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News Link • Housing

Is There A Housing Bubble In Your City?

• by Mark Hanson

This massive divergence has been driven largely from the things present in all bubbles; unorthodox capital, credit & liquidity driving speculation.

Like Bubble 1.0, house prices in the most lofty regions have been driven for years by "non-end-users" SPECULATING on rentals, second/vaca homes, and flipping – riding a wave of cheap & easy credit, liquidity & leverage – believing prices always go up.

While speculative cycles come & go, end-user, shelter-buyer demand is omnipresent.  And end-user employment, income & credit fundamentals are what house prices will ultimately gravitate to.

With between 40% & 50% of buyers putting less than 10% down for years – and because it takes at least 10% equity to sell & rebuy – it doesn't take much downside to swamp the nation in "effective negative equity" once again.

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