Saturday, June 02, 2007
Haven't We Seen This Before?
Did someone say bubble? I am not an alarmist nor am I bearish on the markets and the economy. However, I am skeptical about housing prices. The headlines I read in the paper and comments I hear from everyone around me are almost word for word the same comments I heard in the run up to the tech bubble bursting. As far as I can see there is no fundamental economic basis for the current housing prices. Here is a fancy chart I found over at smalldeadanimals.com
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4 comments:
It's all about demographics.
In five years the Boomers will start dying off and their kids will have bought homes and be out of the market.
Boomers have done a horrible job in preparing for retirement, relying on the equity in their home as the main source of funds. Once house prices start to drop there will be a mass sell off as boomers panic and want to secure the equity. The only problem with that strategy is they still need somewhere to live. So either they rent (which will drive up rent prices) or they move to small towns where housing is cheap. Either way the high prices in the hot markets will only go down, hard.
A buyers market would be great for people my age who have been disenfranchised from home ownership by the housing boom. Still, I don't see some markets crashing, such as the Vancouver fiasco where the average cost of a home is $600,000.
raphael...
Housing prices have crashed in the past. What makes you think it won't happen again? The housing market is just like the stock market, there are up years and down years. But overall the trend is positive.
During the peak of the tech bubble everyone was saying that it wouldn't crash and this time it is different. Well, it wasn't. Real estate is exactly the same, it will crash. But unlike the stock market a housing crash will affect more people and wipe out most peoples retirement plan.
Personally, I will sit on the side lines and wait to buy their houses for pennies on the dollar and laugh at their stupidity.
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