We made a similar market beware call about a year ago - we warned: buy the home you can comfortably afford, expect interest rates to climb, expect your property taxes to go up, and expect the market value of your home to dip 15% in the next 5 years.

We stand by that call. Bottom line, do not expect real estate prices to always go up - they go down too!

When we saw the economist for the National Association of Realtors publish a book last month entitled "Are you missing the real estate boom?", we shuddered knowing that most busts occur because of poor analysis. No wonder people don't trust Realtors to act in their best interest. I read in Barron's that a Yale economist said that book reminded him of a 1999 book entitled "Dow 36000". The market crashed fairly close to when books like that proclaimed there are new economics in play!

Here's a thought from a May 30 Barron's article:

"There seems to be a bubble in news coverage about the housing bubble, which shows editors aren't much different from investors trying to latch onto a trend. But which stories should contrarians bet against - ones warning of the bubble bursting or those explaining why housing prices are unlikely to crash. In the late 1990's, when tomes forcasting Dow 10,000 came out, bears were slaughtered before they were vindicated. Indeed, the final blowoff is the most violent phase. We could be at a point in housing analogous to 3000 on the Nasdaq - which hit 5000 before crashing to 1200."