Is there a Real Estate Bubble in the U.S. right now? Will this lead to a Recession or to a feared Depression?

Answer 1

I blame the banks for financing Milllion dollar homes to people that make 100K a year ! We need to regulate loans more. Banks are just Greeedy

Answer 2

An annual survey that goes back a long time shows that 77 metro areas were up, 79 areas were down and 8 had no change. This means that if prices are falling they are doing so in less than half of the cities surveyed.

Take a look at my blog. Go to the following post and check the graphs. You will see that some cities have not had a bubble and are not that likely to fall as a result. There are some cities that are down but were never up. There are some cities that spiked dramatically and they are seeing falling prices.

Even in California the downward pressure is mostly in the Southern CA areas that had rapid appreciation. Parts of Northern CA were up last year (mildly but still up).

Prices are a local event. When Detroit has years of falling employment they see falling house prices. Similar for Buffalo NY. Some regions of the US are still waiting for the bubble to arrive.

Answer 3

Real Estate is rapidly falling. 1 of 8 homes in California are in foreclosure now. Int rest rates are on the rise because of it and the stock market is falling short, but I don't believe we will have a depression over the RE market.
Real Estate does not make up a huge portion of our national economy and not alot of traditional banks gave out those subprime loans.

Answer 4

I don't think there is a bubble in the real estate market. I think there is a bubble in the financing market. They are not making any more land or natural resources to support the building of new homes, that is limited, but they continue to make babies.
The current fixation on the so called real estate market bubble is misunderstood and is due mainly because greedy financiers decided that the old conservative ways of doing business in the residential loan market just wasn't making them enough money. So they decided to break from tradition and begin to loan too much money to people who had no business borrowing such great amounts with such low qualifications to borrow. It got to that even a cheese sandwich could qualify.
They did this also by luring unsuspecting buyers with teaser rates (adjustable mortgages) so that they could qualify for the lower payments. Now those adjustables are adjusting to monthly payments and such ridiculous interest rates, that these poor unsuspecting borrowers can not afford them and consequently can not make the payments and are loosing their homes. (go see National Home Recovery Program for foreclosures http://www.nhrp.com/ )
This increases the supply of homes above where it should be and in a supply and demand economic system the market will adjust the supply by lowering the prices.
However due to the greed results, now the money is not coming back in to the lenders and there is less money to lend and given the results of this greed result, the feds are now looking at all these lenders that might go bankrupt to see how they did what they did and how they also fooled the secondary market into buying these loans that are now defaulting. ( go see Predatory Lending information from ABA: http://www.aba.com/Consumer+Connection/CNC_pred1.htm and FDIC Emerging issues in Banking: http://www.fdic.gov/bank/analytical/fyi/2003/091703fyi.html
Mortgage Loan Fraud a report http://www.fincen.gov/MortgageLoanFraud.pdf )
To avoid being singled out by the federal investigations into these loans most lenders are now tightening the qualification requirements so less people will qualify for the increased inventory of homes.
Given the results of the greed, now the companies that not only did these loans but those other lenders who bought these loans for the expected super high yields are loosing money and consequently the trust of investors in the stock market, sending their stocks to the floor.
What does it all means simple:
1.) More homes available on the market and this inventory will have to be reduced before new construction begins again. Less construction jobs. Consequently less spending by the lower to middle income class less profits to retailers and manufacturers.
2.) Need to recover the moneys lent, rapidly, on foreclosures, and these homes will need to be sold at discounts. These discounts will mean less of the money lent out will come back and the lenders will have to put out more money from their reserves to make up for the difference, meaning less profits for the lenders less job opportunities and pay increases in the lending industry.
3.) As these discounts are reported the appraisers are governed by the federal rules of appraising and given the over supply and lower prices, will have to lower their opinions on value of homes in areas affected by these substantial # of foreclosures and tightening of loan qualification rules. (go see 2006 Market-by-Market Home Price Analysis Reports from National Association of REALTORS®:
http://www.realtor.org/Research.nsf/pages/MetroHomePriceAnalysisReports?OpenDocument )

Over all I see inflation.

The cost of money needless to say will get higher, either through a rise of rates or the lowering of the values of existing homes until the inventory is reduced. This will mean less money will be spent and less work for the servicing industry will be available.
We should be out of it by mid 2009.
If you think this is gloom you ought to see the Mayan Calendar lol.
Buena Suerte

Answer 5

Yes, but its been slowly deflating....rather than popping!

Answer 6

maybe another couple of years