Monday, August 07, 2006

Where will the Bubble Burst ?

It's the big question everyone is waiting for, where will the bubble burst? With Continued interest increases, a slowdown of home value appreciation and a shift from a seller's market to a buyer's market, the big question among consumers and the real estate industry today is what will happen when the the real estate bubble bursts.

Let's put it this way, instead of telling you how and where the bubble will burst, let's examine how or why it's possible that the bubble will burst.

1. In Recent years, with low interest rates, the Average homeowners have taken advantage of low rates to puchased homes they otherwise could not afford

2. The Majority of this owners bought homes with Low Rates, no money down and interest only loans.

3. Many of this buyers are in overvalued markets such as California and New York and have believe that real estate appreciation will continue to rise yearly in double digit figures.

4. Rise in Potential defaults because of rising interest rates in areas of overvalaution should be factor when buying a home.

5. The Largest correction will occur in states with middle or high end properties that has experienced rapid real estate appreciation.

6. Lower end properties will remain a strong market.

7. States with low real estate appreciation will see little corrections.

8. Increased in Foreclosures are usually attributed to a slow economy - but what we see today is because of overbuying of property as a result of low interest rate.

9. The Bubble has burst from a homeowner who are walking away from a huge deposit on a home where the value has declined or where they been unable to sell the property at a suffiecient price to complete the transaction.

10. The Homeowners more likely to be at risk are those who experienced little appreciation last year and have stretched their mortgage payments beyond the 35% income to mortgage ratio.

11. As ARMs begin to convert, more and more homeowners will find themselves in trouble.

12. The Rise in active home inventory is a strong leading indicator that the foreclosure rates may soon start to escalate, thus leading to slow or decrease home values.

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