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Recovery helps to set up “seller’s market” full of gains.
It's a bubble created by the Federal Reserve. Stock market bubble, bond price (low interest rates) bubble, housing price bubble, it is all going to crash. Anyone should be able to see it coming. When the Federal Reserve prints $85 billion per month--TRILLIONS since Obama took office--and uses it to artificially inflate asset values, what happens when the Fed pulls the plug and ends the program? Look at what happened to the stock market last week to find out.
"Bubble"? Despite the gains we are still below 2005/2007 values--Real jobs are coming out of this "bubble", and real people's lives are being drastically improved from this "bubble", and renters are paying far less for a home that they own and can easily afford---in many cases paying far less than rent with generally far more space and in a much better environment for their families. And many are moving up to an even better environment from this "bubble". This horrible "bubble"---can't you see that improving lives is BAD!
"And many are moving up to an even better environment from this "bubble"." -- And if this "bubble" bursts what then? Before the first bubble burst people thought that was great also.
I find it funny that a house which cost $300k in 2004, and was down to $200k by 2011 now being worth $250k is being called a bubble. :-)
The thing is, I doubt you could build a new home of similar quality for less than $300k today. So we're still in recovery, it's gone up steeply this year but will eventually level out when home prices reach a level people aren't loosing money when they sell, or new construction is considered a competitive alternative. At that point more people will be willing to sell, and more builders will be out looking for buyers.
This is a very tricky market to judge, since there has been so much effort put into manipulating it, and there are so many competing interests here.
The banks are being subsidized by the Federal Reserve and the federal government to keep a huge number of houses off the market (could be as few as 1.4 million; could be as many as 7 million). The foreclosure process is frozen, with people living in their houses an average of 2 years and 8 months without paying before being evicted, and that average increases by 10 days every month. For homeowners trying to negotiate modifications, banks are selling the mortgages to Fannie and Freddie, pocketing the monthly payments, and reporting the loans they no longer own as being delinquent (I have two friends this is happening to).
On top of that, prices got so far out of hand that we really don't have a good, sound, basis to compare to.
One useful rule of thumb is that since about the 1880s, the median house sale price has been about 2.5x the median household income. That fluctuates with the economy, interest rates; all kinds of things. It's a very "broad brush" rule of thumb. Today the US median household income is about $50,000. In the Twin Cities, it's over $60,000. That would extend out to a median house sale price of about $125,000 nationally, or $150,000 in the Twin Cities. At those prices, the housing market can be healthy and stable. But at those prices, anybody who bought since about 1998 can't sell. That's how badly the manipulation of the housing finance sector, designed to loot the bond market via unregulated derivatives, has damaged our entire economy.
Still, I'm very glad to see things moving in the "right" direction, even though I believe we have a very long way to go before the housing sector, and the overall economy, are on sound footing. And a lot of very powerful elite interests are not going to let that health be restored without a fight, as they've got it all their way right now.
First off is the market getting better, sure, for now. In 1999 i would have bought a house too if the interest was 3%, my dad paid 8% in 1956. The Feds created the boom buy bond buying to the tune of 85 billion a month which is propping up the markets and keeping interest rates artificially low driving the housing market. Once the feds pull the plug its double dip time. Just the mere mention of slowing the stimulous sent stocks down 700 points in 3 days. And im calling BS on the 14% i see our house value every year it's maybe gone up 5 percent.
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