This post originated from an RSS feed registered with Ruby Buzz by Christopher Williams. Original Post: Real Estate predictions for 1Q 2007 Feed Title: Late to the Party Feed URL: http://cwilliams.textdriven.com/xml/rss20/feed.xml Feed Description: Ruby. Rails. Stuff. Latest Ruby Buzz Posts Latest Ruby Buzz Posts by Christopher Williams Latest Posts From Late to the Party

I occasionally write columns on real estate here and given the latest news I thought I should post an update. CNN and other major outlets have all been reporting the news for some time - the housing market is stagnant and the bubble has burst.

They're right. The bubble has officially burst and those of you who got into the speculative game in Florida, California, Las Vegas or some of the other areas who saw incredible gains are now paying the price. I don't have much first-hand knowledge of those markets, but as I mentioned before they were well overpriced, they continue to be overpriced and I don't imagine that we'll see any appreciable gains (real gains, adjusted for inflation) in home prices in those markets in the coming quarter, year, and probably not in the next five years. Definitely nothing like those ridiculous 20%+ YOY gains of the past. Gains of that nature are unsustainable in the long term and we're seeing a natural correction in the market.

As for the secondary and tertiary markets, I'm predicting that as a result of the general malaise felt by the aftershocks of the major-market bubble-burst prices will remain at current rates or, in some markets, achieve single-digit gains. Investment in homebuilders and other real estate related holdings will be dropping as returns disappoint (no more flipping properties for a 100% profit!?) and this will ripple into some of these smaller markets holding down price growth.

While this is bad short term news for many owners who bought into the market in the past couple years, assuming you bought into the market for the right reasons (not to flip, the real estate equivalent of day trading), time frame (more than 5 years), and with the right financing (fixed rate mortgages that fit in your budget) you should feel comfortable holding onto your holdings. Those of you who hold ARMs may want to consider dropping properties and even forfeiting deposits on properties in construction which were intended to be sold for profit from appreciation.