FDIC: "Boom Criteria" Markets Up 72% To 55
The FDIC put out a paper today which reports the boom is the largest ever recorded. "The number of individual markets that met the boom criteria increased by 72 percent in 2004, to 55 metro areas. The last time the United States saw a large number of metro areas experiencing housing booms was in 1988. At that time, 24 markets were experiencing a boom."
"Of the 24 boom markets added to the list in 2004, only 6 have ever previously experienced a boom in their history. If national factors are coming more into play, then clearly the most important factors to look to would be the availability, price, and terms of mortgage credit."
"These trends suggest that highly-leveraged borrowers are increasingly taking on interest-rate risk as they stretch to afford high-cost housing. Another evolving trend that has not been tested in a housing market downturn is the increasing market penetration of innovative mortgage products, such as interest-only (I/O) and option ARMs."
"Heightened investor purchases of homes could also be signaling a higher degree of speculative activity in housing markets during 2004." Alternate Link, look in left corner, May 2nd.