Tuesday, January 03, 2006

Great Article on Housing Bubble....

Here's a great article on the possibility of a housing bubble, or depreciating home prices...Note its by a Cendant official, and I own cendant stock, so I may be biased.

I have asserted in the past that there is no housing bubble. ...only the strong liklihood of houses not appreciating as fast as they have been. The most striking thing that is mentioned in the above article and that I have never thought about is supply and demand. regardless of interest rates, houses will always be in demand. Always. Demand causes price increases. Always. Houses will always be in demand because of population growth. Every year there are a few more million people in the US then there were the year before. Furthermore its a compounding growth rate.

According to this website: "By 2050, U.S. population is projected to grow to over 403 million people" This number sounds about right. Where are these additional 130 million people going to live?

On aggregate Real Estate will continue to appreciate, as long as the population appreciates in volume. Only the rate of appreciation will change. Real Estate bubbles only exist in isolated and easily noticable areas.


Anonymous Anonymous said...

I'll have to look up some stats but I will disagree with you here. Here is a quick-hitter I found on a google search: Fact Sheet which has some good info. The proliferation of interest-only and adjustable rates mortgages means that, as rates rise (as they will continue to do), people are NOT going to be able to afford their houses. What's this mean? Bankruptcy and bank repossession of homes. A glut of houses on the market, along with higher rates, assuredly means that housing prices will fall. I'll post some stats later. BTW, listening to the CEO of a company in the housing market talking about housing is akin listening to George Bush on the Iraq War :) .

Tue Jan 03, 05:18:00 PM EST  
Anonymous Anonymous said...

Here's a good article that I think summarizes the housing bubble. I didn't see many stats but I remember reading/hearing that debt, as a percent of GDP, is they highest its ever been...not a good sign. I will agree w/ you that, long term (10+ years), that real estate is a good investment. However, in the short term, I think housing prices will fall. In your situation, I don't think that will matter that much as you are not 'flipping' properties. If people lose their homes, they still need a place to live and will rent instead of own. That is, assuming the bubble popping doesn't cause a HUGE recession.

Tue Jan 03, 08:57:00 PM EST  
Blogger Greg said...

D, you are missing one thing. Me. Investors. There is only so much real estate. People need to live somewhere regardless of who owns the building. The demand for purchasing the housing will simply shift from owner occupied to investor owned....which you alluded to in your 2nd comment.

There is only so much land.

As far as a bubble bursting and a recession happening. I say bring it on! In a recession people are losing money. If people are losing money, than other people are gaining money. The most money I made in the stock market to date was during the 2000 stock market bubble burst. I was making some of the money that people were losing.

Problems for some people are opportunites for other people.]

On aggregate, short term and long term, I do not think there is a housing bubble...but I hedge against it by buying housing 10-20% under market value.

Keep comments coming, I appreciate them...I wish there were more discussions derived from my posts. I have alot to learn!

Wed Jan 04, 09:06:00 AM EST  

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