Interesting argument. This argument appeared in The Conservative Voice magazine under the title
There is No Housing Bubble!! . You always need to wonder about a story title that has two exclamation points in it. Joking aside the author writes:
"The real reason for the housing boom is that American families are getting wealthier, which means they can afford to buy bigger and better housing, while the monthly cost of financing those upscale homes out of current income has dropped significantly with the lower mortgage rates"
Wealth is creating this housing boom? Hmm.
- Incomes are stagnating
- Savings rates are now at zero
- The 'wealth' that is being generated is because of the housing boom.
Posts
good one. :-)
ReplyDeleteHuh? Since when are Americans getting wealthier? Didn't that guy bother to note that incomes have not risen nearly enough to justify the housing prices? Sure, we have more money than our grandparents did, but that's just a weak argument if ever there was one.
ReplyDeleteMy mother just retired and sold her home in Hilton Head for 370K. Six weeks later it is on the market for 600K by the flipper who bought it.
ReplyDeleteHmmm? No housing bubble huh.
We must be getting wealthy really, really, really fast unless the dollar's getting kind of overvalued really, really, really fast.
ReplyDeleteBut doomsayers, real disposable personal income in the US has grown by over 12 percent since the end of 2000. Also, the U.S. Department of Labor recently reported that more than 200,000 new jobs were created in July, and two million over the past year. Add to this the fact that there is a growing population and not enough new housing and you have a situation that always causes price increases: not enough supply and too much demand. Are there certain markets which are overheated? Yes. Is the whole US overvalued? No. This mania about the bubble is almost more of a mania than the housing market itself.
ReplyDeleteCummulative inflation since 2000 is greater than 12%, which means that disposable income adjusted for inflation is lower than in 2000. 90% of new job creation is in the housing sector. The population is growing, but not as fast as available housing when you include rentals. The "not enough housing" comment only holds water if your ignore rentals. We are in a credit bubble. The dollar is artificially inflated because developing nations (especially China) must reinvest the dollars recieved from the current account deficit (trade surplus) back into US dollars. If they want their wages to remain low so their exports to the U.S. can continue to fuel their astronomic economic growth, their currency must remain cheap. Why do you think the Bush administration is strong arming China to raise its currency valuation? We must reduce our trade deficit, but since our wages are so high, we can't do it by exporting. The only solution is to inflate foreign currencies. In a nutshell, the world economy is floating on credit. The american economy is floating on credit which is foreign money infused into the American economy through mortgages. Why do you think that interest rates continued to fall after the Federal Reserve raised rates in June 2004, and the prime rate did not increase until China decided to diversify out of American debt instruments (government bonds) this summer? So technically, we are not in a housing bubble, we are in a currency bubble. But, if you do not believe me, just answer one question. What will happen to the housing market (especially those lovely ARMs, which are 60% of new Southern California mortages) if the prime goes to 9%? Can you spell buyers' market? If someone has a question, or can see something I cannot, please email me at fakesnabriel@yahoo.com
ReplyDeleteRemember the Doors song:
ReplyDeleteThis is the end, Beautiful friend
This is the end, My only friend, the end
Of our elaborate plans, the end
Of everything that stands, the end
No safety or surprise, the end
I'll never look into your eyes...again
Can you picture what will be, So limitless and free
Desperately in need...of some...stranger's hand
In a...desperate land
Lost in a Roman...wilderness of pain
And all the children are insane, All the children are insane
Waiting for the summer rain, yeah
There's danger on the edge of town
Ride the King's highway, baby
Weird scenes inside the gold mine
Ride the highway west, baby
Ride the snake, ride the snake
To the lake, the ancient lake, baby
The snake is long, seven miles
Ride the snake...he's old, and his skin is cold
The west is the best, The west is the best
Get here, and we'll do the rest
The blue bus is callin' us, The blue bus is callin' us...