Real Estate is in a bubble in many of the hot real estate markets such as Miami, Las Vegas, New York City, and Southern California. These markets have become overextended due to rampant speculation and lower than normal borrow rates.

According to Barry Ritholtz of The Big Picture on the topic of mortgage rates:


According to Barry Ritholtz of The Big Picture on the topic of hot markets getting cold:


Chart I Housing Related Employment
Chart 2
Real Estate Agents


And as even more proof the market is being overly speculated even large homebuilders such as Toll Brothers are speculating on prebuild commodities as stated by CEO Robert Toll:


Finally, there are websites created strictly for Florida condo speculation. Condo Flip. These websites are made for flippers or people who buy and sell real estate quickly flipping for easy profits. Remind anyone of the Nasdaq Daytrading?

Therefore I believe this market is bound to cool.

Disclaimer: I am short some homebuilders in the stock market.

Is the real estate market in a bubble?
Where is real estate going in the next few years?

Is the real estate market in a bubble? Where is real estate going in the next few years?

Yes, I believe the real estate market is in a bubble. It is one of the reasons why I just recently sold my house and will rent for a couple of years. The Economist published a really informative article on the global (yes, global) housing market bubble a few weeks back. Some salient points in the article:

Couple the above analysis with record consumer debt, record trade deficit, record government debt, record deficit spending, a weak dollar and the picture seems...well...bleak for those who expect continued growth to offset their debts. Everything about this market is unique; thus, it is hard to predict based on historical precedent. Note that the fed continues to raise interest rates in the hope of a "soft" landing, but it is unclear if this will succeed. Also, Greenspan plans to retire before the end of the year which will inevitably make the market more "twitchy" than it otherwise would be. Personally, I think we're in for a bumpy ride in the near future.

There are definitely localized bubbles, lots of them. I hope it continues here in the Phoenix area until next spring, which is when we will sell and move to Logan, Utah, where the bubble is a lot slower growing. Our house is paid for, so the funds will be more than enough to build our retirement home, and maybe a new truck?
There are some places, tho, where you can buy a nice house cheap, but then you have to live there. Parts of Idaho are really depressed right now, and predicted to get worse.

Is the real estate market in a bubble?

These indicators do demonstrate some weaknesses in certain areas of our country. But I don't foresee those weaknesses bursting the bubble unless we experience a serious downturn in the economy. A bad recession could cause a number of these precarious loans to default, which would drive prices down. Our most recent recession was a mild one and it caused housing prices to level off for about a year here in San Jose.

Where is real estate going in the next few years?

Given that economic recessions seem to run about once a decade in our country, I would predict that the market will continue to rise overall for at least the next seven to ten years.

P.S. Don't bet the farm on my predictions.

I think logophage was smart to sell, and I hope to do the same within the next few months. The bubble has actually started to burst here in Vegas already. Houses aren't going for what they were this time last year. One trouble sign: A mortgage on a 2200 square foot house goes for about 2K a month here, whereas a rental in the same condition and size runs about 1.3 K.

I also predict that the stock market will drop pretty dramatically after this happens. The housing boom/ bubble is one of the major driving forces of the market today. People feel rich because they are sitting in expensive houses...many worth twice what they paid for them three years ago. So, they are in a happy spending mood. I wouldn't short anything, though, at this time (you're brave, nivekelly). The housing market is far from uniform, and house values are still going up in places like Phoenix. The tech market went up about 10 times my expectations before it plummeted 20 times more than I expected it to (I'm still sitting on some Nortel shares that I owned at 100 six years ago...it's less than 3 now). Hard to accurately predict the psychology of the market. I think rolling the bones on commodities (preferably via a commodities index fund) is a safer bet, while we are throwing out predictions.

I am in Real Estate investment, and follow the markets locally and nationally with great interest!

Some markets are anti-cyclical to the US economy- namely oil states- as those states revenues are increased by high oil prices, the rest of the nation is hurting. Think Wyoming, Texas and Alaska. Hawaii, for some reason, is also anti-cyclical for some reason, and I don't know why? - I sold my giant white elephant house for a 200% profit and bought my new, smaller, more cozy house that my wife enjoys much more LOL- and paid for it almost completely. -

In a capitalist society, you have ups and downs- the key to success is correctly guessing both- and I don't feel it will be a national deal, like I said, some markets are anti-cyclical, and Alaska is one.

I was here during Alaska's greatest crash, "the super bubble burst" - a perfect storm for losing your shirt in the 80s. I did well during that time, because I saw it coming and was very liquid at the right time.

The key is to NEVER over leverage if you can help it- don't be too tempted by the "no money down" stuff- I never leverage more than 80% of any building.

Alaska has an enormous population growth, and it is not going away no matter what the rest of the US does, so we will do fine.

I think it all depends on the area. My area has had even the Federal Reserve Vice Chairman assures us that a bubble is less likely to occur.

I also feel my even more local area's condition's play a role too. I live in a water community meaning I have access to the Chesapeake Bay and there are no lots left for development in my neighborhood. We get invites in the mail weekly to consider selling our home for the land. We also have a great school system with a excellent reputation and my community is positioned ..geographically we are surrounded by water..in such a way that it just isn't possible to wake up and find out a massive new development...commercial or residential is going up next to you. My county is also very strict in how it approaches and permits new development residential and commerical for example..we don't have a WalMart, a Kmart or even a Target in the entire county. This makes the market tight.

Then we have just had the Fed. gov reorganize and locate a gob of jobs to the already largest federal employment location in my state. The federal government is big in my area..we have Andrews AFB, Fort Meade and the Navy Academy. Then in regards to state gov we are the capitol of MD.

There are also plans to extend the DC metro out to Fort Meade too


I dunno I bought this house in to live in for a good long time. Yet I think looking at the 1.8 million dollar homes being built on the water in my neighborhood and knowing I paid one of the lowest prices for my home in the past yr in my neighborhood. I feel very confident about my purchase. But mostly I am just happy to be living here and I am glad we made the move before we got priced out.

Is the real estate market in a bubble? Where is real estate going in the next few years?

Heading that way, but not there yet IMO. Housing prices have increased more last year than any time in history. If the rate of increases are going up still, that is an indication that a crash is a bit of a ways away. There are some scary indicators but these are relatively new. There has been a two year influx in second home sales. Interest rates are just now ticking back up. The interest only loan becoming more common is fairly new too.

I don't see a national crash for at least 4 years, and even then I don't predict anything close to the tech market crash because the base indicators are still improving(just not at 12%). Land is still a fixed commodity. The US population is still increasing. Life expectancy is still high. Divorce rates are not dropping(separate spaces for husband and wife creates demand). Officially mark me in the optimist column. As long as the base indicators remain heading in the right direction, the coming housing crash is going to be merely a dip. Sure there will be pockets that are hit hard. I see a 15% readjustment at most when it happens though.

Is the real estate market in a bubble? Where is real estate going in the next few years?

To what degree are housing reports accurate, and to what degree are they propaganda designed to attract more investments?

I see all kinds of housing development going on in the Muskegon, Michigan area, but I see no new jobs. I see that Sappi Fine Paper Products, the paper mill in our area, is cutting out 2,500 jobs that are being outsourced. I see that the Brunswick Company (bowling balls, etc.), a staple for many many years in this community, is also shedding jobs. The only jobs I see staying here are in retail or fast food.

How are people supposed to buy homes and continue to make payments when the good-paying jobs are gone? Are there just investors buying these houses, or are there actual families who plan on buying them and staying in the community?

I think it's a bubble, at least around here.

Here in Florida the housing market is insane. There aren't enough college graduates to fill all the jobs. The same can be said in North Carolina. Parts of the US are booming. Air Conditioning has saved the South.

1.) Not as a whole, I think there are localized hot spots and regional bubbles. For instance, to buy the cheapest lot of property in our community you must have... well, an excess of... er... millions. The property itself and the development in some areas is extremely bubbleized. I do not think there is a single light in the distance for this debate, the market for homes is suffering because of several factors beyond regulation or control.

2.) I would have to consult my crystal ball.

I have to disagree with you when you say that the market for homes is beyond regulation. The fed chairman Greenspan is actually working on popping the housing bubble by raising interest rates. This is indeed control and it will work. When rates go higher and it costs real estate investors more money to borrow investment capital, they are indeed going to slow down or pop the bubble. It's simple logic...the main reason real estate took off was because of the low rates.