Housing: Boom Or Bust?

cbs ^ | 5-16-05

[LouAvul]

Disappointed by the stock market and by mutual funds, Washington architect Joe Wnuk wanted to redesign his retirement accounts. So he decided to move some of his money into real estate. He's looking to buy a second home.

"The increases haven't been as substantially as I would like them to be,'' he says of Wall Street.

In Washington right now, Wnuk says, housing is just too tempting as an investment.

In Washington, the median home price has risen 69 percent in the past three years. Stocks, by comparison, have risen less than 10 percent in the same time.

As CBS News Correspondent Anthony Mason reports, Americans are buying second homes in record numbers. Last year nearly a quarter of all homes sold were bought for investment purposes.

"The second home market is surging," says David LeReah, chief economist with the National Association of Realtors.

He says the boom has been fueled by baby boomers. But in some red-hot markets, he says, speculators are now driving up housing prices.

"So there certainly is some risk," says LeReah. "There are certainly some pockets where they may be more vulnerable to a price bubble bursting than other areas of the country because of the speculative element."

[superiorslots]

On another site a guy mentioned that the homes in his area were 165K 8-10 years ago and are now $700K. This is unbeleievable.

All it takes is a group of homeowners thinking the price is going to come down and put their homes on the market. Everyone else will follow and it will be like a run on the bank.
It does not matter if you have a fixed mortgage or not. If you paid $700k for your house and 2 years later it's worth 450K How do you get out of that one???

[superiorslots]

Rick
The problem that I have with your statement is who are the people that are going to be able to afford property tax on a home that increases 69% in 3 years.
Also wages have not been going up fast enough for many people to buy a 400k house...especially new ariving immigrants