The basic rule of thumb that if you cannot afford to itemize deductions on your income tax form, you cannot afford a house is as true today as ever. A house is just forced savings and if you do not need the tax write-off, you are better off renting. The World Socialist Website has a good analysis of the pending bubble burst of the California housing market, which means now is a good time to sell if your house is not a tax writeoff.

In "California housing bubble: an impending disaster for working people" by Roger Herman of 10/1/05, at:
http://www.wsws.org/articles/2005/oct2005/hous-o01.shtml
he states, in pertinent paragraphs:

"Over the course of the past several months, reports by the California Association of Realtors (CAR) have tracked a dramatic rise in housing prices in the state. This is the latest stage in the development of a housing bubble that has placed tremendous pressure on the budgets of many working people and created enormous financial vulnerabilities for others."

"The housing bubble in California has already caused a crisis for the many millions who are unable to find affordable housing. The eventual bursting of this bubble is an impending disaster for many California workers that have sought to shore up their living standards by borrowing against the rising value of their homes."

According to a report entitled “California’s Deepening Housing Crisis” issued by the Department of Housing and Community Development (DHCD), “Housing production has not kept pace with the State’s housing needs, particularly in the coastal metropolitan areas and housing need has worsened, especially for renter households and low income owner households throughout the State.”

"The DHCD reports that in 2004 California’s home ownership was the second lowest in the nation at 59.7 percent. In April 2005, only 17 percent of California households could afford to buy the median-priced single-family home, compared to 50 percent nationwide. In addition, overcrowding is an increasing problem among renters. Approximately 24 percent of renter households house more people than their dwellings are designed to accommodate."

"In the face of these conditions, Californians have increasingly resorted to high-risk financial means to purchase a home, such as adjusted-rate (ARM) and interest-only (I/O) mortgages, or a combination thereof."

"The recently enacted changes in US bankruptcy law, which will go into effect on October 17, increase the potential financial fallout from a future collapse of the housing bubble. The new laws passed by Congress make it much more difficult to erase debts and are expected to force thousands of people to enter into repayment plans that will leave them destitute for years. If there is a significant fall in home values that forces foreclosures, millions of people could still find themselves responsible for paying off the debt on homes they bought at incredibly overblown prices, whose value no longer covers the amount of the initial loan."

"The housing bubble in California is being driven in large part by financial speculation. With interest rates at historic lows over the past several years and returns on investments in the stock market declining with the bursting of the dot-com bubble, both large and small investors have been pouring money into the real estate market."

"Over the course of the past few months, experts have voiced increasing concern about the housing bubble in California, and there are already signs that the housing market pendulum is beginning to swing in the other direction.. According to the chief economist at CAR, Leslie Appleton-Young, “Things are getting worse by the day.”

"Over the course of the past several years, working people in California have confronted ever growing attacks on their living standards. The ongoing multibillion-dollar fiscal crisis in the state has served as a pretext for the Republicans and Democrats to implement a wide range of austerity measures, ranging from cuts in funding for public education, health care, and a wide range of social programs, to the effective dismantling of workers compensation."

"At the same time, workers face increasing economic pressures as a result of the elimination of jobs that provide decent salaries, and health and retirement benefits. In this context, the bursting of the California housing bubble will have devastating consequences for masses of people. It could touch off an economic crisis throughout the state with widespread reverberations, such that even those who do not own homes or who have not relied upon high-risk mortgages would be affected."

What's the effect of these new 40-year mortgage and Interest Only loans on demand for houses, beyond increasing it and raising prices?

What is the solution to this increase of "capital"-ism?