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Bubble? What Housing Bubble?

REM #I675

By Ilyce R. Glink

Summary: Is there a real estate bubble? Economists can debate whether real estate prices are higher than they should be, but ultimately it's the market that sets prices. So, we decided to ask the market what they think. The ThinkGlink.com Real Estate Bubble Survey answers a key question: Do real estate sellers and buyers believe there is a real estate bubble?

Real estate practitioners might as well jump for joy: 2005 looks like it will go down in history as the best-ever year for existing home and new home sales.
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More than 8.5 million new and existing homes will be sold by December - all that, in a year where interest rates stayed at or below 6.5 percent for almost the entire year. (Note from Ilyce: see my Real Estate Trends article for more information on 2005 real estate trends).

But consumers haven't popped the cork yet. ThinkGlink.com, which provides more than 1,500 pages of real estate and personal finance news and information, recently surveyed more than 4,000 consumers and found that 66.3 percent of 475 respondents believe there is a real estate bubble. Of those who believe there is a real estate bubble, 58.7 percent believe that bubble will burst within a year and 41.3% think the bubble will still be alive and well a year from now.

But few think the U.S. real estate market will get hit as badly as the stock market did during its most recent correction in 2001.

Nearly 58 percent of those responding to the survey believe the effect of a real estate bubble bursting will have a mildly negative effect on the economy. Twenty-four percent believe that the correction will have a massively negative effect and 16 percent believe that whatever correction takes place, it will be good for the economy.

Finally, more than half of those responding to the survey believe that a real estate bubble is a self-fulfilling prophecy: If you talk about it, it will come.

More than 300 of the 475 respondents took the time to write comments about the real estate bubble. You can view comments from those who believe there is a real estate bubble and comments from those who don't believe there is a real estate bubble.

NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.