MM Money

Get Real About Real Estate

Excerpt: THE HOUSING MARKET HAS shown Herculean strength in the past few years. New home sales increased 0.2% in October, to the third-highest level ever, according to a recent Commerce Department report. That same month saw new home construction rise 6.4%, to the highest level of the year. But the furious rise in property prices during the past few years leaves some experts scratching their heads in befuddlement and others dropping the "b" word.

THE HOUSING MARKET HAS shown Herculean strength in the past few years. New home sales increased 0.2% in October, to the third-highest level ever, according to a recent Commerce Department report. That same month saw new home construction rise 6.4%, to the highest level of the year. But the furious rise in property prices during the past few years leaves some experts scratching their heads in befuddlement and others dropping the "b" word.
In his new book, "Bubbles and How to Survive Them," John Calverley analyzes some of the major market bubbles of the 20th century, and says that the U.S. is now in the early to middle stages of a housing bubble. Calverley, chief economist and strategist at American Express Bank, writes that there are clear signs of an already inflated housing bubble in the U.K., Australia and Spain. Modern economies, he argues, are increasingly dominated by bubbles in asset prices, be they tech shares circa 1999 or single-family homes today.

So what's driving home prices ever higher? On the demand side, it's low interest rates, relatively low unemployment, rising incomes and increased migration; on the supply side, new building is constrained by planning and zoning restrictions. Calverley also cites a crucial factor that plays into all bubbles — an expectation of future price increases. "In any asset market, whenever price appreciation becomes the main reason for people buying, the market is in danger of becoming a bubble," he writes. "We must suspect a bubble if homeowners are regarding housing primarily as an investment, rather than as a place to live."

Read Full Story ...

California, U.S. in a Housing 'Bubble,' UCLA Forecast Says (December 11, 2004)

21st-Century Landlords (December 10, 2004)

Can There Be Too Many Homeowners? (December 06, 2004)

Selling Your Home (December 06, 2004)

A New Way to Hedge Your Home's Paper Profit - Dec 12, 2004
California, U.S. in a Housing 'Bubble,' UCLA Forecast Says - Dec 11, 2004
21st-Century Landlords - Dec 10, 2004
Can There Be Too Many Homeowners? - Dec 06, 2004
Selling Your Home - Dec 06, 2004
Conforming Mortgage Loan Limits Rise For 2005 - Dec 04, 2004
12 Tips For Wise Use Of Equity - Dec 01, 2004
Housing Wealth Reverberates - Nov 30, 2004
More Mortgages To Be 'Conforming' - Nov 30, 2004
Realtors Engage In Turf Battle With Discounters - Nov 28, 2004
Expanding The American Dream Commitment - Nov 26, 2004
'Tis the Season to Fix Up Your House - Nov 26, 2004
Sell Your Home — Fast - Nov 26, 2004
Most Expensive Gated Communities In America 2004 - Nov 26, 2004
Exchanging Real Estate Tax Free - Nov 25, 2004
Home Equity For The Holidays? OK, With Caution. - Nov 25, 2004
Does It Pay To Save? - Nov 23, 2004
The High Earner/Poor Saver - Nov 20, 2004
Six-Figure Zip Codes - Nov 20, 2004
Buyer's Home Feature Preferences Reflect Lifestyles - Nov 16, 2004
Pattern of Strong Home-Price Gains Continues in Most Metro Areas - Nov 16, 2004