Home ownership is not the only way to build up assets. A no-load energy fund may be a better way.

However, I agree with Ray that increasing your income potential is the more important thing in your life. It may involve getting more education or relocation. If you’ve decided the current arrangement is not working out, then you have to make some changes.

I don’t feel sorry for anyone who purchased a home at “inflated” prices. If they bought the home looking to flip, then it was a short-term investment and no a true home purchase. If they bought a home they could not afford, they did not do the math.

It is easy to get a 15 or 30 year fixed and know your payments. If they selected a 5 year or longer APR, they would also know what their payments would be and it hasn’t been 5 years. So, the only people who would be hurting are people who 1, thought they could flip their house and make a quick 20% or so, or people who did not sit down and calculate what they could afford.

I like your site Mr Credit Card =) but I just don’t think that anyone should feel sorry for people who buy things they can’t afford.

If you only make minimum wage, I hope it’s because you do not yet have the job skills to make more. If you are young and are attending college, then you have plenty of time, if on the other hand you are in your late 20s or early 30s, then you need to look at getting some sort of education. A Degree is a degree, it doesn’t matter if it costs $200K or $15K. At the very least get your associates and use those technical skills to get a better job.

If you are only earning a minimum wage it is going to be much harder for you to be able to afford a home. If you do not see things changing in the future, you might need to move to a location that has a lower cost of living. You could look at buying a house, but renting out a room or two and have the renter pays your mortgage.

It’s never an easy thing, but striving to reach a goal over time will eventually pay off.

All I see in my future are rent increases, homelessness, and destitution. How can I protect myself from these things?

I understand the point you were making. I also know it’s a touchy issue so I didn’t want to go into it FWIW, I believe housing in certain areas of CA and FL was in a bubble. The real sad part is the people suckered into buying houses they couldn’t afford with a load they didn’t understand.

As for M3, you can find “reconstructed” data from a couple of sites. The one I follow is http://www.nowandfutures.com/key_stats.html.

As far as M3, goes I thought the government stopped providing that data and now only supplies M1 and M2 data. (M1 and M2 data – http://www.federalreserve.gov/releases/h6/Current/ )

M3 FYI: http://www.federalreserve.gov/Releases/h6/discm3.htm

I think you’re reading too much into the article. My model, which I admit did not take into account many specifics of housing, looks at the RELATIVE appreciation rates versus M3 growth rates. No more.

When I say Philly is 25% overvalued, it means RE in Philly appreciated 25% above M3 growth in the preceding 5yrs. It makes no judgment of whether RE in Philly is over or undervalued, against any arbitrary standard or anywhere in California.

Desirability of location may well be the cause of the difference in appreciation rates but that is beyond the scope of what this simple rule of thumb is intended to measure.

As for Eric Jansen’s forecast. Let me say that all bubbles started as an idea with a sound footing which is why they attract a following in the first place. Bubbles usually last longer, grows bigger than anyone can imagine at the onset. Unfortunately, the same can be said for the contractions that follow.

I stress again that I was talking about relative valuation between Q1′06 and 5 yrs prior. As you said,

“The housing market is no different, and while we have seen some large increases in coastal areas, there is no way you can compare a coastal area to Philly, and say the coastal areas are overvalued. There is no easy way to value properties, but people normally pay more for location, to include views.”

I plan to revisit this topic in a year or two. I’ll make sure to look up Philly and Madera, CA again. I promise to look at the relative price change only, but I’m willing to bet that Madera will have dropped more (or appreciated less) than Philly. Any takers?

I just don’t see how people can say this area is X % overvalued compared to site XY. If you compare them straight up, then yes it’s obvious to see the price increases, but that’s why it’s real estate and a house is an investment.

I also find it extremely hard to believe that the housing “Bubble” would continue through as long as 2015. I have not read the article, but does Eric Jansen go indepth about the % of correction he expects for certain areas? As we all know there are many other areas that will only appreciate over the next 5-10 years while other areas could slow and possibly fall, but I do not see a housing bubble for the sector as a whole.

I always find articles on other aspects of the economy interesting, but 2010-2015 is a long way off and in any market there are highs and lows and certain sectors which have runs and then have large drops. The housing market is no different, and while we have seen some large increases in coastal areas, there is no way you can compare a coastal area to Philly, and say the coastal areas are overvalued. There is no easy way to value properties, but people normally pay more for location, to include views.

The bottom line is certain areas are probably overvalued, but there is only so much land out there and even less coastal land. With the baby boomer generation about to retire, that is going to bring a mass exodus from the working population to the retirement areas.. and we all know were those are.