The bubble babble continues

Saw this article from Bank Rate:

Bubble watch: 10 cities that will top out
These bubble sitters have had a good run, but will likely see little more price increases. Job losses, affordability and available land are challenges for many of these towns.By Pat Curry
Washington, D.C.: The D.C. market ranks 10th on John Burns' list of markets facing a potential housing bubble, and home sellers in the metro market report that it's taking longer to sell than it did a year ago. Plus, builders are offering significant incentives to try to move inventory quickly. Fortune's survey suggests the market will decline slightly in 2007. Still, D.C. has a healthy economy and job market; Forbes ranks it fourth on its list of great places for business and a career. And where there is business, there are home buyers.
Fort Myers/Cape Coral, Fla.: Is it overvalued? Yes. Local Market Monitor reports annual housing appreciation of between 9% and 11% between 2001 and 2004 and then a 33% leap in 2005. Has the market topped out in housing appreciation? Not yet, but it can't absorb much more, say the real estate gurus. The market is still affordable and more reasonably priced than Sarasota (43% overvalued) to the north or Naples (a whopping 72% overvalued) to the south, but the amount of building in the market is staggering -- most of the country's major builders have strong presences in Lee County -- and land prices, once quite affordable, have increased as much as tenfold in recent years.
Chicago: The Midwest hasn't had the kind of dramatic price increases as cities on the two coasts and those in the Sun Belt. As such, Chicago isn't as susceptible to a pricing bubble as some of the other major urban areas of the country, the real estate pros say. However, the ratio of housing costs to income in the market far exceeds that of other markets in the state and job growth has been sluggish. "The big challenge in Chicago is work-force housing," Gollis says. "We're always looking at likely income growth and affordability growth or lack thereof."
Honolulu: Because of its remote location, Honolulu is tough to compare to anywhere else. After a drop-off in population in the 1990s, people have started returning to the island, Winzer says, creating a housing shortage that has contributed to rapid increases in housing prices. In 2003, the median price of an existing single-family home was $380,000, according to NAR. By the end of 2005, it was expected to be at $620,000. Currently, the economy on the island is good, Winzer says, driven by economic conditions in Japan. Fortune predicts a small, but realistic increase in values this year followed by a slight drop-off in 2007.
Tucson, Ariz.: Tucson's housing market is dwarfed by Phoenix -- new construction in Tucson is roughly one-fifth of the number of units built annually in Phoenix -- but it has joined its much-larger neighbor in attracting the attention of real estate investors. The NAR reported a 32% increase in appreciation over 12 months. The current pricing is about one-fourth higher than it should be, Local Market Monitor says. The pros look for the market to stabilize in 2006, with an increase that roughly tracks the inflation rate, increase this year, followed by a decline in pricing in 2007.
San Francisco: With a median home price of nearly $720,000 at the end of 2005, according to the NAR, San Francisco remains one of the country's most-expensive cities to live in, outpacing even Honolulu and New York City. Housing prices are unlikely to decline because of short supply -- surrounded by hills and its famed bay -- there's just nowhere else to build anything less expensive in the city. But realistically, there aren't that many people who can afford to buy at those prices, which should keep prices from going much higher.
Detroit: Detroit hasn't been on anyone's list of hot markets for a long time. In the most recent report from the NAR, The Motor City was one of only six metro markets in the country to show a decline in housing appreciation in the past year, with prices down about a half percent. It's a trend that Local Market Monitor has been tracking since 2001; annual price increases have dropped from 7% that year to just 2% in 2005. Fortune doesn't predict any better performance in the market through 2007. John Burns Real Estate Consulting actually gives the Detroit market its worst possible grade, an F, based largely on a large loss of jobs and the highest unemployment rate of any metro market in the state.
Minneapolis: Minneapolis made our list for a couple of reasons. In a year when the majority of metro markets showed double-digit increases in appreciation, it barely surpassed the rate of inflation, according to the NAR. And for the next two years, the prediction is that appreciation won't even see the left side of a decimal point.
Baltimore: Like its pricier neighbor to the south, Washington, D.C., Baltimore has seen double-digit increases in appreciation in recent years. But several reports indicate the market is overpriced compared to its history. Local Market Monitor indicates that prices are overvalued by 17%; Fortune's number crunchers forecast a slight increase in values for this year, followed by a small drop-off in 2007, perhaps signaling that prices have leveled off.
Denver: Gollis has been big on Denver for some time, seeing it as a market that went through a rough time -- it lost thousands of telecom jobs a few years back -- but it is returning to a level state. The market has caught the attention of national builders in recent years, there is major construction underway and the Stapleton Airport redevelopment is one of the largest projects of its kind in the nation. Yet the NAR reports that in a year when the vast majority of markets showed double-digit increases in appreciation, Denver's rate was 4.4%, and Local Market Monitor reports that it hasn't been above 5% since 2001. The good folks at Fortune predict that for the next couple of years, Denver's rate of appreciation won't see half that number.

News you can use

Here's a very interesting article from the Wall St. Journal:


Housing Bubble? The MarketWon't Pop, Expert Predicts
By Christopher C. Williams From Barron's
From his perch as president of Purchase, N.Y.- based Alpine Woods Capital Investors, Samuel Lieber sees slivers of sunshine stealing through the gloom enveloping the U.S. housing market.
Speculative buying has driven housing prices to nosebleed levels -- giving rise to fears that there's a bubble and that rising interest rates will be the pin that makes it explode.
But housing's fundamentals remain strong, argues Lieber, who directly manages or helps oversee some $3 billion of assets through nine mutual funds, including chart-topping Alpine U.S. Real Estate Equity, Alpine International Real Estate and Alpine Realty Income & Growth. The portfolio manager says that he won't retract his horns unless the job market tanks, and he sees little chance of that happening soon.
Based on his record, his opinion is worth heeding.
Eschewing pricey real-estate investment trusts for the most part, Lieber has guided the U.S. fund to an annualized 29% return in the past five years, through April 4, beating 99% of his rivals, according to Morningstar. His International offering was up 26% over five years, while Realty Income, managed by Robert Gadsden, is up 23% for that span.
Late last month, Lieber visited Barron's offices in New York, where condo prices are flattening. Drawing on 25 years of real-estate experience, including stints as a broker and urban planner, he discussed many topics, including the U.S. property market, what he views as blossoming investment opportunities in Hong Kong, Germany and Sweden, and some stocks to avoid.
Barron's: Thirty-year mortgages are still pretty low, interest rates aren't spiking; the economy is still relatively robust, and the job market remains solid. Yet we have this doom and gloom over housing. Is it that folks are just tired of a good thing after years of crazy growth?
Lieber: We've seen a number of [housing] cycles globally, and this one is not that different. We've just gone through a 14-year up cycle for housing, and prices were up because of supply-demand considerations. But, fundamentally, we'll get to a point where, all of a sudden, the market will say: "The Fed is basically done. They will go from a tightening mode to neutral." When that happens, the bond market will do well, and housing will start to take off again. That is going to happen, in all likelihood, within the next nine months.
How many more rate hikes will the Fed do?
At most, we're going to get two more moves. So rates get up to the 6 3/4% to 7% range on mortgages and, as a result, we think the market stabilizes. We do not expect to see a robust recovery, as we saw in 1995. But home-building stocks are trading at just 6 1/4; times earnings multiples, in spite of having had 35% annualized compounded earnings growth over the past seven years. We're going to go through a transition in which the market will look forward to sustainable earnings growth in the mid-teens over the next three to five years. The stocks will be revalued higher by 50% to 100%, in terms of their multiples, in 18 to 20 months.
So there's no housing bubble bursting?
We don't see a bubble. Historically, home prices just don't go down nationwide unless we are in a significant recession. The last time home prices fell nationwide was in 1990. It's employment that really counts. The underlying fundamentals of real estate are still very positive. Job creation and household formation drive housing.
How high can rates go before you'd consider them dangerous for housing?
An 8% mortgage rate would be a problem. My guess is that the Fed will stop short of crippling the housing market. They simply want to slow it down.

Second homes on the rise

Here's an interesting articled from USA Today that I'd like to share with those of your thinking about getting a second home.

Second Homes 40% of Market
By Noelle Knox, USA TODAY
Americans snapping up second homes — as investments or vacation properties — accounted for four out of every 10 sales of existing homes last year, a record that helped drive the real estate market to new highs, according to a report being released today by the National Association of Realtors.
Nearly 28% of homes bought last year were for investment purposes, and an additional 12% were vacation homes, the figures show. Most of the buyers were baby boomers in their top earning years, looking toward retirement and hoping to build wealth or find a more desirable place to live.
"Baby boomers are such a powerful economic force," said Dave Jenks, co-author of The Millionaire Real Estate Investor. "They're using their wealth to go buy second homes."
The typical investment buyer last year was 49 years old with annual income of $81,400. He or she paid $183,500 for the median-priced investment home, up 24% from 2004.
"Real estate, over the past five years, has outperformed virtually every other investment vehicle," said Ron Peltier, president and chief executive of HomeServices of America, the country's second-largest residential brokerage firm. "A lot of people have just speculated in real estate."
The trend really started after 1997, when Congress changed the tax code, allowing most homeowners to duck capital gains taxes when they sold their homes. The exemption is $500,000 for married couples, $250,000 for singles, if it was their primary residence for two of the past five years.
Under the old system, the only way to avoid the tax was to "roll" the gains into another home of equal or greater value. Americans bought bigger and costlier homes. But now, they can downsize and use the equity built up in their homes to buy second homes.
"That's what spurred all this on in the beginning," says David Lereah, the NAR's chief economist. "It's like all the stars are aligned. The tax situations helped, but at the same time, baby boomers were entering their peak earning years. That's why we just boomed in second homes."

Life stages

It was a great weekend this past weekend. The weather was wonderful and lots of people were out. I held two houses open this weekend and both had very good traffic. It was a busy Sunday for Donna and me. When I talked to people at the house I held open (3105 12th St.) most of them were buying for the first time but a few were people who were downsizing. There are many life stages to the home buying and selling process and at some point everyone who has a house or wants to buy one will experience one them. If you're buying for the first time and you're single or a new couple without children, your needs will be different from someone who's been married or partnered for a while with a couple of children. If all the children are grown and you've finally gotten them to move out of the house, your needs are different too. You're not likely to need the house with five b bedrooms, and three baths anymore. Whichever stage you're in currently, there's a home out there for you. If I can help you, please feel free to respond to this blog, go to my website atwww.angelajonesrealestate.com or call me on my cell at 202-494-6797.

BTW, I wish the Washington Post would stop with the gloom and doom articles about the housing market. The housing market is very brisk, people are buying and selling like crazy. Those who aren't buying probably never will so they'll complain about how high prices have gotten and awful the properties are because they're afraid. Fear keeps you stuck right were you are. Sometimes renting is better for awhile if you're trying to save for a down payment for a house, but there comes a time when you have to stop paying someone else's mortgage. It's a great time to be in real estate! Enjoy the rest of your day and remember you can rest when you die.