Housing market/Finances

[SunDancer]

Being in Boston last week, and seeing the off-the-hook prices of homes/real estate, I am wondering if you think we'll see a housing bubble burst? Seems like we got alot more McMansions being built.

If so, what will happen? What happens to the finances and houses of the boomers moving towards retirement? I just found this discussion from our class today interesting.

[Crapshoot]

Yes. Bust. Liquidity = King.

[digamma]

The market has slowed recently.

For there to be a flat out bust, I think interest rates will need to rise significantly, preventing folks who went with ARM's and other variable interest rate mortgages from re-financing at an affordable rate at the end of their fixed period. If this happens, we could see more foreclosures and a drop in the market.

However, it may be more of a city by city basis than the across-the-board tank of the early 90s. In LA, for example, buyers still greatly outnumber sellers, despite the slowing market and the increasing prices.