MSN Money - The housing bubble has popped
MSN Money - The housing bubble has popped
Here's an article by one of my favorite authors on the housing bubble. As you know, in the Tri-City newsletter, I've provided a number of articles on the bubble in a variety of markets (Boston, Northern NJ, Long Island, DC, CA, Northern VA and others.) Like most manias, this bubble has been fueled by easy credit and the belief that real estate is a "can't lose" proposition.
Up until recently, I believed that the Lehigh Valley was immune from the bubble, however, now I'm not so sure. I happened to be driving around Bethlehem this past Sunday and dropped in on an open house. The place was a wreck and yet they were asking nearly $ 180K for the place and were saying that if the house were in reasonably good shape, it would go in the low $ 200's. I just shook my head knowing what I paid for a couple of real estate purchases here in the Valley over the last 3-5 years.
One argument for the lehigh valley real estate market revolves around the relative cheapness when compared to Northern NJ and Philadelphia. This is quite true, even with the price increases here. A 2o% to 30% reversal in prices in Northern NJ would still leave valuations there well above average prices here, however, I remain unconvinced that a reversal of that magnitude would leave our markets here unscathed. Moreover, many folks here commute to jobs in NJ or Philly and with fuel costs rising, an impact might be felt by many exurban communities that people are fleeing to. The bottom line is that the price of any asset should reflect the underlying economic fundamentals. For real estate, this generally means local well paying jobs, which are few and far between in the Lehigh Valley. What remains to be seen is whether our markets can sustain themselves with people commuting to far flung jobs in the face of high gas prices.
Here's an article by one of my favorite authors on the housing bubble. As you know, in the Tri-City newsletter, I've provided a number of articles on the bubble in a variety of markets (Boston, Northern NJ, Long Island, DC, CA, Northern VA and others.) Like most manias, this bubble has been fueled by easy credit and the belief that real estate is a "can't lose" proposition.
Up until recently, I believed that the Lehigh Valley was immune from the bubble, however, now I'm not so sure. I happened to be driving around Bethlehem this past Sunday and dropped in on an open house. The place was a wreck and yet they were asking nearly $ 180K for the place and were saying that if the house were in reasonably good shape, it would go in the low $ 200's. I just shook my head knowing what I paid for a couple of real estate purchases here in the Valley over the last 3-5 years.
One argument for the lehigh valley real estate market revolves around the relative cheapness when compared to Northern NJ and Philadelphia. This is quite true, even with the price increases here. A 2o% to 30% reversal in prices in Northern NJ would still leave valuations there well above average prices here, however, I remain unconvinced that a reversal of that magnitude would leave our markets here unscathed. Moreover, many folks here commute to jobs in NJ or Philly and with fuel costs rising, an impact might be felt by many exurban communities that people are fleeing to. The bottom line is that the price of any asset should reflect the underlying economic fundamentals. For real estate, this generally means local well paying jobs, which are few and far between in the Lehigh Valley. What remains to be seen is whether our markets can sustain themselves with people commuting to far flung jobs in the face of high gas prices.
posted by Greg L at
1:15 AM
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