Is the U.S. Housing Bubble Making A Top?

[HenryTo]

Various commentators have recently argued that the U.S. housing market is finally slowing down - with the culprits being a rise in the Fed Funds rate, a stretched consumer, and even an exhaustion of buyers.

Is the U.S. housing market about to cool down? Please let us know what your thoughts are. Please note that a "slow down" does not mean U.S. housing prices will in general collapse from here. Rather, various commentators are just calling for a flattening of the recent appreciation in prices in markets such as Nevada, Arizona, California, etc.

[PonderThis]

It's all built on a crazy credit bubble. Banks are brazen because they know they would get bailed out if it all came crashing down. Greater than 40% of loans interest only or negative amortization? Please, you won't see me buying a home in that environment.
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Kemp Moyer
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[findfreegold]

Within the next few years, more and more baby boomers will be retiring and downsizing their residences. At some point, the market may become flooded with houses for sale and it may become a buyer's market as a smaller number of Gen X & Y shop for houses dumped by baby boomer retirees and new construction homes. Higher interest rates on mortgages could also motivate sellers to price more competatively.
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[HenryTo]

Welcome to the board, pkeber! I am assuming you meant: "If oil and gas prices continue to rise, and I believe they will, that will be the main pin to pr*ck the bubble."

Sorry, our filters are very "trigger happy" when it comes to langauge being using on this board.

To expand our thoughts further, I am seeing three important things which will determine how the housing bubble will fare in the coming months:

1) Interest rates - both ST and LT. This has been covered in our commentaries and in other sites so I will not venture into further detail here.

2) Personal income. We have experienced a deflationary economy in consumer goods ever since the fall of the Berlin Wall in 1989. The advent of the internet has further accelerated that trend. Computers, DVD players, textiles, furniture items, and even "mundane items" such as books, etc. That left the average consumer (and especially the wealthy of this country) with much discretionary income - income to buy antiques, bigger houses, bigger cars, etc. The less cyclical nature of the economy has also encouraged people to spend more on bigger items. TrimTabs has been very bullish on personal income for the last two years and is calling for continuing growth of 8% to 10% in the coming months. This is a very strong pillar for the housing bubble. If there are mass layoffs in this country, however, then all bets are off.

3) Capital flows into the United States - with many choosing to invest in financial assets but most probably in real estate as well. So far, foreigners (and I mean private investors as opposed to foreign central banks) are still very keen to finance our current account deficit. Witness the reluctance of Japanese investors to invest in their own domestic stock markets despite the recent rally in the both the Nikkei and the Topix - instead choosing to stay in U.S. Treasuries instead.

Please let me know if anyone else has further thoughts on this board.

I am taking a break for the rest of today!

Henry

[pkeber]

There are too many factors at play to know for sure if the housing market is peaking just yet, as this market can possibly get a little frothier in selected areas, and mask a peaking or plateauing in other areas. I don't think there can be much upside left, unless interest rates reverse lower. The energy situation is a key here. If oil and gas prices continue to rise, and I believe they will, that will be the main pin to xxx the bubble.