Wednesday, January 07, 2009

Bruce Bartlett on the housing bubble debate

Bruce Bartlett gives an interesting timeline of the debate over the housing bubble. He ends with this thought:
There were many economists who did see it coming, but there were many others of equal or greater prominence and authority who repeatedly insisted that there was nothing to worry about. ...

Unfortunately, it is in the nature of economic and financial forecasting that being right too soon is insignificantly different from just being wrong. And forecasters that are wrong when most of their community is also wrong never suffer for it. The trick is to be right just a little bit sooner than everyone else—but only a little bit.


  1. Yes Virginia, there are new slums coming. Look to the commercial sector to find neighborhoods on the decline;

    "In the District, the vacancy rate remained relatively flat at 8.5 percent compared with 8.6 percent a year ago. Asking rents increased to $47.51 per square foot from $46.43 a year ago. And some notable deals did get done. "

    "In Northern Virginia, the vacancy rate inside the Beltway remained relatively flat, with the Rosslyn-Ballston corridor at 8.2 percent compared with 8.1 a year ago. Rents increased to $36.38 per square foot compared to $35.17 a year ago. "

    "Along the Dulles Toll Road, where developers built buildings in hope of lining up tenants later, the vacancy rate for Reston and Herndon was 18.6 percent compared with 11.7 percent a year ago. Asking rents were flat at $31.14 per square foot compared with $31.16. "

    "Along Route 28, south of Dulles International Airport, the vacancy rate ticked up to 20.5 percent, compared with 18.1 percent a year ago. Asking rents declined to $27.80 per square foot from $28.98 a year ago.

    In Montgomery County, the vacancy rate rose to 10.8 percent from 9.2 percent a year ago. Rents increased to $30.15 per square foot from $28.75. Prince George's County's vacancy rate increased to 17.4 percent from 15.1 percent a year ago. Asking rents there declined to $22.59 per square foot from $22.94.

    Meanwhile, some 38 buildings comprising 3.3 million square feet of office space remained under construction throughout Suburban Maryland at the end of the third quarter, according to CoStar.

    A significant portion of that was speculative office space, Sikaitis said. "

  2. We are seeing a decrease in suburban values for both commercial and private real estate, combined with higher vacancy rates, higher inventory, and lower prices for both (commercial and private suburban real estate).

    Hmmm. If I consider those facts in conjunction with metro-area traffic congestion and the extreme volitility in (ahem) oil prices (sorry) and the lack of public transportation to/from those suburban locations, I draw one conclusion.

    But I'm not going to state the conclusion here because it is incongruent with pop culture (lemming) wisdom.

    Remember folks; there was a time when pop culture had most people thinking that you would fall off the edge of the earth if you ventured too far from home. More recently, pop culture (aka "science") in the USA had people thinking that regular excercise was bad for you. (look into it; circa 1955)

    Did I mention Extreme Volitility?