Our "favorite housing economist" Dr. Bob Shiller thinks the market (especially housing) is already overheated. "We are in a very unusual circumstance," says Shiller, "because of the massive bailouts, the homebuyer tax credits, the Fed's purchase of mortgage-backed securities – and these things are coming to an end. I don't trust the trend we have."
"So the question is, are we at risk for even more price increases, and another bubble? I think we are at risk, but I'm not predicting it," says Shiller. "I think it's more likely we don't do so well from here," Moneynews reported Shiller telling The Motley Fool.
So is that "a yes, a no, I know, or a maybe?"
Marketwatch reports in the same article that in a conference call to investors, John Paulson, hedge fund manager for Paulson & Co, famous for betting against Goldman Sachs' mortgage backed securities investment packages, has flipped from being negative to being bullish on the U.S. housing market and the economy at large. Paulson famously and successfully wagered billions shorting mortgage instrument investments.
Different than "Bad News Bob" Shiller and his overexposed House Price Index and MacroMarkets trading index, Paulson has made billions for his hedge fund investors by taking a counter party CDO position against the now discredited Goldman Sachs' Timberwolf and Abacas mortgage backed investment illusions.
Earlier this year Paulson was reported being concerned about a potential double-dip recession. "I'm not concerned about that at all today," Paulson said, "as house prices have stabilized and could climb 8-to-10 percent nationwide in 2011." With the "final leg" of a rising housing market, "the outlook for 2011 could be very strong," Paulson was reported saying.
Real estate investors take notice that as these folks start softening their position (Shiller) or voicing their positive opinions (Paulson), they are most likely reporting after the fact the positions they are taking on future investments.
Two things will happen; more investors will follow and come into the real estate market especially looking for well priced real estate. And loan money will become more available as interest rates rise and banks see less risk in lending. Good rental buys in formerly down markets like Phoenix, Las Vegas and Florida cities are already getting hard to find.
From a world perspective the U.S. is still a safe haven for investors worldwide who recognize this as a relatively predictable market as they watch both the Euro and the Yuan test uncomfortable economic limits. American turnkey real estate investment companies (such as Norada Real Estate Investments) are actively selling in the U.K. Australia and New Zealand attracting cash buyers to deals not possible in many other markets. The average rental home in Auckland, New Zealand sells for north of $350,000 so can almost never be expected to be cash-on-cash positive. No wonder foreign investors are shopping here.