See how stupid that sounds? Only a complete and total fool would go buy a house today, unless he or she was able to get it for the same price it went for in 2001-2002
July 19, 2006
Oops - my bad. There was no housing bubble. Home prices can only go up and up. Everyone rush out today and buy a house.
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The United States housing bubble refers to an economic bubble in real estate in the United States. Many economists believe the US currently has a housing bubble, following the stock market bubble in the 1990s (called, among other things, the dot-com bubble). A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid increases in the valuations of real property such as housing until they reach unsustainable levels relative to incomes and other economic indicators. This in turn is followed by decreases that can result in many owners holding negative equity (a mortgage debt higher than the value of the property). Just like any type of economic bubble, it is difficult to identify except in hindsight, after the crash. A May 2006 Fortune magazine report on the US housing bubble states "The great housing bubble has finally started to deflate … In many once-sizzling markets around the country, accounts of dropping list prices have replaced tales of waiting lists for unbuilt condos and bidding wars over humdrum three-bedroom colonials." [2]
There are several factors believed to explain the U.S. housing bubble. The Economist magazine said that "the worldwide rise in house prices is the biggest bubble in history" [3], so any explanation must consider global causes as well as those specific to the United States. Former Federal Reserve Chairman Alan Greenspan said in mid-2005 that "at a minimum, there's a little 'froth' (in the U.S. housing market) … it's hard not to see that there are a lot of local bubbles." President Bush said of the U.S. housing boom in early 2006 "If houses get too expensive, people will stop buying them … Economies should cycle" [4].
Bubbles may only be positively identified by some in hindsight, after a market correction, and consistent with other economic bubbles, there has been debate about whether unprecedented price increases were caused by sustainable economic reasons such as larger demand due to increased population and liquidity, and limited supply, or by mania.
"Do you have any idea what kind of annualized return you'd need if you wanted to turn that measly $24 into $186 billion? Just 6.37%."
It is way less after the cost of the improvements (buildings, subway, roads, etc) are factored in.
"Holdings of derivatives are concentrated in the largest banks, with five commercial banks accounting for 96%..."
Like Goldman Sachs? How lucky was Paulson to get the Treas job and be allowed to sell his GS stock tax free?
People are scared. When they are scared they do irrational things such as buy overpriced houses (fear of being left behind), buy things (SUV) in hope to look good to others (fear of rejection), and hold to their assets until the bottom (fear of lost $$).
I see fear every day in my friends' eyes. Especially the ones who are mortgaged to the hilt. The ones who are 1 paycheck away from living in the SUV. I hear fear in people's voices at the bar. Fear that they will soon be unemployed. At the bagel shop I smell fear in the way johnny-come-lately realtors talk on the phone. "No mom, I am not working until Saturday, can i borrow some money for the BMW payment?".
I sense fear in my neighbor, the sweet mortgage broker who is dead set on buying an overpriced condo.
Fear abounds.
That's an awful lot of fear. Exactly what city are you hearing all this from?
No fear where I'm at(Virginia Beach, VA), everyone seems to be racing around in traffic just trying to get ahead on one more car. I wish for higher gas prices to slow life down and get those out of shape SUV drivers on bikes so they can say hi to each other. They can talk about how happy they are that they bought a overpriced house too far from their job, instead of living closer to work.
"People are scared"
Yep, I see that fear (or perhaps anxious living) all over the place.
The difference, however, is that I'd gone through a lot of "genuine" fear during the early 90s while living relatively frugal and paying off school (and even parental) debts and perhaps that's why I'm a bit perplexed.
Today, I have a lot more in savings (both USD and EUR accounts), precious metals (bought some gold at ~$400, silver at ~$6), and a few intl diversified AAA bonds but everywhere I go, people have new cars (a.k.a. a big monthly payment), new condos, 2nd homes, etc, I don't get it? Didn't we just have a tech recession only a few years ago? Why aren't people more afraid to jump into RE or cars than in living cheap? Where are the so-called new jobs? Back in the early 90s, we were hearing about up and coming real brick 'n morter tech companies like Oracle, Cisco, Novell, Amgen, etc, etc before their stocks had gone through the roof. Today, we just have stocks through the roof and no real growth sectors just the Googles (can you say Yahoo run up part deux) and Vonages (can you say Genuity redux) type of flash in the pan companies along with tons of outsourcing announcements. Please explain this to me?
The baby boomers are spending their parents' houses. That' won't last.
Everything is crazy now - the only people who aren't scared are the ones who are blinded by - whatever.
Less fear up here in Maine. The realtors are all rabid.
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