I’m a bit worried about the housing market. You probably know that I’m not buying a house at these prices, especially in the NJ area. But I’m worried that the buyers are over stretching themselves, and when the interest rates rise (a little more), many of them will not be able to pay for their mortgage. As a result, the pool of buyers will shorten. As a result, the whole economy might suffer. That’s what I’m worried the most. But like I said, this frenzy cannot continue, and will not continue, forever. Every bubble inflates to the point when it bursts. Hopefully, it will only be by a slow deflation…
There is an interesting article on Economist.com (one of my favorite magazines; recently subscribed to it), about the housing market in US, and in other parts of the world. I have some interesting excerpts from the The Economist article, Miraculous recovery or last gasp?.
If the housing market does turn sour, it would be bad news for the American economy, as it has been for the economy in Britain, where the recent slowdown has been partially attributed to a weak housing market. In both countries, consumers have become dangerously dependent on strong house prices to keep them feeling wealthy enough to spend. Housing markets may be the canaries that signal the fate of the broader economy. And, as any miner will tell you, canaries don稚 live all that long.
ReferenceMiraculous recovery or last gasp? — The Economist
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