Tuesday, October 11, 2005

Greed Turning into Fear

It is well known that one significant factor driving the housing bubble has been strong speculation. This is a speculative episode. Greed drives the speculators to speculate.

But, fear is actually a stronger emotion then greed. The greedy speculators have either cashed in or are left holding the bag. But, the cat is out of the bag. The bubble is now widely accepted. Those left holding, are increasingly fearful that the market has changed. Fear is now rising. Fear leads to selling. The rising inventory in the bubble markets is a key sign.

11 comments:

  1. It will be interesting to see when this actually happens, although I haven't seen it yet.

    I think sellers' first reaction will be to take their house off the market. Some (flippers, etc.) will not be able to, or will hold on desperately and declare bankruptcy rather than sell at a lower price.

    Others, longer term owners, will finally start to make real reductions and know they still walked away with more than they paid for (though after inflation, taxes and renovations over years, maybe not much more).

    Will be interesting to see. But I think it's a ways off.

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  2. The bug has been out and into the ear of the public about a housing bubble- however the blood has yet to begin to flow in earnest. Locally a townhouse condo in my community 17 miles NE of Hartford CT has been on the market for several weeks.
    We have a nice self managed complex of only 24 townhouses. Thet are around 1100 square feet, attached garage, built between 1990-1996. Very attractive landscaping. Units in the spring and summer sold in a matter of days- above asking price. The unit for sale now is well kept, end unit, hardwood floors, skylights. Still listed, and from what I have seen, not many showings-price is $161,900.

    Inventories for condos are up in the greater Hartford area about 40% over 6 months ago.
    The time of inflection is near- lets see what happens in late winter, and spring. I wonder what will happen if these listing increase, and sit- will prices fall?

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  3. David: Since when is making money considered to be greedy? Does your definition of "greed" apply only to real estate investors or to any person or company that makes a profit? What about the guys that founded Google - they are rich so they must be greedy(?) How about Warren Buffet or Jimmy Buffet for that matter. You seem to be rubbing your hands in glee at the possibility of a catastrophic (you hope) drop in housing prices. Is your point to facilitate intelligent and thoughtful debate on the issue of, and forcast of, housing prices or to revel in the financial undoing of your neighbor, co-worker, hated successful brother-in-law or ...you fill in the blank. I don't get your point or the true purpose of your blog.

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  4. "Since when is making money considered to be greedy?"

    It is not neccasarily greed, unless it brings you to making such risky moves as in a speculative episode. Flipping ( without improving the home) is a problem.

    "Does your definition of "greed" apply only to real estate investors or to any person or company that makes a profit"

    Not all real estate investors are greedy. Those that buy a property, do no improvements and then sell it in 3 months at a profit are a part of this greedy speculative episode. Those long term investors who buy properties and manage them are cool.

    "I don't get your point or the true purpose of your blog."

    The true point is two fold:
    1) To inform about this speculative episode. I don't want people to lose lots of money.

    2)To be an 'economic activist.' Speculative episodes are bad for economies. The longer a speculative episode continues the worse off the inevitable period after the crash will be ( think about Tulipmaina, Great Depression ).

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  5. Good defense David

    a decent profit is fine, a gross profit is greed. In the USA today it has become totally acceptable to make gross profits at the expense of the vulnerable and weak. What that says about American 'democracy' is open to discussion.

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  6. David - my posts are not showing up. am i banned from your blog?

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  7. This comment has been removed by a blog administrator.

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  8. "David - my posts are not showing up. am i banned from your blog?"

    I have not banned anyone.

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  9. And where does the far right end up? In skinheads>?

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  10. The bug has been out and into the ear of the public about a housing bubble- however the blood has yet to begin to flow in earnest. Locally a townhouse condo in my community 17 miles NE of Hartford CT has been on the market for several weeks.
    We have a nice self managed complex of only 24 townhouses. Thet are around 1100 square feet, attached garage, built between 1990-1996. Very attractive landscaping. Units in the spring and summer sold in a matter of days- above asking price. The unit for sale now is well kept, end unit, hardwood floors, skylights. Still listed, and from what I have seen, not many showings-price is $161,900.

    Inventories for condos are up in the greater Hartford area about 40% over 6 months ago.
    The time of inflection is near- lets see what happens in late winter, and spring. I wonder what will happen if these listing increase, and sit- will prices fall?

    ReplyDelete