is there a housing bubble?

[progmac]

here is something that's been talked about a lot lately. i'm from the midwest, land of non-bubbled prices, and moreso living abroad for awhile, so housing prices themselves are of no great concern to me. however, i find this all very interesting.

do you all think there are regional housing bubbles? lots of people try to explain it away with supply and demand, but here is what i see:

tons of sub-prime lending and interest-only loans. i think this artificially drives up demand for housing, thus driving up cost. in the longer-term, it seems this will lead to a lot of people defaulting on their loans, causing things to cool dramatically

irrattional speculation. it seems everyone is trying to make money in real estate, especially in california, vegas, london, etc, i think this is also unsustainable, the whole concept of "rent AND APPRECIATION" for investing

the belief that real estate is an investment. in a way, it is. it is a bank of money that will always be worth inflation-adjusted, what you paid for it. i am not saying that money cannot be made in real estate. for example, if you buy in a cheap, low-demand area that later becomes a cool place to be (renovated downtowns, etc.) then there is absolutely a chance for money. but i don't consider this investing. i consider this SPECULATION.

ultimately, i don't believe that housing prices can so dramatically outpace inflation. it just doesn't seem sustainable. people can't afford 50% of their income for housing. it just doesn't work that way. in the history of housing, prices have pretty much stayed on pace with inflation.

i found this graph of housing prices in london:
http://www.firsttimebuyerhelp.co.uk/images/youarehere.gif
i think that california is probably pretty similar to this graph. the London market has cooled off some.

all of this said, i don't think will see a CRASH, just maybe a 5% drop and then a freeze in prices until inflation catches up.

well, i'm off on holiday for a week, so i won't get to see everyone's thoughts. here are two sites that you will like if you agree with me:

http://thehousingbubble2.blogspot.com/
http://www.housepricecrash.co.uk/

[JimDreamworx]

Ditech giving 125% mortgages... of course.

But do you really think houses are gonna drop in price to the point of being worthless? Sorry, that only happened in dot-bomb.

People gotta live somewhere, and someone will always buy that property.

[trick fall]

I predict that in NYC prices will drop by 30-40% in the next 18 months.

[groverat]

Originally posted by trumptman
I think the biggest thing that needs to happen though are more anti-speculation laws, like the ones passed in California that requires someone purchasing in a new tract to actually buy and live in the house a year. (Didn't really help enough though) and get rid of these 100% interest only, variable rate loans.

That would be a gorgeous, beautiful, wonderous thing.

[trick fall]

Long term one of the things I keep wondering about is if congress doesn't do anything about AMT I wonder if it will negatively affect the housing market. I know a few people already that I wouldn't consider rich whose main tax deductions are children and mortgage interest who got hit with AMT this year.

[mrtwistor]

I think there will be a crash. I live in a resort area where prices have gone insane, like California, but unlike California there are few high paying jobs. I know of an apartment next to a highway that is selling for $875,000. It is a nice place, but there is nothing special about it, and the location is poor. A house near it that is literally in the same condition as the house in the movie "Animal House" is on the market for $975,000. The same house could have been gotten for $100,000 - $125,000 ten or so years ago. At the same time my rent hasn't gone up in 4 years, a sign of a very unhealthy market.

[tonton]

Bubble? You ain't never SEEN a bubble, folks.