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[bbotcs]

lentinman:

I disagree that there is a housing bubble. I think that we are close to seeing a top in what is a normal real estate cycle.

If personal income does not increase at a rate sufficient to offset the increase in mortgage costs resulting from the %rate hikes, boom, Joe Blow can no longer afford to buy the house of his dreams. Housing at the moderate and lower price levels might actually continue to increase in cost, since people will be forced to trade down. For example, if Joe Blow no longer can qualify for a mortgage on that 3-bedroom house with a garage, he might have to go for something smaller,--say a townhouse or a condo. I think a leading indicator of this trend is the fact that the prices of resale condos have been rising for the past year. (I am not talking Florida or Arizona here, Len.)

There are going to be some sad sacks who will end up selling their residences for less than what they paid. That is the pits, but it is going to happen. Stocks aren't the only thing that you can buy at too high a price!


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