Bubbles are swelling in pockets of the U.S. housing sector, especially in those areas that fell the hardest and are soaring back in part due to speculative demand, said Kathy Fettke, founder and CEO of Real Wealth Network, a California real estate services and consulting company.
“When inventory levels are so low, that has everybody kind of in a panic and diving in to buy, and that is driving up prices in some areas that I think personally is creating another bubble,” Fettke told Newsmax TV in an exclusive interview.
As a nation, the housing sector is showing signs of life after the Great Recession.
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U.S. homebuilding permits touched their highest level in more than four years in November, pointing to strength in the housing market, even though groundbreaking activity dropped 3 percent last month.
Home prices have shown signs of life as well, though some areas of the country in particular may be overheating.
Areas hit the hardest after the housing bubble burst in 2007 are shooting back the hardest, as many investors have scooped in to buy cheap and distressed properties.
“In Phoenix, Las Vegas we are seeing prices rise so rapidly, and we really believe that a lot of it is speculative, with investors all over the world coming in and buying up those properties. That makes me nervous,” she said.
“But other areas that are more stable — let’s say Dallas, Houston, Atlanta — these are the fastest growing population areas in the country, with the fastest job creation. So there really are fundamentals there to support the housing market.”
Metropolitan areas with little land are seeing prices shoot up as well, including the San Francisco bay area.
“We work with a lot of teams there selling real estate and just in the last few months they have bumped up their prices in some areas up 30 percent from last year,” Fettke explained.
“That feels like bubble market to me. Our salaries haven’t increased by 30 percent,” she added.
“So really what that reflects to me is very low interest rates that could cause a bubble in some of these markets where people think they are going to see a rise in prices.”
Turning to fiscal matters, successful aversion to the year-end fiscal cliff could affect the housing sector, whose recovery is tied heavily to improvements taking place in the labor market.
The White House and Congressional Republicans are debating a fiscal framework for 2013, with the Obama administration’s proposal calling for tax hikes on those with incomes over $400,000 a year, with Republican countering with a proposed hike on those with incomes of over $1 million a year.
Should wealthier Americans get hit with tax hikes to the point that they cannot hire, the housing sector could feel the fallout.
“The housing market depends so much on job creation so if employers are going to be facing massive taxes, is that going to create more jobs or not?” Fettke asked.
“What we do know is that places like Texas where taxes are very low for employers — they are high on property taxes, but have low employer taxes and no state taxes — we are seeing a very strong economy there, and I do believe that when you tax companies they can’t hire.”
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