By Suzie Bridgham

According to the FDIC (Federal Deposit Insurance Corporation), 54 Regional Housing “booms” occurred (defined as appreciation over 30% in under 3 years) over the past 25 years. Of these 54 Regional Booms, 21 markets “busted” (defined as at least a 15% decline over a 5 year or less period.)
… Moral of the story: Most “Booms” do not lead to “Busts.”

The last “bust” that California experienced was from 1990 to 1996. Why? Well, because 750,000 jobs vanished from our region due largely to the elimination of Aerospace and Defense needs. Remember the “Star Wars” program? Well, that crumbled with the Berlin Wall and so did a lot of jobs.
… Moral of the story: Don’t bet on rising interest rates to burst the bubble. Follow the business sector instead.

Experts, forecasters, economists, study groups, think tanks and students alike have been predicting a bubble burst for the past 4 years. And although Greenspan has raised interest rates over a dozen times since the “boom” started, we still have not heard the “pop.”
… Moral of the story: Only hindsight is 20/20.

Homeowners can afford their homes. In the early 80’s, owners spent 30% of their household income on the mortgage payments. With interest rates as low as they are, that figure has been reduced to under 20%. Two thirds of the market is comprised of repeat buyers. These repeat buyers have a lot of cash to put down on their homes. A lot of equity buffers higher interest rates. Add that to the 61% increase in per capita earnings since the early 80’s, and you have a hearty pool of homeowners out there.
… Moral of the story: Huge foreclosure market unlikely.

Demand still exceeds supply. Currently, Los Angeles only holds a 2.6 month housing supply. A 6 month supply starts to balance demand. Equilibrium is highly unlikely considering that since the year 2000, 1.1 million immigrants have relocated to our beautiful state. We are not only a landlocked region, but our building regulations are among the strictest in the country. Homes here are a very hot commodity.
… Moral of the story: With the exception of a national plague occurring, home prices are likely to keep going up over the long run.

All numbers, figures and statistics taken from The 2006 Real Estate Outlook’s “Why the Housing Bubble is Bogus!” presented by Gary Watts.

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