Housing Bust

A noted Houston economist says the nation's housing market can't take much more price inflation, and he's predicting the bubble is going to burst sometime soon. The good news is that it won't hit Houston as hard as it will hit other cities. Houston Public Radio's Jim Bell reports.

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Barton Smith of the University of Houston Institute for Regional Forecasting says home prices are as high as they can go in some parts of the country.

"Home prices in many parts of the country are way above what the typical American can purchase. We've seen rates of appreciation of home values that have exceeded growth in income by an order of magnitude of four to five times. That's simply not sustainable."

Smith says sky high prices, rising interest rates, and overbuilding in some markets will bring many markets down. Where will it hit hardest?

"California, once again, up north in Seattle, so the west coast phenomenon now is much broader. And then the east coast, from Boston really all the way down to Florida to Miami, the entire coast is overpriced."

Houston, on the other hand, has one of the most underpriced and affordable housing markets in the country, which means it won't take as bad a hit.

"A major housing market correction in selected markets in the United States could still have a negative impact on the national financial markets. It may make it harder for you and I as Houstonians to borrow money, even though we're in a market that's relatively secure."

Smith says the correction is already beginning, with rising interest rates and record foreclosures, and he thinks by this time next year, it will be very clear that the housing bubble has burst. Jim Bell, Houston Public Radio News.

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