Wednesday, August 29, 2007

Over-valued real estate #38 - Santa Barbara, California

Santa Barbara is the King of Bubbles. Overall, the index is at 327. Real estate prices have increased by 130 percent in five years. Housing prices are now a massive 115 percent above long run trend. I would love to know how realtors in this town try to explain this run-up of prices. Just wait the "soft-landing" in Santa Barbara. However, the past offers a warning for Santa Barbara. There was a bubble in the late 1980s, and prices fell throughout the early 1990s. A crash can and will happen again.

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