CNN Real Estate Bubble update

[Phoebe Loosinhouse]

http://money.cnn.com/2006/05/03/news/economy/realestateguide_fortune/index.htm?cnn=yes

I thought this was pretty good reporting and all of the links within the article are very interesting.

Don't miss

Welcome to the dead zone
Unmaking the myths of the housing boom
Who will be hurt the most?

[benburch]

1. I bought my house in '83 for $49,500

And I have never assumed that it was worth more than that, or gotten equity financing on its "market value".

So, when the bubble bursts, I ought to be OK.

[Warpy]

4. You did the right thing, although I sincerely hope

you refinanced it when interest rates finally fell below 6% (or even 8%).

I bought this disaster of a house in 96 and it's appreciated 140% on paper, but I've never considered it worth a cent more than I paid for it. It's paid off and there's no way I'm going to use it to incur more debt.

The people who will be badly hurt are the young families desperate for space who took on interest only and balloon mortgages just to get their foot in the door. Others who will be hurt are the speculators, people who traded up to bigger pieces of property every couple of years on paper profits and will now be stuck with a big debt on an unsalable house.

It's hard not to feel sorry about the smart young things who did what the culture told them to do. I'm afraid times are about to become very tough for them.

[benburch]

5. Well, the bad news is its on a 3 year ARM

The good news is that the ARM is quite cheap now (I pay $400 a month), and even if it goes limit up for he next several times I can still afford it.

I wish I could have refinanced recently, but being mostly unemployed since 2000 made that difficult.

[Warpy]

6. I hear that

Refinancing was next on my list when I had to drop everything and leave town to care for my parents. A 15 year mortgate at 5.5% would've been what I'd have done.

[Gregorian]

2. I think they missed a few things.

It is my opinion that the "war" in the Middle East has contributed to a broad spectrum of economic growth. Now we cannot keep dropping bombs forever. There is huge debt. And the price of oil is hidden in literally everything. And it isn't going back down.

There is demand for housing, but population growth in this country is not high.

But who knows where the housing prices will go. I don't see them going up. And even though I am actively selling my property, and would dearly like to make enough to buy that next place, high housing prices are one of the worst things that have ever happened to this country.

[WestSeattle2]

3. Still waiting....

They've been forecasting a collapse of San Francisco pricing for 30 years. They've been forecasting a "correction" in Seattle prices for 10 years.

These cities have two things in common. They are surrounded by water, limiting the amount of land available for building in the city limits. They are not like Dallas, LA, or Vegas.

Unfortunately, San Francisco has turned into a uber rich and upper middle class "only" city. Middle and lower classes have been forced over to Oakland, or you see 3-4-5 or more roommates per home. While that can be annoying in a college frat house, it really sucks to still be living like that in your 40's.

We see the same thing happening in Seattle, where we are about 10-15 years behind SF in pricing. Our middle and lower classes are being forced south to South King County, and Tacoma\Pierce County.

The downtown core is filling up with uber rich and DINKS. The neighborhoods are still holding tight with mostly middle class, but many of those are being forced out by skyrocketing property taxes, and DINKS are moving in. Seattle schools have seen a dramatic drop in enrollment, has families move out to more affordable cities.

On my street with 24 homes, just 3 have children. That speaks volumes.