Real Estate Expert McCabe: Bubbles Growing in Calif., Fla.

Friday, 18 Apr 2014 04:11 PM

By Aaron Stern

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A Gallup poll shows Americans have renewed faith in the investment potential of real estate but the housing market could be headed for another bubble burst, says Jack McCabe.

"I personally believe that, yes, there is danger of a bubble. Not a national bubble at this point, but definitely those sand states, the southern states where we saw the greatest rise in artificial appreciation and then the rocket came crashing back to Earth," the real estate expert told John Bachman and J.D. Hayworth on "America's Forum" on Newsmax TV.

Southern California and Florida, in particular, could be in line for hard times ahead.

"California definitely is getting into that bubble territory now with the gains they've seen out there," McCabe said. "Florida, you can make a case where we've seen 21 to 28 percent increases in real estate values here in the last year may be approaching that sometime soon."

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A longstanding rule of thumb has been that two-thirds of Americans owned homes, while one-third rented, McCabe said. Those proportions have shifted since the subprime mortgage crisis and economic crisis, with fewer Americans building up personal nest eggs by owning homes that appreciate in value over the course of five, 10 and 20 years of ownership, he said.

Older, more affluent Americans are more likely to view real estate as a good investment than younger generations who value mobility and don't have as much personal wealth built up yet, McCabe said.

McCabe agrees with the growing perception that real estate is a good investment, but said it should be part of a broad investment portfolio, not the only place Americans hope to gain wealth from.

"Real estate should definitely be a part of your investment portfolio, but you shouldn't put all your money into just real estate because if we have a down-turn, prices drop 30 to 50 percent and you can't unload your assets, you're in a world of hurt," he said. "Right now, it makes great sense to have real estate in your portfolio, it might even be real estate heavy right now with the returns that we're seeing from different investment classes."

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