Same Bull... Different Day

"The housing market will likely level out in 2006, as sales of existing and new homes are expected to cool in the coming quarters, according to the National Association of Realtors."

"Existing home sales are expected to fall 6 percent to 6.65 million in 2006, compared with 7.08 million in 2005, the NAR said Tuesday."

"Demand for new homes is expected to fall off as well, with sales forecast to fall 10.9 percent, to 1.14 million this year, compared with a record 1.28 million last year."

"Prices for new and existing homes are also expected to slow from their previous rate of growth, while still maintaining steady rates of increase over the course of the year."

"NAR President Thomas M. Stevens said, "Even so, the market is in a process of normalization — appreciation will return to normal single-digit patterns."'

This is just irritating. Normalization? Just for the sake of beating a dead horse, it is not a normal market when the cost of renting is 1/2 and less than half of the cost of owning the same property.

Normalization will be when the cost of renting vs. the cost of owning the same property are more in line with each other. The NAR can continue making up the truth as they go along and they will only face the truth when they run out of greater fools who can't do simple math.

Again... you do NOT have a NORMAL market when the costs of owning are double, and sometimes even triple the cost of renting.

A normal market also does not require one to pay 8-10 times their middle class income in order to buy a median priced house in a suburb.

"NAR's projections included assumptions of gross domestic product growth of 3.7 percent in 2006, and an average unemployment rate of 4.8 percent over the year."

'"Economic growth and job creation are providing a favorable backdrop for the housing market, but rising interest rates have an offsetting effect," David Lereah, NAR's chief economist, said.
Lereah expects the 30-year fixed-rate mortgage to rise to 6.9 percent by the end of the year."

I love this- from About.com (maybe someone from NAR should read this)

What Is a Real Estate Bubble?
"A real estate bubble occurs when housing prices take an unhealthy climb instead of rising gradually with the rate of inflation or the rise in median incomes. When the bubble bursts, housing prices tumble, which causes the real estate market to collapse, often followed by a recession in that area. In a real estate boom, the cycle runs its course and a market correction takes place more gradually, with prices settling down to more realistic levels."

What Causes a Real Estate Bubble?
"There's heated argument among experts about whether we're in a real estate bubble or a real estate boom."

"Either way, the rising cost of housing encourages people to take on risky debt. The bubble (or boom) has been fueled by falling interest rates, which makes higher priced houses more affordable, and the willingness of homebuyers to take out second and third mortgages, variable rate loans, terms longer than 30 years (unwise), mortgages that exceed the value of the home (if you can believe it), and interest-only loans (buyer beware!). Most of these place homebuyers at extreme financial risk."

How Does a Real Estate Bubble Affect Me?
"The rule of thumb that your total housing expenses, including principal, interest, property taxes, and homeowners' insurance, should not exceed 25% of your gross monthly income has been tossed aside in recent years. The Center for Housing Policy reports that in the last five years the number of working families paying more than 50% of their gross income for housing has jumped by 76%."

"The people most at risk are those with adjustable rate mortgages. As interest rates rise, many people with adjustable-rate mortgages and low monthly payments that allowed them to buy a home they couldn't really afford will not be able to make the rising payments. As home prices fall, these people may owe more than their house is worth. They may be forced to sell, perhaps at a loss. Where will they get the money to pay off their mortgage if the balance is more than they'll get for the house? Some will be forced to default and walk away from their home, ruining their credit for many years."

How Can I Protect Myself From a Real Estate Bubble?

* Don't overextend yourself. Buy a house that you can afford with a traditional mortgage where you make principal and interest payments at a fixed interest rate.

* Follow the rule of thumb that you should limit your housing costs (including property taxes, principal and interest, and homeowners' insurance) to between 25% and 32% of your family's gross income.

* Don't assume that your house will continue to appreciate at the fast pace that it may have in recent years.

* Don't buy a house whose price is artificially inflated just because you're afraid you'll miss out on the opportunity to buy before prices go up yet again.

* Don't buy a house you can't really afford just because you think it's a good investment. The more real estate prices rise, the less likely they'll continue to do so. Eventually the bubble will burst, and you don't want to be caught in "bubble trouble."

* Don't indulge in cash-back refinancing and use the equity in your home to buy cars or boats, take vacations, or pay off debt (unless you're committed to avoiding the spending habits that got you into debt in the first place). It could come back to bite you if real estate values decline.

* Don't purchase real estate with an interest-only loan if you can't afford the property otherwise. These loans usually have adjustable interest rates, which could make your payments unaffordable. Once the interest-only period ends and you must start paying principal as well as interest, you may not be able to make the payments and could be forced to sell the property at a loss.

Oh, wait... I have one: Don't buy stuff you can't afford!