July 2005 The Allstate Lending Group Update is sent to you as a free news service providing information regarding the Mortgage Industry, Refinancing, and Company Information. Don't forget to forward to your colleagues. In this issue... Housing bubble or no housing bubble? That is the big question. This issue explores the differing opinions of whether we are in a housing bubble or not. The following are industry articles analyzing the housing market and where it’s headed.
Feature Article :. An Overblown Bubble By James K. Glassman, Scripps Howard News Service, June 13, 2005 It's rare that Alan Greenspan, the man who guards the sanctity of the dollar, speaks in Congress on a subject that most Americans understand and truly care about. He did last week when he addressed real estate. Freddie Mac, a major provider of the money for mortgage lending, just reported that home prices rose at an annual rate of 9.6 percent in the first quarter of the year. The big question on America's collective mind is whether there's a bubble, that is, have home prices, driven by the low cost of borrowing (the average 30-year mortgage is just 5.56 percent), soared so much that, like the prices of high-tech shares in 2000, they will come crashing down? Greenspan said that he didn't think there was a national bubble but that "signs of froth in some local markets" had appeared. A recent study of 142 metropolitan areas by Economy.com concurs. It compared actual prices with what the local market should have been able to bear based on personal income, interest rates, building costs and supply. U.S. housing, on average, turned out to be overvalued a bit, but some specific markets were "highly overpriced," including (in order) Las Vegas, Washington, D.C., West Palm Beach-Boca Raton, Fla., and, in California, Riverside-San Bernardino and Sacramento. Continue Article Recent News :. Top 10 Reasons Why the Northern California Housing Bubble Won't Burst By Ed Krafchow, RISMedia Real Estate Magazine, June 13, 2005 In the many years that I have observed this industry, we have never been in a more peculiar time. Everyone is abuzz over the steadily increasing cost of the Northern California housing market, up 68% since March 2004 according to the most recent CAR (California Association of Realtors) statistics. Cable channel prognosticators, spoon-fed by pundits from the stock brokerage industry, love to manufacture news of a pending real estate bust. But, there is very little evidence of a bubble in the Northern California market. This market still suffers from a significant housing deficit and mortgage interest rates are still at 40-year historic lows. So, you figure it out-where's the bubble when housing supply can't meet demand and money's as cheap as it's been in a generation? I'm not forecasting the national market, but Northern California is my backyard. Here are 10 reasons why this market is not a bubble waiting to burst. 10. Lack of integrity in the stock market 9. We don't have a housing boom, we have a buyer boom 8. Emerging markets and cultural diversity 7. Unique household formation 6. Cheap and cheaper money 5. Intergenerational transference 4. The Boomers 3. The intellectual capital of the Bay Area 2. Positive government influence 1. You can't live in a stock portfolio! While there is no Northern California bubble about to burst, I do know that real estate markets are seasonal and cyclical. The CAR Housing Affordability Index fell six points to just 19% of the state's households compared to a year ago, and the median number of days it took to sell a single-family home was 31 days in March 2005, compared with 25 days for the same period last year. So, while those stats may not signal a cyclical change, they may indicate that a subtle shift is occurring in the market. Stay tuned and good sailing. In the Spotlight :. UCLA Economists Still See a Bubble in Housing Market By Annette Haddad, UCLA Anderson Forecast, June 21, 2005 California's economy has long benefited from the surging housing market, while economists at UCLA Anderson Forecast have long warned that the wave will eventually break. In their latest quarterly forecast, to be released today, the UCLA forecasters once again predict that a housing slowdown could push California into recession, while causing a noticeable slowing in U.S. economic growth. Read Full Article Expert's Point of View :. Real estate experts address O.C. market: Recent reports show homes in Southern California continue to gain value; downturn not likely By Andrew Edwards, Newport Beach Daily Pilot, June 27, 2005 As home prices around Newport-Mesa and the rest of California continue to rise, homeowners want to know if their property values are sitting on a bubble that's waiting to burst. Until the market plays itself out, different people are ready with different answers to the bubble question, which was addressed at multiple conferences around Southern California this past week. Read Article If you have more questions about the advantages and benefits refinancing can do for you, consult with one our refinancing professionals. Contact an expert at Allstate Lending Group at 1-800-648-5363 or visit www.allstatelendinggroup.com. You have received a copy of the Allstate Lending Group Update. If you’d like to be removed, please link hereremove@allstatelg.com. . |
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