Monday, August 22, 2005

Affordability May Bust This Bubble Say Analysts

The lack of affordability in the California housing market (and elsewhere) will pop this bubble if nothing else does. The Marin housing market is as dependent on first-time buyers as is any other housing market as it is the first-time buyer that initiates the "buy up" chain reaction.

Some choice quotes:
"Prices in the hot U.S. housing market are poised to decline as demand dries up due to the inability of first-time buyers to afford a home, a Merrill Lynch analyst said in a research report on Monday."

""The housing market has become so stretched that the affordability ratio for first-time buyers, the folks who drive the incremental demand in the real estate sector, has deteriorated to levels last seen in the third quarter of 1989," wrote David Rosenberg."

" The price of an average starter home in the United States has climbed 14 percent over the past year, while the average income for the first-time buyer family has risen just 4 percent, Rosenberg said, calling that an "unprecedented gap.""

"In the third quarter of 1989, bids evaporated and new home sales dropped 20 percent the following year in response to lofty prices that first-time buyers could not afford, the analyst said."
Affordability, Congress revamping housing's tax incentives, declining sales volume, declining prices, China floating the yuan, mortgage rates increasing (if slowly), what else? All in all it looks bad.


Blogger David said...

Affordability is becoming key. In many bubble markets afordability is at outrageously low.

Aug 22, 2005, 10:00:00 PM  

Post a Comment

<< Home

Terms of Use: The purpose of the Marin Real Estate Bubble weblog (located at URL and henceforth referred to as “MREB” or “this site”) is to present and discuss information relating to real estate and the real estate industry in general (locally, state-wide, nationally, and internationally) as it pertains to the thesis that recent real estate related activity is properly characterized as a “speculative mania” or a “bubble”. MREB is a non-profit, community site that depends on community participation and feedback. While MREB administrators do strive to confirm all information presented here and qualify all doubtful items, the information presented at MREB is neither definitive nor should it be construed as professional advice. All information published on MREB is provided “as is” without warranty of any kind and the administrators of this site shall not be liable for any direct or indirect damages arising out of use of this site. This site is moderated by MREB administrators and the MREB administrators reserve the right to edit, remove, or refuse postings that are off-topic, defamatory, libelous, offensive, or otherwise deemed inappropriate by MREB administrators. You should consult a finance professional before making any decisions based on information found on this site.

The contributors to this site may, from time to time, hold short (or long) positions in mentioned and related companies.