Boom or Bust

For those looking to invest in the real estate market?keep your eyes on the headlines. According to the Federal Deposit Insurance Corp. (FDIC), the number of areas across the U.S. with real estate booms shot to 55, increasing by nearly two-thirds last year. The FDIC warns, "these booms may be followed by busts".

"Boom" areas are defined as having inflation-adjusted prices at the end of 2004 that were up 30% or more in three years.

Of the 362 major metropolitan cities included in this study, over 15% were boom areas. This data, analyzed by the Office of Federal Housing Enterprise Oversight, more than doubles the peak of the 1980's booms and is the highest ratio of boom markets in 30 years.

As for "boom or bust", busts are rare. Only 17% of U.S. housing booms from 1978-1998 ended in busts, which are defined as a 15% or more drop in home prices over a five-year period.

What is making the market soar? Aside from inflation, the mortgage industry has to be considered first. Adjustable rate and interest only mortgages are growing in numbers and subprime loans now account for 10% of all mortgage loans.

With interest rates lower than they've been in years, borrowers can afford to finance an amount greater than the standard 80% loan to value. The percentage of loans exceeding 80% of the purchase price has grown to over 30%. If a borrower has an adjustable rate mortgage and the interest rates rise, their payments increase. If the market values drop, or bust and they have 90% or 95% loan to value, they owe more on the home than it is worth. But these are all "What ifs??".

In the markets with the highest number of "boom" cities, California with 21 cities has a high increase rate of 58% and Florida with 11 cities has a high increase rate of 54%. These two states alone account for 60% of the boom areas! With these numbers, would you purchase an investment property in Florida or California and flip it in three years for a possible return upwards of 50%?

Of course. A relatively sound investment. How much longer can the market withstand these price increases before it busts? Even history shows a period of time when the market stalls so that inflation can catch up. If you want to invest in real estate, carefully examine the history of the market you are purchasing in! If it has been booming like Florida and California, be careful how long you hold on to the property. If you notice the market is starting to drop, sell. Hold on too long, it may bust!

Jason M. Rigler
Cash now for future payments

In The News:


pen paper and inkwell


cat break through


Why Should Sellers Be Absent During Showings?

If only there were a way to sell your home... Read More

Make Money With Room Rentals

I don't know why I didn't do it sooner, but... Read More

Top 7 Reasons Why FSBOs Fail To Sell Their Home On Their Own!

In the United States, less than 10% of all For... Read More

Investing in Real Estate Profitably: Eliminating the Need for Mortgage Insurance

In an earlier article, we presented various options for ensuring... Read More

Real Estate: The Consumers Will Have The Final Word!

"The first step toward change is awareness. The second step... Read More

Real Estate: Buyers Agent, Sellers Agent & Dual Agent (defined and explained)

There is a relatively new and not always well understood... Read More

Investing in Residential Real Estate: Achieving Positive Cash Flow

When investing in real estate, it is highly desirable to... Read More

Old House? New House? Weighing Your Options

Maybe it has something to do with a childhood home... Read More

Choosing a Residential Lot

Finding a lotPlanning for your new home is a very... Read More

The Listing Contract: Its All in the Details

Now that you've chosen a real estate professional to sell... Read More

Investment Real Estate: An Inexpensive Way To Get Started

If you are considering getting involved in investment real estate,... Read More

How to Show & Sell Your California Home

Seller's Showing Instructions1. When the agent arrives with the potential... Read More

How Can Real Estate Investors Profit From The Internet?

The Internet is a powerful marketing tool, but just how... Read More

Miami Property Booming for Foreign Investors

Miami tourism is growing and so is the Miami property... Read More

Buying and Selling Real Estate: Negotiating to Win-Win

You don't get what you deserve - you get what... Read More

Investing in Real Estate Profitably: Financing Options for Purchase of Rental Houses, Part 1.

This is not an article about tricks for 100% (no... Read More

Investing In Land

Changing social trends point to a huge rise in demand... Read More

The Cat in the Attic

Strange and unexpected things happen during home inspections. Seldom are... Read More

Negative Gearing ? It?s Not to Your Benefit!

The concept of negative gearing has been originally developed to... Read More

How Real Estate Investors Use Mortgage Note To Purchase Properties

Many of you may not be aware of the various... Read More

Is 100% Annual Return On Investments Possible With Low Risk Land Investments?

In last week's article, we discussed how substantial profits could... Read More

Should You Use a Property Management Company or Manage Your Real Estate Investment in Florida?

When considering investment properties, first of all, it must be... Read More

Negotiating and Sales Skills Are Critical

When I first started getting active in creative real estate,... Read More

Selling Investment Houses: Psychology of Mirrors

Discover new interior Design Psychology strategies to increase your real... Read More

Secrets of Making Money from Real Estate - Part 5

Where to from here:One property is great, but It wont... Read More

Selling A Home ? What Attachments Stay or Go?

The home selling and buying process can be confusing. This... Read More

Questions You Always Wanted To Ask A Master Builder But Never Had The Chance

Building a house (or lots of them) seems to be... Read More

Create a Great Webpage to Sell Your Home

The majority of people in the UK who are looking... Read More

How Does Interest Rates Affect New Home Sales and Wheres The Best Place To Build?

These real questions on new home starts and interest rates... Read More

A Simple Step by Step Aproach to Fail Your Way to a Million Dollars

If You want to be Financially Successful you need to... Read More

Lake Havasu Real Estate

Lake Havasu real estate is a hot commodity. With surrounding... Read More

Home Not Selling In Todays Hot Market? Tips and Ideas to Help You Sell

So, your selling your home. Prepare yourself both physically and... Read More

You Dont Need Health Insurance!

Seems almost every situation in our lives is centered on... Read More