Newsletter: Housing bubble hasn’t even gotten here

BALTIMORE, MD.
November 8, 2006 11:02am

The author of an investment newsletter says any real bursting of the U.S. housing bubble it at least two years away and that the current price and selling setbacks are nothing compared to what is likely to happen.

"Homeowners are in denial," says Karim Rahemtulla, an advisory panelist for Investment U, a newsletter based in Baltimore, Md. "Right now, sellers aren't selling ... They're still waiting for Santa to deliver their asking price, or close to it."

The situation is about to get worse, he says.

Those who have interest-only, or "teaser-rate," mortgages could see their monthly payments more than double, Mr. Rahemtulla contends.

"Interest rates will rise on about $300 billion in adjustable-rate mortgages this year alone," he says. "That figure is projected to skyrocket to more than $1 trillion in each of the next two years."

California, Arizona, Nevada and Florida will be hit particularly hard, he says, and homeowners in these states may not see a 5 percent decline, as experts predict, "but could fall two or three times that number."

Homebuilders are feeling the pinch, too.

According to Mr. Rahemtulla, the bottom of the housing market will be here no sooner than two years.

"So while the brokers are upgrading homebuilding stocks," he says, "and trying to make it seem that the worst is over for housing, my advice is to take the first reasonable offer and count yourself lucky. The housing bust is not today's news. It is going to be tomorrow's."

Mr. Rahemtulla is an equal opportunity bubble-popper. He says the Canadian housing market will see its bubble pop, too, just after the U.S. market.