More on the housing bubble...

i've posted rather extensively on what "bubbles greenspan" has so endearingly called some slight "froth" in the housing market... with figures like the following, we should all sit up and take notice...

(thanks to oldest son for the tip...)

Single-family home prices are "extremely overvalued" in 53 cities that make up nearly a third of the overall U.S. housing market, putting them at high risk of price declines, according to a study released today.

The report, by Richard DeKaser, chief economist of National City Corp., examined 299 metro areas accounting for 80% of the U.S. housing market.

DeKaser terms a market extremely overvalued if prices are 30% above where he estimates they should be based on historic price data, area income, mortgage rates and population density - a proxy for land scarcity.

Based on those criteria, Santa Barbara, Calif., is the nation's most out-of-whack market, with houses 69% overpriced. Rounding out the top five: Salinas, Calif.; Naples, Fla.; and Riverside and Merced, Calif.

[...]

The big culprit: in 85% of the cities surveyed, home-price gains outpaced income gains during the past year. In Bakersfield, Calif., prices rose 33% while incomes increased 3%. In 29% of areas, prices outpaced income growth by at least 10 percentage points.

Just 2% of markets were in bubbly territory at the start of 2004, vs. 31% in the first quarter of 2005.

if this thing bursts rather than pops a slow leak, there's gonna be hell to pay... the combination of borrowing against appreciated equity, the reliance on housing-related employment, and, lest we forget, the trillions that the chinese are tossing into the u.s. bond market, is all that's been keeping the economy afloat... now that we're on the verge of engaging in another cold war, this time with china, it might be a good idea to look both ways before crossing the street to the mortgage lender...

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