Is the Real Estate Bubble Hissing?

The great debate on whether the real estate bubble is about to burst or at least spring a significant leak continues to be waged in the media. For every person who says that prices will soon plunge (usually an economist) there’s another person who says the contrary (usually a real estate broker). Still, there some indicators that might help predict which way the market is heading. Several of them, unfortunately, are bits of information that are closely held by real estate brokers such as the number of houses on the market for how long. Another indicator is called Price-to-Rent Ratio which shows how much it would cost each month to own a property compared to the cost of renting it. I read, for example, that in a certain condominium complex in San Diego, California, the monthly mortgage payment for a traditionally financed unit in the complex would be $3700, while the monthly rent for a comparable unit in the same complex would only be $2000. When the cost of owning far exceeds the cost of renting, that’s a good indication that prices are inflated. Two other indicators are available here at the registry of deeds website. One is the sales price of houses. By looking at our Sales Reports (see the link on www.lowelldeeds.com) you can compare the sales prices of properties in this registry district over time. Our reports include all of 2003 and 2004 and 2005 to date. The other indicator is market activity which can be traced by the number of properties sold. While there has been a slight reduction in the number of deeds recorded here in Middlesex North during 2005, the drop has not been a staggering one. Here are the number of deeds recorded from January 1 to July 31 for the past five years: In 2005 – 5022; in 2004 – 5234; in 2003 – 5106; in 2002 – 5040; in 2001 – 4739.