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Archive for May, 2013

U.S. Real Estate Bubble Watch

Sunday, May 26th, 2013

If you are looking to buy a house or apartment in U.S., you may need to face some tough competition. Almost every property in San Francisco bay area is getting multiple offers and there are bidding wars. Real estate agents tell me to always bid for price little higher than asking price. It reminds me of 2005. I won’t be surprised if this is going to end badly as happened from 2006 thru 2010. Recently, real estate site Trulia introduced something called “Bubble Watch” to track the real estate prices in U.S. You can read more about this in Forbes.

Trulia’s chief economist argues that we are not in bubble zone, yet. When a real estate site’s chief economist favors buying properties, that is not coming in as a surprise. You need to take his theory with a grain of salt. Do not trust the theory from chief economist of National Association of Realtors as well. These guys are obviously biased. Do your home work. Trulia’s Jed argues that current prices are 7% undervalued. That number is the average for entire nation even if you buy into his calculation. In many areas, like San Francisco Bay Area, the prices are already shooting up. There is no justification for the bidding wars. One of the main reasons is the foreign money inflow. Many foreigners are making cash purchase. Low interest rate is also fueling the market. But, what about the job market situation? There are still foreclosures happening in many parts of the country. Trulia’s economist agree that the next bubble is just the matter of time. If you are not totally comfortable with your job situation or do not have enough down payment, it would be a good idea to rent rather than taking the risk of buying.

If you do decide to buy, check out apps like Homesnap. AllThingsD has good review of this app. The app gives you useful information about financial data about the property and neighborhood information.

Related posts: Right time to buy a house? | Home prices rise again

Jobless rate down to 7.5% – More signs of economic recovery?

Sunday, May 5th, 2013

On Friday, U.S. markets cheered after taking a look at unemployment numbers. Unemployment rate is at the lowest level since December 2008. U.S. Labor Department also significantly raised hiring estimates for the two prior months, by a combined 114,000 jobs. Without much argument, this is clearly a sign of economic recovery in U.S. But, the question is will it sustain? Especially with crazy housing boom (and the subsequent bidding wars for real estate properties) in many parts of the country.

The Dow Jones Industrial Average rose 142.38 points, or 1%, to 14973.96. In an interesting development, gold futures are losing momentum which may indicate that investors are willing to sell gold to move back into stocks. Investors start accumulating gold when they feel that other investments are relatively worse and gold is the safe bet. They start selling gold when they feel that other investments are relatively better off.

Some Fed officials are adjusting their hopes for a stronger economic rebound. Economic growth has averaged about 2% a year during the recovery. “We are likely to see brief swings above and below that rate from time to time, but I don’t see a compelling case for a sustained departure anytime soon,” Jeffrey Lacker, president of the Richmond Fed, said in a speech Friday.

It’s not all rosy. The Institute for Supply Management’s non-manufacturing index released on Friday fell to 53.1 in April, from 54.4 in March. This index is still above 50 which typically indicates improvement for the service sector. However, the decline from previous month is something to watch out for.

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