Report: Housing Bubble Fears May Not Be Unfounded


This is a case of any housing bubble that builds will probably be localized and not a threat to the nation. California seems to be the most likely suspect for this trend with San Francisco leading the way. For a more detailed look at this subject – please read the article below.

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Fitch Ratings Wednesday stated unabashedly a fear that has been whispered across the industry for the past several months—a looming bubble in some markets.

National home prices are 17 percent overvalued, and current levels of price appreciation in some areas of the country are unsustainable, according to Fitch.

“Fitch identifies a bubble risk in continuing price rises and sees several factors which could halt or even reverse recent gains in the market,” Fitch stated in its quarterly U.S. RMBS Sustainable Home Price and Economic Risk Factor Report released Wednesday.

Rising prices and interest rates threaten affordability, and investors may be creating an illusion of demand that does not exist.

“Having avoided the worst of the downturn, but participating fully in the drastic growth of the past year, much of coastal California is now approaching the peaks of home prices seen during the expansionary bubble of the early 2000s,” Fitch said.

Fitch identified the San Francisco Bay Area as experiencing “the largest unchecked growth” in the nation. If prices continue their current rate of appreciation, they will “eclipse 2006 levels within six months,” Fitch stated.

Prices are already 30 percent overvalued in the region, according to Fitch.

Furthermore, Fitch points out investors have contributed considerably to recent buying activity. In fact, cash purchases—often an indicator of investor activity—is almost 50 percent in the Bay Area.

To read the complete article – please use the link below.

Housing Bubble Fears

Explore posts in the same categories: Real Estate Market Trends

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