Is the housing bubble bursting?
The housing market continued to defy gravity in April, with prices in Palm Beach and St. Lucie counties still rising and the national sales volume setting new records — even as more and more observers fret about the ultimate fallout from the real estate frenzy.
The median price of an existing single-family home in Palm Beach County rose to $372,300 in April, up only $800 from March but up $90,000 from a year ago, the Florida Association of Realtors said Tuesday.
In St. Lucie County, the median price — half sell for more, half for less — rose to $229,100, up 41 percent from a year ago. Martin County sales information for April was unavailable.
Nationally, the median home price for April hit $203,800, up 15 percent in the past year, the National Association of Realtors said. And sales hit a seasonally adjusted rate of 7.18 million houses in April, smashing the previous monthly record of 7.02 million houses last June.
David Lereah, the chief economist for the national Realtors group, credits low mortgage rates. The average 30-year loan costs 5.71 percent, a three-month low, according to mortgage giant Freddie Mac.
"A new record is a bit unexpected, but so is the performance of mortgage interest rates, which have been lower than forecast," Lereah said in a statement.
Still, soaring home prices worry Federal Reserve Chairman Alan Greenspan, who cautioned that the real estate run-up has reached dangerous heights. Greenspan said last week that there's no evidence of a national housing bubble, but, he added, "it's hard not to see that there are a lot of local bubbles."
Palm Beach hedge fund manager Doug Kass called today's home prices "eerily reminiscent" of the stock market in 1999, the peak of another bubble. He expects home prices to fall once interest rates rise.
"I don't think there's any question that we're in a bubble," Kass said. "We're in this real estate-centric economy, and it's balanced on the head of a pin in the form of unsustainably low interest rates. It seems to me the Fed has no choice but to take the punch bowl away."
Martin Weiss, a contrarian investment adviser and head of the Jupiter-based Weiss Group, also predicted falling home prices.
"I think we have a real estate bubble nationwide," Weiss said. "We do have excessive borrowing out there."
Interest-only loans and 40-year mortgages have gained popularity as strapped buyers struggle for monthly payments they can afford. Federal bank regulators last week warned lenders to tighten lax standards on home-equity loans.
Of course, skeptics have warned of a housing bubble for several years as home prices have soared.
Palm Beach County housing prices have jumped faster and higher than most metropolitan areas of the country, making the county the nation's ninth-priciest housing market in the first quarter of this year. But many real estate experts argue that strong demand for homes in Palm Beach County and the Treasure Coast make it unlikely that prices will fall.
The region's strong job growth and influx of second-home buyers forestall falling prices, said Jim Sahnger of Palm Beach Financial Network in Sewall's Point
"We still continue to have strong job growth," Sahnger said. "I really don't see any sign of price abatement."
Michael Istvanko of Summit Mortgage, a Boston lender with an office in West Palm Beach, agreed.
"I certainly don't think we're in a bubble," Istvanko said. "Unlike the stock market, real estate is not as liquid. It's classic supply and demand."
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