Housing Bubble Concerns

Whether there's a bubble or not, one has to be concerned about the continuing pace of leverage on personal balance sheets. For some time now, experts have predicted this leveraging will eventually wreck havoc but so far it hasn't. Here are some interesting facts from the most recent analysis according to Freddie Mac . . . nearly $250 billion was added to consumers pocketbooks with the cashing in of home values in 2005. What happened to it? Much of it was plowed back into real estate to improve or invest in existing homes, some was invested in stocks and bonds and the rest was used to maintain lifestyles. That won't be the same case in 2006 for a variety of reasons. Federal regulators are zeroing in on the non-traditional loan market and you can bet that zero interest loans won't be that available in 2006 for speculation on housing. Second home values are now beginning to fall and new home sales are off 21% from last year's peak levels. Conclusion, the appreciation of home values is not going to provide for consumers the cash as in the past.