I believe there is a strong likelihood the housing bubble will burst and soon. While factors such as the economy and the shift from high paying technology and manufacturing jobs to a lower paying service orientation are a concern, they are ancillary. With the ability to project a more long range potential for negatively impacting housing prices, I believe the bubble will burst due to our crippling dependence on fossil fuels.

The impact of this commodity becomes more clear when several market features are analyzed. According to BBG Communications, when California was experiencing high paying jobs, coupled with low interest rates and low fuel costs, a higher level of home ownership resulted. Adding in low commuting costs resulted in new neighborhoods, farther from cities. The economy continued growing and expanding; and the bubble grew even faster. According to data gathered by the National Association of Home Builders, the average new home price has risen 400% since 1980, consistently growing $20,000 (or 10%) a year in the past five years.

The second factor to consider is supply and demand. During the time the bubble was expanding, builders did not need incentives for new developments, there were plenty of buyers. This positive economic atmosphere (demand) supported the expansion within the housing market supply.

Now, an earlier, neutral factor - fuel - has changed. Demand, as a result of various disasters, has driven this commodity to new highs, rising 24% since 2004. This has a tremendous effect on the housing market. Fuel is needed for transporting labor and materials, as well as for producing affordable, timely construction. Higher fuel costs may also contribute to recent declines in home sales. Renters and homeowners may defer relocating or upgrading, if their new commuting fuel costs consume too much of their income.

In addition, many positive factors have deteriorated. The job market bubble burst in many parts of America, and the economy fell as a result of post 9/11 factors. National resources shifted to support the war effort so the individual's ability to secure low interest rates, was also degraded. However, while recent trends show home sales are declining, the average market prices are still rising. The housing market is, apparently, no longer responding to the pressures of supply and demand!

As a result, I believe that unless there is a radical shift in energy management, or oil returning to pre-2004 levels, this escalation will continue, but not be sustainable. The purchase homes and absorb these higher costs, will not be within economic reach for many citizens. In addition, when the bubble bursts, many individuals may experience a tremendous loss of personal economic power due to the diminished value of their current homes. These two resulting scenarios will force the examination of what it means to be successful, to be part of the American middle class that has long enjoyed being a homeowner. The bubble will burst, I believe, simply as a result of our unwillingness or inability to shake off the crippling grip of fossil fuel.

About the Author:
Broderick Booth Goran is a devoted author who focuses on a range of different topics. The market as it relates to purchasing quality jewellery has incredibly little written about it across the web.  Some more information can be viewed at my Communications page.