People still have something of a bubble mentality. They want to get in now, when things are cheap, because they expect that we'll return to the housing price inflation of the 1990s, if not the last decade.Her entire blog post is well worth reading.
Thursday, August 20, 2009
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"because they expect that we'll return to the housing price inflation of the 1990s"
ReplyDeleteInflationof the 1990s? Case shiller 10 in Jan 1990 was 82.3. It didnt rise above that level til Jan 1998.
Her "1990's" reference is unclear, but I do think she's onto something. The fear that I have is that prices will start rising again due to runaway inflation.
ReplyDeleteThis does raise an interesting point however. To a lot of people, the line between gambling and investing has become hopelessly blurred. Buying into a bubble is fundamentally a gamble - you are gambling that you can get out before everyone else. The problem is that everyone is greedy and they want to hang in there until the very end. It is also the case that a lot of people forget that they are investing in a bubble, and start to believe that it will go on forever..
ReplyDeleteI suspect there are a lot of people out there for whom their retirements were based upon the grossly overinflated values of their houses. At this point, they may not have enough time to really recover if one assumes "normal" rates of return with age-appropriate risk factors and investments. Thus some of them might be tempted to "double-down" and throw some money into what ever appears to be the next bubble all in hopes of earning it back again. I hope I am wrong about this, but the eagerness that I see some people jumping back into housing leads me to wonder if we will have a double-bubble of some sort.
"To a lot of people, the line between gambling and investing has become hopelessly blurred."
ReplyDeleteIt always has been, its just the odds of the house drastically changed.
"It always has been, its just the odds of the house drastically changed."
ReplyDeleteHmm, house odds... Odds of housing price declines... There is a double-entendre here that I should have spotted when I wrote my original post...
yeah I was playing on the words, trying to be a bit witty.
ReplyDeleteI personally think she is missinformed. I think the reason people are trying to buy homes now has more to do with the fact that money is still cheap and there are a lot of desperate sellers and has little to do with people thinking that houses are going to start inflating again like they were before.
ReplyDelete"has little to do with people thinking that houses are going to start inflating again like they were before."
ReplyDeleteA lot of posters here who think its all over, or their street is different, would beg to differ. They all think prices are going to double or triple in the next coming weeks.
I have not gotten that impression from any of the posters hear. The impression I got was that some posters think the market has to correct more and other posters think that some markets are at a reasonable level givin the interest rates and inflation. I have not read many if any posts from people that think the market is going to shot back up like it was before.
ReplyDeleteAnonymous said...
ReplyDelete"Inflation of the 1990s? Case shiller 10 in Jan 1990 was 82.3. It didnt rise above that level til Jan 1998."
The Case-Shiller national home price index did increase in nominal value between 1990 and 1997, but all of that occurred in the post-1993 years. See my graph here. That said, I think she was just trying to refer to historically normal price appreciation vs. bubble price appeciation, but probably hadn't looked at a graph before making her comment. The bubble began growing in 1998.
"I have not read many if any posts from people that think the market is going to shot back up like it was before."
ReplyDeleteperhaps a reading comprehension class is in order? There are lots of people telling everyone its a good time to buy using the 90s blip/bubble as an example, then quoting how much money they have earned by buying in 2000. etc.