The latest warning comes from the “State of the Nation’s Housing 2005” report released Monday by Harvard University’s Joint Center for Housing Studies, as reported by SmartMoney.com. The bubble in prices is most acute in California, southern Florida and New York, the article says, but graphic information in the article indicates that the surge in housing costs in Washington, D.C. is comparable to those in New York (as measured by the dollar increases in monthly mortgage payments in 2003 to 2004).
A big problem, notes the report, “is the disparity between the residential home and rental markets. The after tax cost of owning now exceeds the cost of renting a comparable home by 28% nationally, and by much more in certain areas of the country, according to the report. In 2003, it cost 23% more to own than rent a comparable home.”
There are solid fundamentals underpinning the market in metro Washington, including strong job and income growth. But bubbles always start where the fundamentals are sound, and then escalate beyond all reason. Local governments across Northern Virginia had better batten down the hatches. The storm is coming.