I've read the bullish forecasts for real estate and find that there is a growing incredibility gap with each new forecast claiming that it is blue skies forever and that there is no bubble because people can afford the 130 percent increase in home values (in Southern California), despite a less than 4 percent increase in real wages over the same period. I have lived in the San Diego area on and off since the early 1970s. Boom and bust is part of the history of real estate and each time it is triggered by the same thing: overpriced homes. What is overpriced? First, the average household income for this area is $52,000 and average home prices are in excess of $460,000. Second, rents have trailed so far behind prices that investors have disappeared. Who is going to invest in the average home at $460,000 when the rental value will barely cover the property taxes and homeowners' dues? Third, as less than 12 percent of the people can qualify for a traditional fixed-rate loan, the vast maj...
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