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Bubble Fears Escalate

Posted by Scott Van Voorhis July 10, 2014 10:50 AM

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Bankers aren't exactly known for their bold predictions. Simply put, they are more likely to be behind the curve in their predictions, not ahead of it.

So when a bunch of bankers say they are worried about a real estate bubble forming, well then it could be a sign that we are already in some deep doo-doo.

A majority of mortgage executives surveyed by FICO - 56 percent - are convinced the real estate recovery has gone off the rails as home and condo prices soar.

In particular, the lenders expressed concern that "an unsustainable real estate bubble is forming," according to a press release by the Professional Risk Managers' Association, which conducted the survey for the credit score agency.

Meanwhile, the effects of the last bubble are still with us. As many as six million homeowners across the country are still underwater on their mortgages, with average negative equity of 33 percent, the risk managers note.

Yet for many other homeowners, it's a different story, with their real estate values soaring back to levels not seen since the Great Recession changed everything, or at least seemed to at the time.

"With home prices soaring in many cities, total homeowner equity in the U.S. is at its highest level since late 2007," said Andrew Jennings, chief analytics officer at FICO, in a press statement.

"That doesn't feel like a healthy, sustainable growth situation. No wonder many lenders in both Canada and the U.S. are concerned about the risk in residential mortgages," he stated.

Of course, it's not just home prices that are seeing a huge run-up. Land, office towers, shares of U.S. companies, you name it, are seeing their prices soar into bubble territory, the Times notes in this piece on the "everything bubble."

Bubble reality or bubble baloney? What's your take?

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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