Do we have a Real Estate Bubble?

Summary: Some slow-down is coming, with largest downturns probably in places that saw the largest upturns (aka, not in the mid-West)

Over the last year, many have been saying that we are nearing the peak of a real-estate bubble. A few voices say that “real estate is local”, so any forthcoming bust will be geographically-specific.

At the recent Berkshire shareholder meeting Warren Buffett said that there may be a bubble at the high end of the market. Charles Munger went further, saying that he thought there was a bubble in Washington D.C. and some parts of California.

I have seen too many Buffett predictions come true to take this lightly (though this time he was not whole heartedly endorsing the idea of a bubble).

Our house is far from top-end, and we don’t live in a city where prices have sky-rocketed. In fact, if it is a bubble and it does burst, I should consider waiting 4 or 5 years and then “trading up” around the year 2010.

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