Equities, to many people, maybe a majority of U. S. citizens, are the magical currency that always gains in value.
and of course, real estate. (see bold below)
Analyst: Sarasota among overpriced home markets
Sat, Feb. 12, 2005
MICHELE DERUS
Milwaukee Journal Sentinel
MILWAUKEE - One-fifth of the nation's housing market is significantly overpriced, but the overall market is financially sound, new industry research shows.
"There is no 'housing bubble' in America," said Richard DeKaser, chief economist for National City Corp., a Cleveland-based financial services company. "There is a growing risk of 'bubblettes' in certain places."
The average U.S. home price has soared almost 50 percent in the last five years, according to the Federal Deposit Insurance Corp. One housing market - Chico, Calif. - leaped 43 percent last year alone, DeKaser found.
In his Friday research report, he identified 46 of the country's largest 99 metro markets as overpriced, including 16 that are at least 20 percent overpriced.
"It's common for markets to fluctuate somewhat. Anything within 10 percent of norm is considered fairly valued," DeKaser said.
"It's the 16 markets that we waved the red flag on," he said. "That's where we see the risk."
"I just got out in time," said Dan Smith, 42, who moved his family to suburban Milwaukee from California last fall. He and his wife, Sandy, 41, got priced out of the market in the short time between selling their $550,000 house in Oakland, Calif., and trying to buy another in nearby Lafayette, Calif.
"We put offers on five different houses at $50,000 to $75,000 above asking price, but they kept selling for even more," Smith said. "We finally gave up."
The couple moved with daughters, Sophie, 7, and Emma, 4, to a $400,000 house on 2 acres in Mequon, Wis.
"A similar property in Lafayette would have gone for $2 million," Smith said. "It doesn't surprise me at all that researchers found California overpriced. More and more people there are slaves to their houses."
In his report, DeKaser identified 16 bubblette markets, localized hot spots of potential trouble: California's Chico, Stockton, Santa Barbara, Los Angeles, San Francisco, Modesto, San Diego and Sacramento markets; Florida's West Palm Beach, Miami and Sarasota markets; Las Vegas; Portland, Ore.; Detroit and Saginaw, Mich., and Bellingham, Wash.
Their bubblettes may burst, the economist said, if local economies and incomes don't grow fast enough to absorb their overheated price growth. If they don't, housing prices in those markets will freeze or fall.
"I don't see any economic downturn on the radar screen for 2005," DeKaser said. "However, the further out in time we go, the more the risk increases."
DeKaser's report comes amid warnings from Milwaukee-based Mortgage Guaranty Insurance Corp., the nation's largest home insurer, and the Federal Deposit Insurance Corp. in Washington, D.C., that the heady run-up in the nation's housing prices since the mid-1990s can't last.
Average U.S. home prices rose 13 percent last year and nearly 50 percent in the last five years, the FDIC reported Thursday. Increases of this magnitude "clearly are not sustainable over the long term," the agency concluded.
"Home appreciation has been 8 percent to 10 percent a year for the last five years," said Michael J. Zimmerman, MGIC vice president of investor relations. "That pace can't continue. We think, nationwide, prices will slow into the 3 percent to 5 percent range soon. But it's difficult to predict when."
Housing has long been and eventually will return to be a slow, solid investment option - not glamorous, but safe, Zimmerman and DeKaser said.
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