George Soros: "Gigantic Real Estate Bubble"

George Soros says:

I believe we are currently in the midst of a gigantic real estate bubble. It was caused by the determination of the Federal Reserve Bank not to allow a stock market decline in 2001 to turn into a self-reinforcing rout. The federal funds rate was lowered to 1 percent. Mortgage institutions encouraged mortgage holders to refinance their mortgages and withdraw the excess equity. They lowered their lending standards and introduced new products such as adjustable rate mortgages (ARMs), “interest only” mortgages, and promotional “teaser rates.” All this encouraged speculation in residential housing units. House prices started to rise at double-digit rates. This served to reinforce speculation, and the rise in house prices made the owners feel rich; the result was a consumption boom that has sustained the economy in recent years. Again, the bubble can be attributed to a short-circuit between the value of assets and the act of valuation. This short-circuit is called the wealth effect.

Soros isn't right about everything but what he has to say here is something to consider.If you live in an area with declining population the last five years such as San Francisco,Philadephia,Chicago,and Boston you really have to be concerned because speculators and supply restrictions are all that has held these areas up.