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The Real Estate Boom –
Will It Ever Bust?

By Debbie Markley

California real estate is still red hot, but will this sizzling trend continue – or will the bubble burst soon, sending shock waves through the state? A panel of local experts was consulted which, in true California fashion, included not only a seasoned mortgage broker and a real estate agent but also an astrologer and a psychic. Here are their predictions:

Coldwell Banker Realtor Karin Basin Miller has more than 30 years experience in the business and is confident that the strong Los Angeles real estate market is here to stay. "There may be slight depreciations in housing values over the next few years, but there is no bubble about to burst. A bubble occurs when you have more property than demand, and, right now, we have a shortage of inventory and very high demand. Interest rates are still below 7 percent, which is wonderful. And there is a lot of money in Los Angeles because of the movie and music industries here. The Baby Boomers are affluent and may be for years to come. All things considered, Los Angeles real estate is still a bargain when it is compared with other great cities of the world."

Patty Mattson, a mortgage lender with Real Estate Mortgage Exchange, has a more mixed opinion. "Overall, real estate is always a great investment, and the demand here is high; however, the median price has now exceeded the median income. Fortunately, with historically low interest rates and creative financing solutions, people are still able to participate in home ownership. Many of the financing options available are great as long as borrowers are educated by a good lender and are aware of all the risks and rewards of their loan program. I think there will be a correction on the horizon as interest rates rise. As to the impact it will have on real estate prices and the financed public, the outcome will depend on how much and how quickly these rates move."

For astrologer Jeannie Johnson, the answer can be found in the stars. "Real estate remains a solid investment as long as you plan for the ups and downs of this cyclic market. In 2001, we began a 12-year cycle of growth and expansion, thanks to the expansive planet of Jupiter crossing over Cancer, the ‘hearth and home’ sun sign that the U.S. was born under. This expansive cycle includes real estate. Jupiter also brings over-excitement and exuberance to the market, encouraging buyers to take on risky mortgages and over-valued properties. It’s harder to turn a profit when you buy in the enthusiasm of a booming market."

Averi Torres, Malibu’s resident psychic for more than 30 years, predicts a bump in the road may be looming for real estate investors. "While California real estate has always been a good investment, and will continue to be, it is at the top of a 20-year cycle with a correction looming of 10-20 percent. We’re approaching the bubble, and we might already have one foot in it. Investors have had a good run with real estate, and people will always be buying into that market. Soon, they may be investing again in the stock market. Everything is cyclical. With real estate and everything else, it’s important to remember that what goes up must come down, and all we can do is hope that we have a gentle landing."

In this high-priced market, people are holding on to their primary homes and either remodeling them or buying second homes. Owners are staying put – unless they are leaving the area, retiring or passing away. The few houses that come on the market are fought over by speculators and would-be homeowners, further driving housing prices into the stratosphere.

Nationwide, homeowners are really stretching to afford buying their homes. Interest-only loans and adjustable mortgages have soared in popularity but may wreak havoc if interest rates rise. So, while the housing market’s direction is continually up for debate, all of our experts agree that California real estate remains a very desirable investment. And the dream of owning a home in this golden state is still attainable – for those who can afford it.

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