Wednesday, December 08, 2004

California Home Price 'Bubble' Could Burst

Report: California Home Price 'Bubble' Could Burst

Researchers Say 'Bubble Burst' Is Biggest Risk To Economy

KCRA Channel

SACRAMENTO, Calif. -- A new report about California housing prices was released Wednesday, and once again, researchers are using the word "bubble."

Less than a month after signing on the dotted line for his first home -- a $225,000 house in Sacramento's Del Paso Heights neighborhood -- Don Byham admits he's a little nervous about the current real estate market. "If the bottom drops out, I'm going to be completely screwed," Byham said. The quarterly University of California, Los Angeles Anderson Forecast says the state's fortunes could change if the national economy falters amid rising consumer debt, a growing trade imbalance and bloated housing market. Researchers say California housing prices are unlikely to continue their double-digit gains. And nationwide, they say the threat of a bursting housing bubble is the single biggest risk to the economy. The new report comes two weeks after Smart Money magazine named Sacramento, Stockton, Modesto and Fairfield among the top 15 most overvalued housing markets in the country. "Sacramento is, I believe, No. 5, right now, among the hottest markets in the United States. Prices are just continuing to go up," said real estate agent Elizabeth Weintraub. But John Firth with the state Building Industry Association says he doesn't think any bubble exists. He does, however, think prices are likely to start leveling off. "For 2005, we're projecting probably about a 5 percent increase across the board for new and existing homes, which is a much more sustainable and historically normal level than what we've seen in the last couple of years," Firth said. Despite researchers' concerns about the housing market, they still predict solid overall economic growth for California in 2005.

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