November 19, 2005

With Real Estate, This Time it Really is Different


A well layed out case - with all the guilty parties listed.

Anyone want to guess when the FREAK OUT headlines will start appearing, like

"Housing values plummet"
"Trading curbs put into effect as market meltdown continues"
"No buyers, too many sellers - and a reversion to the mean"


The housing mania, like all manias that have preceded it, is finally coming to a long overdue end. Time tested principles of prudent mortgage lending will inevitability return, and houses will once again be regarded merely as places to live. However, the country will be a lot poorer as a result of the unprecedented dissipation of wealth and accumulation of consumer and mortgage debt which occurred during the bubble years. Before real estate prices can return to normal levels, they will first have to get dirt cheep. It has been a wild party, but in the end all that will remain is a giant hang-over.

3 comments:

skytrekker said...

Mr Schiff gives a complete scenario

here is repost of mine from Calculated risk today,

'from my own experience with a housing bubble here in Connecticut (from 1983-1989) The rise in inventories was the first hint of problems in a housing market that had risen for 6 straight years. With stuff just sitting, the price reductions began (small ones, just like now) So in 1989 here, prices fell about 5%, then in 1990 5%, 1991 5% 1992 5% 1993 5% 1994 5% 1995 4% 1995 3% 1996 1% not a big pop but a solid hissing sound over several years-amounting to over a 35% fall- which was disastrous for the local economy, the current scenario looks startlingly familiar. Back here in the Hartford Metro area they said in 1989- 'prices will not fall much here'- 'we are in a great geographic location' and even this tired old line..'it's different here'. In any case it took 13 years for prices to reach what they where here in late 1988.'

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