Real Estate Bubble

[robby]

Do you think there is a real estate bubble? It seems everyone thinks there is, but everyone continues to buy so I'm a little confused. If there is a real estate bubble forming, what will happen when it bursts?

[cercis]

Re: Real Estate Bubble

When it bursts people who are upside down on their home loans will find themselves in a very serious situation.

People are continuing to buy because lenders are now doing interest only loans on 100% of the purchase price. These people and lenders are banking on the house selling for more than they bought it when it comes time to sell, or that they will get a job that pays significantly more and be able to afford to refinance when the balloon payment comes due.

What we will see when it bursts is a large number of homes for low prices and a lot of people filing bankruptcy. We'll see the gov't asked to bail out the idiot lenders who created the issue by lending too much.

[robby]

Re: Real Estate Bubble

If this is true, wouldn't it be better to wait to buy instead of buying now?

[34saving]

Re: Real Estate Bubble

I think most markets will see the air slowly come out of the bubble as opposed to the bubble bursting. I think one obvious impact will be a strong decline in the number of houses switching hands. I'm glad I don't make my living as a realtor. I'm also very scared of the interest only loans cercis talked about. A 5% interest only to a 7.5% interest only means a 50% increase in mortgage payments and you're still not paying any principle!

[34saving]

Re: Real Estate Bubble

You might want to check out this article. It's about the "bubble sitters"

http://biz.yahoo.com/brn/050825/17205.html

[robby]

Re: Real Estate Bubble

Any prediction of how far in the future this will happen? The next year? 5 years? Tomorrow?

[cercis]

Re: Real Estate Bubble

I've thought about waiting, but I don't want to throw money away on rent meanwhile. Plus I want a home I can control, no carpet (allergies), something other than white walls. More energy efficient appliances, etc.

I'm just going to have to shop very carefully.

Of course, I don't live in an area that is experiencing the bubble. We do have a small bubble starting because of the ease of getting loans and loans you can't afford.

[cercis]

Re: Real Estate Bubble

Robby, it's just not something most people can predict at all. We can guess, but no one knows.

It will happen when more people are working low wage jobs or have no jobs at all. When a lot of people can no longer make their mortgage payments and foreclosures increase (which they actually are, my friend does foreclosure and her law firm is hiring a new person every month).

[VJW]

Re: Real Estate Bubble

As I posted in another thread:

Annually, more than 2 million housing units are being constructed, whereas the number of households is only growing by 1.4 million.

It can’t last.

#

[CRFSaver]

Re: Real Estate Bubble

In the DC area, an area that is supposed to be immune from the bubble bursting (due to a stable economy ie. federal govt and growing private industry) they are starting to see appreciation slow down and in some places prices go backwards.

[fiffer010]

Re: Real Estate Bubble

So we know that it is probablly going to happen... but do we know when?

[jmjj215]

Re: Real Estate Bubble

I'm not in the market for a home right now. But I may very well be next year. We're heading to Dallas where prices are still very reasonable (suburbs of Dallas). I can't imagine I would put off buying a home because I thought there was a bubble - not b/c I think that you necessarily "throw money away" when you rent - but because I just can't imagine NOT buying a home as if I were waiting for a stock to go down or something...just my feelings though

Hopefully we buy at the bottom, it skyrockets up over 15 years, we sell and move to the country and retire, sipping lemonade in rockers on our (very large) porch.

[jmjj215]

Re: Real Estate Bubble

So we know that it is probablly going to happen... but do we know when?

As mentioned earlier, nobody knows when. Do you realize how much money you could make if you did know? (And others believed that you knew).

[robby]

Re: Real Estate Bubble

Are there tools or formulas that show what areas are more likely to be in a bubble?

[moneyrant]

Re: Real Estate Bubble

If you can't afford it, don't buy it.