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[Gene GeRue <genegerue AT ruralize.com>]

> After the recent discussion on house prices, I thought you would be 
> interesting in the following blog.
>
> http://www.calculatedrisk.blogspot.com/

I have here the Money magazine Real Estate Guide 2005. In addition to 
articles about and on both sides of the real estate bubble question are 
some solid facts about the 100 major markets. That long chart is prefaced 
with a subhead: "Home prices across the country will keep rising over the 
next year. While many hot markets on both coasts could see a dramatic 
slowdown in their growth rates, the forecasters at housing research firm 
Case Shiller Weiss aren't predicting outright losers anywhere."

I heard this morning on The Diane Rehm Show two experts, David Lereah, 
chief economist, National Association of Realtors, and
William Wheaton, professor, MIT Department of Economics and director of 
research at the Center for Real Estate.

Lereah says that Las Vegas growth and high appreciation rate is sustainable 
because Californians, where the median home prices are double that of Las 
Vegas, are moving out of California and, as before, to Oregon, Washington, 
Colorado and to Nevada and Arizona. Florida is another hot spot. He says 
that growth, too is sustainable because of the large numbers of upper East 
Coast people moving to Florida.

As I have said before, lots of journalists with minimal knowledge are using 
the sensationalistic sounding term "real estate bubble" when they can't 
think of anything else to fill their writing commitments.

Real estate economics are well established. People need a place to live. 
The laws of supply and demand prevail. There is currently a shortage of 
housing across the country. Read National Association of Home Builders 
facts. Builders are having a helluva time keeping up with demand. As Will 
Rogers famously noted, they ain't making any more land. Single-digit 
interest rates have allowed and continue to allow more people to buy homes 
who would otherwise be renting. My personal prediction is that the shortage 
of renters will cool the heat of speculators who will have trouble covering 
the payments due to long vacancies. But the foundation of the real estate 
market, young couples buying their first homes, will continue for years. If 
you would know for how many years, study the U.S. Census demographics. When 
a young couple buys a starter home, the sellers move up to the next tier. 
This continues throughout the price strata. Think of a huge pyramid. The 
bottom is composed of starter homes, the top is the multi-million-dollar 
mansions. Low interest rates and growing populations--think Hispanic and 
Asian immigration into California--make the foundation solid.

What most hurts local real estate markets are massive job losses due to big 
employers leaving town. This includes military installation shut downs as 
well as firms moving their production facilities to Mexico and other 
countries where labor and rules are more favorable. If the local employment 
scene is steady, so, too, will be the real estate market.