Yes, Virginia, There Is A Housing Bubble!
Bruce Collins
February 21, 2006
A lot of economists, realtors and CNBC pundits have weighed in on their opinion of the housing bubble.
Here is why I believe there IS a bubble:
Creative lending practices - Today, creative lending practices have allowed people to buy homes for No Money Down, Interest Only and Adjustable Rates. The fact that so many people, who SHOULDN’T be purchasing homes, are scooping them up should be a major concern.
In high priced areas such as Northern California, half of all new home purchases are done with adjustable rates. Considering that the Fed doesn't seem ready to stop raising the rates any time soon, this doesn't seem to bode well.
America’s savings rate - The average American’s savings has dropped to zero. This is a catastrophe waiting to happen.
Homes as investments - 30% of all homes being purchased now are for investment purposes, not living purposes.
Have you noticed that the homebuilder's stocks are falling? It seems that as they are 'peaking' in housing starts, less homes are being purchased. Therefore, the inventory of new homes is steadily rising. This is all part of the nasty spiral.
We haven’t even touched on people who have used their homes as ATMs in the form of home equity loans to buy luxuries. Consumers, like the government, are over-extended in a sea of credit.
We seem to be lulled into a belief that homes never depreciate, which is simply not true. If you look at history, there have been major downturns in the housing market worldwide.
Taking these three factors into account and adding to it a strong possibility of a slowing economy and that spells disaster for the mortgage and banking industry. This might explain why the government passed new bankruptcy laws. No doubt they see it too.
A good book on this subject is by John Rubino, called "How To Profit From The Coming Real Estate Bust". His website is www.dollarcollapse.com.
Good luck.
Here is why I believe there IS a bubble:
In high priced areas such as Northern California, half of all new home purchases are done with adjustable rates. Considering that the Fed doesn't seem ready to stop raising the rates any time soon, this doesn't seem to bode well.
Have you noticed that the homebuilder's stocks are falling? It seems that as they are 'peaking' in housing starts, less homes are being purchased. Therefore, the inventory of new homes is steadily rising. This is all part of the nasty spiral.
We haven’t even touched on people who have used their homes as ATMs in the form of home equity loans to buy luxuries. Consumers, like the government, are over-extended in a sea of credit.
We seem to be lulled into a belief that homes never depreciate, which is simply not true. If you look at history, there have been major downturns in the housing market worldwide.
Taking these three factors into account and adding to it a strong possibility of a slowing economy and that spells disaster for the mortgage and banking industry. This might explain why the government passed new bankruptcy laws. No doubt they see it too.
A good book on this subject is by John Rubino, called "How To Profit From The Coming Real Estate Bust". His website is www.dollarcollapse.com.
Good luck.
Print
Email
