FDIC bubble prognosis

Boom markets increase by 72 percent

An FDIC study determined that the number of local markets with home prices up at least 30% over 3 years shot up 72% in '04 to 55 out of 362 U.S. metro areas. This figure is more than double the highest number of boom markets during the last housing boom in the late 1980s.

The study suggests that the broadening of the US housing boom may imply that national factors like availability of credit may be playing an increasingly important role in driving the housing market.

An important conclusion of the study for investors is that a housing boom does not necessarily lead to a hosing bust. In fact, boom was found to lead to bust in only 17 percent of all cases prior to 1988.

Locally, the challenge is the same one that we have discussed many times on this site, incomes are not rising in step with appreciating property values. At some point new home sales will need pause to allow incomes to catch up. This issue is some what offset in SW Florida with all the influx of retirement wealth that moves to the region.

FYI Revisited -- U.S. Home Prices: Does Bust Always Follow Boom? [FDIC]

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