Zeev's Turnips Patch-No Politics (ZEEV)

[Ken2]

Zeev and others,

Do we have a Real Estate bubble about to burst or is that just another irrational fear?

I have heard from various sources that Real Estate is a bubble and due for a sharp drop. Reasons: National Debt, Consumer Debt, rising interest rates plus Adjustable Rate Mortgages, unemployment, etc. Add to that the hanky panky at FNM and FRE. Is there a derivatives problem that could easily rock the US economy?

On the one hand, it sounds similar to the Y2K hype of coming disaster, but on the other hand, the arguments seem valid. Both FRE and FNM have dropped sharply recently. Is that just the first salvo in a major dive? Consumers are over-extended and likely to be hurt when interest rates rise, especially if the employment picture doesn't improve. I am surprised at how many people are choosing ARMs instead of locking in these low rates with a 30yr fixed.

I am surprised I didn't see a discussion of FNM in September when it dropped almost 15%. Now that the election is behind us and we know who will be in the White House for the next four years, I would appreciate hearing thoughts on the economy related to real estate prices over the next few years.

TIA - Ken