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"They've had to kiss a lot of frogs before they find their prince," says Ms. Jacobson, a native New Yorker. "But those other frogs will find their palaces, too. There are still plenty of opportunities."Skip to next paragraph
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Not so in Massachusetts. The state has seen a precipitous drop in housing construction, keeping demand taut and prices aloft. The conditions have worsened in three years, evoking a theme akin to the late 1980s.
At that time, housing prices throughout Massachusetts were appreciating rapidly and they didn't correlate with the annual rent a house could command - a relationship economists scrutinize to detect a bubble. The result: a real estate recession that knocked prices down and drove investors away from the housing market.
Despite the evidence, "I don't believe there is a bubble right now,'' says Maggie Tomkiewicz, president of the Massachusetts Association of Realtors, who argues that today's supply-and-demand conditions don't contribute to a real estate bubble. Interest rates were also trending downward in the late 1980s.
But economists today are forecasting that interest rates will rise, a notable characteristic of a cooling trend for the real estate market. The danger is that until interest rates rise, home buyers will continue to snap up real estate they can't even afford. Zero percent down and 100 percent financing are influencing many homeowners to live beyond their means.
"It's like you have all of these people driving around in fancy cars and drinking expensive wine because they feel rich,'' says Christopher Thornberg, a senior economist with the University of California at Los Angeles Anderson Forecast. "The problem is there is all of this money floating around and something has to break.''
Mr. Thornberg's prognosis: "The whole US is in a bubble right now. And it could go on for another year.''
Or burst in the next six months, according to Harvey Dent Jr., author of "The Next Great Bubble Boom." He bases his prediction on a recent estimate from the National Association of Realtors that 23 percent of last year's home sales were second homes purchased by investors.
That made sense when real estate proved a better investment than poor performing stocks. But as interest rates rise, Mr. Dent says, they will push investors out of real estate and back into stocks or bonds. "That's why I'm renting an apartment in Miami Beach," Dent says. "I don't want to get stuck owning some overvalued piece of property."
Unfortunately, Jane Centofante has yet to sell her home in Los Angeles. An inspector found traces of creosote - a mixture of potentially toxic chemicals - throughout her home. Since the finding, she has lost four potential buyers during escrow, that critical period of time when a buyer and seller work out the money and other requests when transferring ownership of a home.
"I'm ready to sell. And I want to sell. But now I can't," says Centofante, who hopes to have the creosote problem remedied before the market sours.