The chief economist for the Mortgage Bankers Assn. is worried enough about the torrid housing market to get out of it.
"I'm going to rent for a while," said Douglas Duncan, who expects "significant reversals" in regions that have enjoyed strong home price appreciation, including Washington, D.C., Florida and California. He plans to sell his suburban Washington home, which has tripled in value since he bought it a dozen years ago, and move into an apartment.
Duncan is among a multitude of experts and consumers across the country debating the possibility of a housing bubble -- a condition where prices have risen so far out of hand that they eventually crash.
Prominent policymakers and academics, including Federal Reserve Chairman Alan Greenspan, have recently warned about bubbles in regional markets. A recent nationwide Gallup/Experian poll of consumers showed that nearly four in 10 said they expected a bubble to burst in their region in the next three years. Across America, water cooler or cocktail party conversations often include talk about those who have made a killing in real estate, and whether it's now too late to get in on the action.
However, none of the experts or novices knows for sure when and how a bubble might burst. Bubbles throughout history, including tech stocks in the late 1990s, often go on for years, and crash when few expect it. Many experts and media pundits have been predicting a downturn for the last three years -- and home prices have continued to rise, up nearly 70% since 2001 in the hot Southern California market.
Consequently, though some homeowners like Duncan are pulling back, others are buying as if prices will continue to rise for quite some time. Still others regret that they didn't buy in the last two or three years, now hoping to pounce when the bubble bursts and prices fall.
"If I had been reckless and disobeyed every single financial analyst's advice, I would be one of those people with tons of equity," said Susan Lindsey, a 42-year-old La Jolla renter who passed up buying a home in San Diego three years ago because she refused to take out a riskier type of mortgage that would have allowed her to qualify.
She estimates she would be up as much as $200,000 in home equity now if she had pulled the trigger then. "Yeah, I'm bitter. I want to own my own home. I want it badly." When the crash comes, she said, "I will have no qualms about swooping in on someone's foreclosure."
