Has Housing Bubble Sprung A Leak? Experts: Don't Count On Property Values Rising POSTED: 5:34 pm PDT August 9, 2005 UPDATED: 9:15 pm PDT August 9, 2005
SAN DIEGO -- Housing experts say recent buyers who used low-interest or interest-only loans to buy houses that were previously above their reach could be in for a rude shock.
Industry analysts like the New York Times' Paul Krugman say prices could start to fall. He and others point to markets like San Diego where the rise in prices has slowed dramatically.
The number of single-family homes on the market has doubled in San Diego in the last year. There are fewer buyers and the average time it takes to sell a home has also doubled.
Signs of slowdown mean people counting on their property values to rise could be out of luck.
"Home prices have accelerated at a rate far faster than household income and this has increased concerns there may be a bubble out there," said Greg McBride, Senior Financial Analyst at Bankrate.com. "The fact that homes may take longer to sell and the fact that mortgage rates may go up could throw cold water on what's currently a very hot housing market."
San Diego is not the only trouble spot. Analysts say New York, Boston and Washington, D.C., are also risky markets where speculative fever may have inflated prices.
Some housing experts say there is simply too much demand for prices to drop, however. University of San Diego Economist Alan Gin said the median house price is still up 6.25 percent from last year.
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