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I doubt the RE bubble will suddenly pop, but it is unquestionably losing
air. Sort of like a car tire with a slow leak with no cheap air to fill
it back up. There might come a tipping point at which the bubble starts
losing air much faster, because there's no cheap money to purchase or
refinance. We're just seeing the beginning of problems which are likely
to get worse. Not all markets will deflate at the same rate, because of
local, geographical and other factors. However, all markets are
vulnerable. We could see a pronounced domino effect if things worsen
quickly.
Another huge consideration for properties vulnerable to hurricanes is
insurance cost and even insurance availability. If you live in a high
risk area, and you cannot get insurance or are forced to pay skyrocketing
premiums, this will seriously drive prices down. This should be a big
concern for buyers of Florida property in particular. Katrina
insurance lawsuits working their way throuh the courts will have far
reaching consequences.
This is a time to be cautious. The old investment paradigms do not work
like they used to. The greater fool theory of RE sales is no longer
valid. (This is the concept that suggests no matter how much you pay,
or over-pay, for real estate or Beanie Babies, there will always be a
greater fool to buy at an even higher price down the road. My fear is
that we're near the end of this road.) Bob
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Re: Why no posts about the "elephant" in the room?
