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Housing Market?

Why is the housing market suddenly so hot that it is pricing the middle-income family right out of becoming homeowners? The southeast has 3-4 bedroom homes that several years ago sold for $200K now selling for $900K! When is this trend going to shift back into affordable housing?

Public Comments

1. Many experts think that the United States is experiencing a nationwide "Real Estate Bubble" similar to the "Internet Bubble" that the stock market experienced a few years ago. Extremely low mortgage interest rates have fueled a real estate market in which demand has outpaced supply in many parts of the country. This has led to rising home prices. Low mortgage rates have enabled many people to buy homes that were previously priced out of the market. Many people found that they were able to "buy up". They found that they were able to sell a smaller home and move up to a larger house for the same or slightly higher monthly mortgage payment. In addition, real estate speculators entered the market and began buying properties anticipating that they could quidkly resell them at a profit. This same scenario played out in Southern California over a period of time beginning in the mid 1980's. When the bubble burst and residential property values plummeted, many people found that they had paid far more for their homes than they could then get out of them. At this time, we are starting to see this take place on a nationwide basis. Mortgage interest rates have been slowly rising for the last couple of years. So far, these increases have not significantly slowed the real estate market. Many economists think that we are getting close to the point of "critical mass" at which time higher interest rates will have a devastating effect on the real estate market. The number of new housing starts is down on a nationwide basis and we are beginning to see the market soften in some geographical areas. I am optimistic by nature, but I also remember the cyclical housing markets of the 1970's and the near nationwide shutdown of the housing market during the Carter Administration when mortgage interest rates approached 20%. While I don't see that kind of catastrophic scenario playing out in the near future, I do think it is a time to be prudent in real estate investing. In the end, my advice is to save as much cash as you can. When this market changes from a "sellers" to a "buyers" market, he who has the cash will be in a great position to make the best deal in real estate. Can't, or don't want to wait ... do your homework before buying. Search out the "deal of your dreams" ... not necessarily the "house of your dreams" and your investment will likely pay dividends. Good luck with your real estate investments.