that residential real estate prices will probably come down most places.
How fast is the issue. If they come down in a hurry,10 year and longer interest rates will rise dramatically because people will be less willing to lend money on declining equity.This all will end the inversion of the yield curve (which is a symptom, not the problem).
The problem is the quite possible decline in real estate equity, hurting lots of folks and reducing America's piggy bank,which fuels much of our consumer spending.
"I'd prefer to let the pros define what is a bubble and what is a bust. In most of the USA no bubble exists. That is the fact."
surely you must see the comedy in the contradiction? :-)
truth is general labels without objective and measurable definition are more or less worthless. Your declaration of "overpriced" really isn't much different than the "bubble" term that set you off.
Rather than quibbling over labels, I'd suggest real property ownership can be best viewed in the context of two things: the cost of renting equivalent property, and the relationship between the cost of ownership and mean incomes.
While it's true that by the nature of real estate, local and regional markets can and do move independent of one another, that does not necessarily mean there can't be an overarching national trend or a definition suitable of describing that overarching market. As it turns out ALL regions and virtually all major metropolitcan markets currently have divergence between cost of rental and ownership. The Wall Street Journal ran a piece in March (with a table I can't reproduce) that showed the rent/own ratio at less than 1.0 in every single one of the 21 major markets for which they gathered data.
Dallas, Houston, Atlanta and Philly had relatively modest divergence with ratios between .90 and .95. Cities like Phoenix, Minneapolis, New York, Chicago, and Boston were in the neighborhood of .70 to .75. And then there were the scorching markets like San Diego (.40), San Francisco (.45), Las Vegas (.54), Washington, D.C. (.59), and Miami (.63)
I'm making absolutely no characterization of real estate prices, or predictions about where we're headed. But ... I will tell you if you took a drive around Miami and had a look at the number of major/large condominium buildings currently under construction on Miami Beach, downtown, Brickell and the Miami River, you'd be wondering to yourself exactly where the demand is going to come from to sop up that many new units coming on the market in the next 18 months. Rental rates on condos in these areas already are in the neighborhood of scarcely 70%-75% of the cost of ownership. I don't know that there will be a problem, but there's certainly at least the potential for there to be some ... issues ... for the, ummm ... condo flippers. I guess it'll make for good entertainment either way.
In the meantime, for the more cynical view, you can consult the work that Barry Ritholtz has done http://bigpicture.typepad.com
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