Thursday, August 04, 2005

HBAS #3: Explaining why the Price "bubble is being sustained'

Here is a housinghead argument taken from the Housing Bubble Blog. Read it carefully: (HBAS = Housing Bull Arguments Series)

In case anyone was wondering how the price bubble is being sustained. It's being sustained by the 30%renters waiting and waiting and waiting and finally buying in 06, 07, 08, 09, 2010 as the 'bubble' continues and price increases through the end of the decade. "
This housing bull has an interesting argument. In fact the person admits that there is a 'price bubble', but that there will be "price increases through the end of the decade." It is not about if there is a bubble or not, the argument of this poster is merely about timing. The poster states that the price increases are "being sustained by the 30% renters waiting and waiting and waiting and finally buying in 06, 07, 08, 09, 2010." First of all homeownership is at an all time high of 69%. Many, of the people in last remaining percentage of people are either too poor, not interested, or too mobile to own a home.

The explosion of housing bubble news has changed the demand curve in the bubble markets. People are less eager to buy. Since, home affordability is at such lows in the bubble markets, the renters for the large part have given up on homeownership until prices declines occur or until their incomes go up ( in the bubble markets). But, with incomes stagnating, income gains will not be sufficient to continue the bubble.

1 comment:

  1. Housing heads are getting sillier and sillier every day. Perhaps this one is from silly valley.