Real Estate Bounce Setting Up a Second Crash

Home prices are rising at the fastest pace since before the real estate crash, according to the Case-Shiller Index.  Data for January showed a 10-city composite up 7.3% over the last 12 months and a 20-city index gaining 8.1%.  A bullish sign for the housing market?  More like a death rattle, we’d say.  In our estimation, the collapse in residential real estate prices begun in 2007 is only halfway to a bottom, implying that valuations will eventually fall a further 35% from their 2007 peaks.  Check out the Mountain View, CA home pictured below if you want to know why, even after the real estate collapse of 2007-09, California home prices in particular are still egregiously out of line with incomes. We rented this house from 1995-1999 for about $2400/month before moving to Colorado like so many other Californians seeking twice as much home for half the price.  The three-bedroom rancher was worth about $525,000 at the time, and we wondered who would be so foolish to buy it at that price. With just 1150 square feet of usable space and a small back yard, it had sat unimproved since 1952, when it sold new for around $12,000. The only feature in the house that might be considered an upgrade was the quiet-flush toilet in the half-bathroom. Otherwise, fixtures, carpets and structure were original and well worn. Termites could be heard munching on the garage.(…)
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© Rick Ackerman and www.rickackerman.com, 2013. |
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