Housing Bubble, What Housing Bubble

 

The nay sayer’s, otherwise known as those who know nothing and love to predict doom on the premise that all good things must come to an end, predicted 2005 was the end of the housing boom in the US. They would have been wrong. However, the red-hot market keeps getting hotter.

And it’s not just in Florida and Connecticut. The government reported Tuesday that purchases of new single-family homes shot up 12.2 percent in March, the biggest percentage gain in more than a decade. The big gain pushed sales to an annual rate of 1.43 million units, the highest in history and well past the 1.3 million rate set last October.

The March surge surprised analysts. They had been forecasting sales would decline around 2 percent last month, reflecting the rise in mortgage rates during the month. The 30-year mortgage rose at the end of March to 6.04 percent, the high so far this year.

But now rates have turned back down again, a development that many economists believe will support further gains in home sales in coming months.

A nationwide survey done by Freddie Mac showed rates on 30-year, fixed-rate mortgages have fallen for three straight weeks to 5.8 percent last week, very close to their low for the year of 5.57 percent in early February

What analyst do not take into account is that fact that rising incremental interest rates are not worrying the American public. There are those that owned homes or remember their parents owning back in the late 70′s when there were double digit interest rates that fluctuated like a Geiger counter measuring a California earthquake. Also the fact that more people have access to mortgages and home ownership than ever before. Blacks and Hispanics are at unprecedented home ownership.

I think what many analysts miss is the following:
Home ownership is not only looked upon as a great asset and form of investment. Home ownership is still one of the great American Dreams.

Posted April 27, 2005 by
Business | 2 comments


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  • Comments

    2 Responses to “Housing Bubble, What Housing Bubble”

    1. Tomahawk on April 27th, 2005 8:45 am

      I would agree that the naysayers pointing to a housing bubble burst are way off base. However, I do think that in certain areas of the US, the bubble will burst. In Florida, there are at least 3 counties where the housing bubble cannot expand any further without prices beginning to stagnate, if not fall. I am talking about nearly 100% built on counties, that have been this way for more than a decade, and who have now priced families out of the area. As the tax base shrinks, and the pool of buyers shrinks in those communities, the housing boom will move north, south, east or west…so I think that the “bust” many have predicted will never take place, but in certain localities, it will.

    2. Red on April 27th, 2005 9:57 am

      Tomahawk,

      There are of course some areas where saturation finally catches up; however, the nay sayers have been predicting this since 2003-2004. They almost go off the idea that because it has been so profitable, it must end “just because”.

      There are parts of the country that are completely untapped which make up for the parts that have been exhausted. Here’s a nice sports comparison. Its similar to a basketball game, it doesn’t matter who scores how many points a typical team on a typical night will score 98 points.

      Up here in NE there is no end in site. Has the rate of return lowered a little, sure. But having a 43% rate of return on the resale of property in 2 years isn’t shabby. There are areas near us that have increased 400% over the past 10 years.

      There is always a bigger and better place to live in the US. We are a transient society in employment and housing. Gone are the days of buying a home and living in it for 30 years as our parents and grandparents did.

      What annoys me of the nay sayers is that one day they may be right and they will take credit for saying so forgetting the fact that they had predicted the same gloom & doom for the past 20 years.

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