Randolph Kinney
Elite Member
- Joined
- Apr 7, 2005
- Professional Status
- Retired Appraiser
- State
- North Carolina
Don't Worry, Housing Declines Should Be Moderate
http://www.ocregister.com/ocregister/money/homepage/article_1361000.php
Q. Is this a bubble bursting, or just a natural, cyclical easing after a decade of grand performance?
A. It depends on what you mean by the latter vs. the former. If you think the late '70s run-up in prices was a bubble, and the late '80s run-up was a bubble, then this is a bubble bursting. The same market characteristics that defined the cooling starting in 1979 and 1989 are what we are seeing today. If you think that what we have seen in the past is just a normal cycle, then this is a normal cycle. The key point here is to remember that a bubble is simply a market mispricing an asset due to excessive speculation. I do believe that houses are substantially overpriced relative to their real value. Housing markets seem very prone to these problems – probably due to the fact that unlike other asset markets such as in stocks and bonds, the amateurs tend to dominate sales and the brokers in the markets are not required to understand anything about assets, what they are and how they work – unlike the relatively stringent licensing requirements for bond and stock traders.
http://www.ocregister.com/ocregister/money/homepage/article_1361000.php
Q. Is this a bubble bursting, or just a natural, cyclical easing after a decade of grand performance?
A. It depends on what you mean by the latter vs. the former. If you think the late '70s run-up in prices was a bubble, and the late '80s run-up was a bubble, then this is a bubble bursting. The same market characteristics that defined the cooling starting in 1979 and 1989 are what we are seeing today. If you think that what we have seen in the past is just a normal cycle, then this is a normal cycle. The key point here is to remember that a bubble is simply a market mispricing an asset due to excessive speculation. I do believe that houses are substantially overpriced relative to their real value. Housing markets seem very prone to these problems – probably due to the fact that unlike other asset markets such as in stocks and bonds, the amateurs tend to dominate sales and the brokers in the markets are not required to understand anything about assets, what they are and how they work – unlike the relatively stringent licensing requirements for bond and stock traders.