California, U.S. in a Housing 'Bubble,' UCLA Forecast Says

Discussion in 'Politics, Religion, Social Issues' started by Xtremehkr, Dec 8, 2004.

  1. Xtremehkr macrumors 68000


    Jul 4, 2004

    Given the less than stellar accuracy the government has had in prediction job growth over the last few years, how will this bubble affect the economy as it stands now.

    The housing sector has been the bright spot in the economy for the last few years.

    Any thoughts on what the outcome may be?
  2. skunk macrumors G4


    Jun 29, 2002
    Republic of Ukistan
  3. Desertrat macrumors newbie

    Jul 4, 2003
    Terlingua, Texas
    This has been discussed in contrarian venues for a couple of years, now. What will make the big hit is if interest rates go up, and they're expected to do so.

    Then, those with variable rate mortgages will get hit in the billfold. Those who are already marginal as to percentage of net income devoted to their housing may well lose their houses. If this becomes widespread it will mean a decline in prices. It's happened before, particularly back in 1985-ish, although a different cause: The Oil Patch collapsed at $12/bbl oil, and Houston jobs declined dramatically--as did real estate prices, by 30% and more.

    The thing is, few people have a year's worth of house payments in savings. Also, the number of people who are more than 30 days late with a mortgage payment is at an alltime high.

    It won't be everywhere, of course...

  4. IJ Reilly macrumors P6

    IJ Reilly

    Jul 16, 2002
    California was hit with declining values in real estate on the order of 20-40%, depending mainly on location, during the 1989-92 timeframe. It was a side effect of the worst economic conditions the state had experienced since the Great Depression. The underlying cause was unemployment, but was vastly complicated by the run-up in real estate values in the previous years. In short order, lots of people found themselves looking at negative equity. Many walked away from their properties, causing a snowball effect. It was a pretty scary time to be homeowner, with foreclosures on every block, or so it seemed.

    Could it happen again? Yeah, sure -- but the economic conditions in this state at least aren't remotely as bad as they were circa 1990 and are forecasted to remain reasonably strong over the next few years. Given what I've seen locally, I wouldn't be surprised to see the real estate market level off or even decline some in a few areas. But a "bursting bubble" -- that's a bit dramatic.

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