The housing market is in a bubble. I have been saying that for about a year now. The average selling price of a house is around $377K. Right before the housing collapse in 2007, the average selling price was around $330K. New signs are emerging that the housing bubble is dangerously close to popping.
House prices in Manhattan and Brooklyn have risen so fast that they have forced renters to devote a greater share of their income to housing. Today, more than 30% of Americans pay half their income in rent.
As Bloomberg reports here, a luxury condo at Manhattan’s One57 is scheduled for a foreclosure auction, the second foreclosure in a month that a property seizure is being sought at the Billionaires’ Row tower following a mortgage default.
Some ultra-luxury buildings in Manhattan like One57 are struggling with unsustainable vacancy rates of nearly 40%.
We saw foreclosures go up in 2006 right before the collapse of the housing market. The reason is that before a recession, its often better to just walk away from a property that you can’t afford the mortgage payment on and let the bank foreclose on it so that then they have to deal with finding a buyer for the depreciating asset.
Two foreclosures in the same building does not make a trend yet but keep your eyes open for more foreclosures in markets where property prices have risen way beyond the wages of the people who live there, which is practically everywhere.