Monday, February 25, 2013

Housing bubble? Define bubble...

Is Rebound in Housing Creating Another Bubble?

I have to admit, I've been thinking there's a bit of a bubble in housing.  After watching this video, I guess it really boils down to your definition of a bubble.  Home prices are up, which is good, but they never really got back down to the long-term trend.  And I've actually seen people complaining that 6% or 8% rise in home prices in a year isn't good enough. The truth is that the real estate market is being manipulated.  It is artificially high.  But, it could be okay this time because there's not the same air of speculation going on that there was a few years ago.  Still, home prices have been propped up by the Fed, as well as the federal government, and given that the federal government is trying to find places to cut spending, I might be a bit leery of their continued support of the housing market.  And what would happen if there were no deduction for mortgage interest?  With that deduction, the rent vs. buy decision may favor buying, but take that deduction away and does it still?  I don't know.  I don't expect anything bad in housing soon, but it wouldn't really surprise me to see a substantial drop in a couple of years, and maybe sooner depending on how the spending debate goes in Washington.

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