November 22, 2005

Feeling a bit 2001 lately? The housing bubble = the NASDAQ bubble

I'm really seeing erie similarities between the nasdaq bubble pop and our current housing bubble pop.

The Top 10 List:

1) "new economy" now "migration trends", "demographic demands" and "the country is filling up"

2) "day traders" now "speculators" or "real estate investors" or "flippers"

3) "pump and dump stock manipulators" now "realtors"

4) "margin accounts" and "leverage" now "mortgages"

5) "Henry Blodgett" now "National Association of Realtors"

6) "Worldcom" and "Enron" now "Toll Brothers" and "Fannie Mae"

7) "analysts" working for "investment houses" now "appraisers" working for "realtors"

8) "penny stock" now "Miami condo"

9) "the stock market will always be your best investment" now "housing never goes down historically"

10) "irrational exuberance" now "froth"

How's that?

A bubble is a bubble is a bubble - generation after generation after generation. It's just humans being humans. The surprising thing about this one is that it was just so damn soon after the last one. Are we that stupid that we don't learn or that we selectively forget - so soon?


Rob Dawg said...

A generally good list but a few quibbles:

4) "Low margin trading" now "I/O mortgages"

6) "Worldcom & Enron" now "Countrywide & Fannie Mae"

I see no reason to bash Toll Brothers for any of their actions. They warn, they report their insider trading they build houses. and enter TOL (or LEN or KB) to see they aren't gaming the market or investors.

everyone_calm_down said...

Another quibble.....

9) "the stock market will always be your best investment" now "housing never goes down historically

The above both are true LONG TERM:

Average US Median Home Price

1968 $20,100
1969 $21,300
1970 $23,000
1971 $24,800
1972 $26,700
1973 $28,900
1974 $32,000
1975 $35,300
1976 $38,100
1977 $42,900
1978 $48,700
1979 $55,700
1980 $62,200
1981 $66,400
1982 $67,800
1983 $70,300
1984 $72,400
1985 $75,500
1986 $80,300
1987 $85,600
1988 $89,300
1989 $89,500
1990 $92,000
1991 $97,100
1992 $99,700
1993 $103,100
1994 $107,200
1995 $110,500
1996 $115,800
1997 $121,800
1998 $128,400
1999 $133,300
2000 $139,000
2001 $147,800
2002 $156,200
2003 $169,500
2004 $185,200

Holgs said...

The above both are true LONG TERM.

If you buy in at the peak of a bubble, WRONG.

000000000000000000000000000000000000 said...

I am an Antique Dealer who enjoyed buying all your family treasures in the crash of 91 so that you could "ride it out". Most of you did not make it! Thanks for the things, and thanks for puffing up real estate again. I'll see you again in 2010!

Walter said...

That is an interesting chart of median prices. It reflects the fact that prices now are way above the median and will be due for a correction. As an example. I bought a small house in MA in '97 for 105K and sold it last year for an insane 250K. If it follwed the median curve growth rate, it should have sold for ~159K not nearly 100K more! And I don't even think I lived in a whacky bubble area at all.

41cadillac said...

Antique Dealer:

Yes, Yes, In 1991 I bought a California artist painting by Von Schneidow at auction (Butterfield and Butterfield) for $1500. Now worth $15,000.

In 1991 the homes in the area, Hancock Park, where I live in were selling $200,000 to $800,000. With exception of one estate which was $1,500,000.

Last Sunday I looked at an open house of a 3 bedroom bungalow for home for $1,285,000. If the estate was for sale I would guess is would be over $7,000,000 today. I look at open houses nearly every Sunday.

blogger said...

again, cash is king. the mother of all buying opportunities is just a couple of years away

just look at warren buffet - $41 Billion in cash, that he doesn't want to deploy until the crash is over and he can buy real estate at distressed prices.

One play that I do recommend is EBAY - why? Because the interest only crowd will be selling everything that's not bolted down to make their payments (until they're foreclosed) the next few years

But 2008 or so, when the bubble over-corrects, and we're below the mean, that's when cash will be king to buy up the HUD homes, and believe it or not you should see positive cash flow on the rental income side (vs. serious negative flow today)


Marinite said...

You forgot "Roberert Shiller" now "Robert Shiller".

sf_bubble said...

Just a personal story ...

We are moving to San Francisco from Sacramento. Found a 2 bedroom rental in an acceptable neighbourhood. We are happy w/ it.

When we told our relatives about the new place, the first thing my mother in-law said was "are you renting or did you buy !?".

I could not believe what I heard. Here's a 60+ year old lady w/ no college education. Cannot even speak English. Only been in the CA Bay Area for 2 years and she's so sure that buying a house is a no loose situation.

I replied "Housing prices are pulling back now, they probably will come down more".

To which she said "Price pullback is great. You get a discount if you buy now". Dumb-founded, I said something semi-rude. Hopefully she stops bothering me about NOT buying a house.

I know she means well. Stories from my other in-laws who are heavily into real estate business/speculation abound.

But I think this is the TOP right here. Even better than cocktail parties full of RE wins.

This is it. Right at the top in SF

000000000000000000000000000000000000 said...

Just closed a listing I had stake in. The seller got a nearly full price offer of $700,000.00 first day on the market which he turned down. So he waited a month and sold for $70,000.00 less.

Not too bad... He only lost a new Mercedes. Who wants a new Mercedes anyway???
Where is the "New Mercedes" column in your "Average US Median Home Price" graph???

41cadillac said...


I assume you are in Real Estate in Los Angeles. What is your current opinion of the prices and near future prices in LA?

Anonymous Person said...

The Dot Com bubble didn't really pop. The Fed just transferred it to housing, it's just a postponment of the inevitable deflation we're about to see. Deflation that didn't have to suck. (there was deflation from 1800 to 1900 and the world didn't end)

Wes D said...


If you think it will all be over by 2008 I think you're pretty optimistic. It took many markets 10 years to recover from the last bubble and that was during the hottest economic expansion in history.

With the coming retirement (and assumed divestiture of assets - including r/e) it wouldn't surprise me in the housing market was in the slums for 10-15 years.

Even very smart people were liquidation 401k plans worth hundreds of thousands of dollars in the stock meltdown without regards to the tax costs. These same people will liquidate housing just as quickly to cut losses.

Wes D said...

EDIT: the coming baby-boomer retirement.

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