MJ and Bubbles
If this happens, I'll sure be glad I live in Ohio where appreciation is a reasonable 2-4% than in an overpriced town like San Francisco...the higher prices go the harder you get hit.
Didn't this happen locally in the Southwest in the 90s??
Housing in the U.S., except for a few regions, is still relatively cheap. And, unlike stocks, there is a strong reason for sustained demand: record high immigration. New immigrants (many illegal, but until I see evidence of anything being done about that, they are in the demand pool) are sleeping 5 to a room in NYC. They will move into apartments and, eventually, houses.
Until we get reliable numbers on immigrants, it is impossible to call a housing bubble. All the anecdotal evidence I have indicates to me that the entire populations of Russia and Brasil have moved the the U.S., nevermind that Mexico has colonized California.
Bill Fleckenstein is a drooling imbecile, and if he said the sun rose in the East, I'd check it first. A few years back, he trashed a stock I owned ("their business is just going to go away."). When the owners of the company wrote a letter to Barron's explaining why their business wasn't going to "go away" (they make excimer lasers for semiconductor manufacture and have a 90%+ market share), Fleckenstein wrote a reply that revealed he knew nothing whatsoever about what they made. He called it a "light bulb." What a moran.
MJ and Bubbles
Sometimes I see bubbles in my bathtub....I don't tell anyone either.
This first sentence of the article appears to be dead wrong. Didn't Alan Greenspan famously talk DOWN markets in 1996 when he coined the phrase irrational exuberance?
Irrational Exuberance story here
If anything, wasn't the Fed criticized for possibly raising rates too aggressively and talking too morosely about the markets during the salad days of the late 90s? Don't people complain that if anything he was too hamhanded in tempering the markets, not the opposite?
40% of all new mortgages are adjustable rate mortgages. The pin that breaks this housing bubble may very well be the rising interest rates that are to come. Thus far, the Fed has steadfastly refused to raise interest rates to reasonable levels. With 50% of American government debt being held by foreigners and with the dollar on a slide that shows no sign of ending, this policy cannot last forever.
It's coming.
There are 2 relatively new factors that make real estate more valuable that in was in say 1997. Congress passed a law allowing you to exclude $500,000 in capital gains(for a joint return, $250,000 for a single filer) on your house if you lived in it at least 2 of the last 5 years. Congress also eliminated the rollover requirement.
Also, extremely low mortgage rates have allowed people to borrow say, $250,000 at 6% for the same monthly payment as a $204,000 mortgage at 8%. The largest increases in prices have occurred in those bluest of locations where zoning restrictions and excessive regulations have restricted new supply.
The FDIC just completed a study on housing bubbles. Their prognostication is that the bubble will not burst but that housing prices could well stagnate for some period of time as and when mortgage rates go up. There could be a couple of markets that burst, but they would represent special economic circumstances.
Tiny bubbles, at the Fed...
My question is who is living in all these homes being built? If its people here already then there must be many many many apartments sitting empty.
If its immigrants (illegal and legal) then I suspect we have added 20+ million of them in the past 15 years. And that number may be much higher.
I don't know. I'd figured I'd bought at the top of the market. Lots of folks were saying, "This is it, prices can't go any higher." And, I felt I was overpaying, even on top of that.
That was February, 2001.
Since then, my house has appreciated 60%.
The bubble pops when inteest rates go up.
While there plenty of stories of speculators really banking on a zero down turnaround or homeowners who went out and spent their re-finace money on a bunch of toys, the reality is that the vast majority of homeowners have done NOTHING.
Whether the house is worth $800k, 600 or 400 doesn't mean one iota as long as the mortgage is lower and the monthly payments are manageable. Without any huge job losses on the horizon, most people will continue to meet their debts.
As I recall, Greenspan did nothing but down talk the high stock prices until the bubble burst.