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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (30603)	5/3/2005 9:33:13 AM
From: Proud_Infidel	Read Replies (2) \| Respond to of 306849

U.S. Real Estate Booms Grow Two-Thirds Tuesday May 3, 9:25 am ET Areas Across the U.S. With Real Estate Booms Grow Nearly Two-Thirds, FDIC Says WASHINGTON (AP) -- The number of areas across the United States with real estate booms grew nearly two-thirds last year to 55, the Federal Deposit Insurance Corp. said, warning that these booms may be followed by busts. The boom areas represent 15 percent of the 362 metropolitan areas the Office of Federal Housing Enterprise Oversight analyzes, the highest proportion of boom markets in 30 years of price data and more than twice the peak of the late-1980s booms. Boom areas were defined as having inflation-adjusted prices at the end of 2004 that were up 30 percent or more in three years. Adding recent data and analysis to a study released in February, FDIC economists Cynthia Angell and Norman Williams repeated their view that credit market conditions may make current housing market booms different than past ones, which have tended to taper off rather than bust. "To the extent that credit conditions are driving home price trends, the implication would be that a reversal in mortgage market conditions -- where interest rates rise and lenders tighten their standards -- could contribute to the end of the housing boom," they say. The FDIC economists found that only 17 percent of local U.S. housing booms in the 1978-1998 period ended in busts, defined as a 15 percent or greater drop in nominal home prices over five years. But their updated study, released Monday, also notes special qualities of the current boom, including the large number of boom markets across the country and a risky credit environment. While the previous FDIC study on the subject in February emphasized local market factors for historical boom and bust cycles, recent past experience signals possibly broader ranging causes. "The notable expansion in the number of boom markets in 2004 suggests that national factors could be helping to drive home prices higher," the updated study says. "If national factors are coming more into play, then clearly the most important factors to look to would be the availability, price and terms of mortgage credit." Among special risks the FDIC has found in the current credit market are increasingly leveraged new home purchases, more use of adjustable rate mortgages, growth of interest-only mortgage payment plans and accelerating growth in subprime mortgage lending. The study also cited more purchases of homes strictly for investment as a sign of increased speculation in the market last year. biz.yahoo.com