US bubble set to burst - [physicists predict burst of housing bubble in 22 states]

PhysicsWeb ^ | June 7, 2005 | Belle Dumé

[kingu]

Hell, scare enough people with this kind of talk and it's rather a self-fulfilling prophesy.

I'm still shocked at the house across the street from us.. On the market for $512,000 for five months now, he's sold the house five times, each time the buyer backs out before the end of escrow. He bought the house four years ago for $310,000 - a hefty profit if he could ever get someone to actually get someone to buy it.

Been in our house for twelve years, bought it for $165,000. Someone asks me about my retirement plan, I tell them I'm living in it. Yeah, I expect the bubble to burst - I think it already has. Far too many properties around me are up for sale whereas eight months ago the Realtors never bothered to put up a sign - it was usually sold before the ink was dry on the listing papers.

[durasell]

May I ask what state?

[snarks_when_bored]

You make some good points. However, the data analyzed by the two physicists announce the presence of what they call 'faster-than-exponential growth' in the real estate markets they looked at. Faster-than-exponential growth is the mark of a bubble and is unsustainable by any physical process. Their success in predicting the decline of the U.K. housing market is no guarantee that they're going to be correct this time, but their current analysis certainly warrants attention, it seems to me. I haven't read their paper, though. If I can find some quiet time, I'm going to try to work through some of their paper in the next day or so.

[kingu]

California - the eastern end of the San Gabriel Valley to be specific. If the homes on my street are really worth $360,000, I'd be shocked. A $160,000 upcharge from that is just insane.

[stands2reason]

"track record"?

You need more than one point to create a line.

[snarks_when_bored]

"Track record" is too strong, you're correct. Let's say, their "previous successful prediction".

[Treader]

Sizing the US market by using a formulae for the exfoliating UK market and any other- is inane. Regardless, Buffet is fella to listen to after the fact- just try to follow him before the fact, see how that works for ya. The US housing market will continue to boom towards a sustained leveling; unless one or more, of three events happen- none of them good scenarios- then all bets are off.

[Mikse]

I blame Greenspan... rates were ridiculously low for too long, I just hope we have a soft landing.

[durasell]

Greenspan's real legacy might be a real estate meltdown, like the early 90s -- but bigger.

The only thing keeping the prices up at this point is hype and a rapidly dwindling supply of greater fools.

[The Electrician]

Moreover, the models were able to predict the critical turning point at which these bubbles might burst – after which time the high prices may slowly start to come back down to more realistic levels or stabilise at their current levels.

Did anybody else read that definition of "bursting the bubble"? To reiterate, according to that paragraph, it means that prices would slowly retreat or else stabilize at their current levels, not that they would crash by 50% as some are breathlessly claiming.

[snarks_when_bored]

The Nasdaq tech bubble burst in March of 2000:

If the real estate market behaves similarly, there will be big trouble. But perhaps it won't be quite that bad.

[raybbr]

That will piss off all those states who are getting gigantic raises in revenues from the huge property tax income.

Just because the values drop doesn't mean they are going to adjust the assessments.

[advance_copy]

E=mc²

Therefore, the U.S. bubble will burst. Makes complete sense to me.

[snarks_when_bored]

E=mc²

Therefore, the U.S. bubble will burst. Makes complete sense to me.

You're ignoring higher-order terms...

[advance_copy]

Everything is relative :-)

[wotan]

Moreover, the models were able to predict the critical turning point at which these bubbles might burst – after which time the high prices may slowly start to come back down to more realistic levels or stabilise at their current levels.

No one in his right mind would call a large increase in price stabilizing at a high level a "bubble".

[snarks_when_bored]

Everything is relative :-)

Yeah, that's what my Tennessee kinfolk used to say.

[metesky]

Extraordinary Popular Delusions And The Madness Of Crowds By Charles MacKay

[Cacique]

BTT 4L8R

[metesky]

Twenty years ago, when I first bought property in Maine, the Yankee gentleman I bought from (one of the last real Downeasters left) gave me a maxim to live by as far as Maine RE goes:

"Maine, last to know, first to go."