Knight-Ridder has a good piece on the alleged housing market bubble.

Full disclosure: I sold real estate in calendar year 2003. I am looking at buying in the future. I am also counting on lower buy-in prices. So please bear that in mind when I say anything about the near to intermediate term of the health of the real estate market.

Here is how I view the current and near to intermediate price structure for real property in my area. New Hampshire.

It was made abundantly clear to me that the markest was in the formative stages when real property 'values' began to really outpace both inflation and the stock market.

My view was further confirmed by area realtors that this was not a speculative bubble, but a reflection of the intrinsic value of real property. This is absurd. The first stages of a true bubble begin when reality and expectations diverge. Denial is indicative of bubble formation.

I am in the process of building a warehouse. I intend to sell rental space there, and also have a business established utilizing the warehouse so I'll have something to occupy my time during retirement. I can build far more cheaply than I can buy at present. That is a warning flag.

Interest rates, and inflation are without certain headed in one direction. Up. If you pay close attention to commodities prices vs. the real rate of wage growth there is a huge disconnect. This cannot continue with consumers already absorbing record levels of debt.

Do you think this is erroneous? How much more are you paying at the gas pump? For home heating/cooling? For food?

Amongst the best pre-inflationary indicators is the price of copper. It is almost unchallenged as a barometer of overall inflationary trends. This monthly graph illustrates the recent rise in the price of copper. It is almost 'straight up'. Looking at 2004 trends the same picture emerges -- if you use the moving average, rather than the week to week volatility.

Copper, energy prices, a weakened dollar, and the lack of real job growth -- both in numbers, and in wage stagnation -- all point toward higher inflation. We have seen scant evidence of inflation as technology and worker productivity increases have kept most hard goods prices relatively flat. The more volatile prices for energy and food show a clearer trend toward a period of higher inflationary pressures.

New home sales have already shown signs of cooling form the record levels of 2003. Not much of a cooling off, but enough to keep one's eye on. Consumer sentiment is weak, durable goods orders are in decline, and any number of geo-political crises could slam the brakes on what appears to be a weakening recovery.

I won't even touch deficits.

The trends that are in place are unprecedented this far into a recovery -- save for the Great Depression.

Since this is really about real estate prices, I'll end with a prediction. Within two years from this date, housing prices in my area will correct by thirty percent. Other markets will of course differ. Things in this area are utterly insane at present.

Happy home buying!