Housing Bubble Bursting?

[Randolph Kinney]

Another Proverb

Anyone inexperienced puts faith in every word, but the shrewd one considers his steps.

Now, let us consider the application of that proverb. Don't believe everything you read, see, or hear. And so when that application fits, do you apply it to yourself? Or does it only apply to the other person who holds the opposite opinion from yourself?

I believe the gist of the Harvard study was that the economy going forward will have more of an impact on home prices rather than the other way around. The question becomes, is there a recession in the near future? Rising interest rates and tight credit may cause that. If so, there will be job loses. And that could produce the scenario where the "bubble", rather than slowly deflating, the "bubble" has a pronounced and abrupt deflating. RE is not the only "bubble" that will be adjusted by market driven forces. The FED has been known to cause "bubbles" to collapse because their policy changes produce monetary and credit strangulation.

We all have to adjust to the changing market conditions and the economy. Some will have a very difficult time. Others, well they may have less risk than some.

 

[Mike Simpson]

Don't worry about the world coming to an end today. It's already tomorrow in Australia.
Charles Schultz

History is more or less bunk.
Henry Ford (1863-1947)

History is the version of past events that people have decided to agree upon.
Napoleon Bonaparte (1769-1821)

I never think of the future - it comes soon enough.
Albert Einstein (1879-1955)

Say goodbye to the oldies, but goodies, because the good old days weren't always good and tomorrow ain't as bad as it seems.
Billy Joel

The future belongs to those who believe in the beauty of their dreams.
Eleanor Roosevelt

The times they are a-changing.
Bob Dylan

We haven't the money, so we've got to think.
Lord Rutherford

Ordinary riches can be stolen, real riches cannot. In your soul are infinitely precious things that cannot be taken from you.
Oscar Wilde (1854-1900)

Teach a parrot the terms "supply and demand" and you've got an economist.
Thomas Carlyle

The highest use of capital is not to make more money, but to make money do more for the betterment of life.
Henry Ford (1863-1947)

The honest poor can sometimes forget poverty. The honest rich can never forget it.
G. K. Chesterton

Unquestionably, there is progress. The average American now pays out twice as much in taxes as he formerly got in wages.
Henry Louis Mencken (1880-1956)

If you had your life to live over again - you'd need more money.
Construction Digest

In all recorded history there has not been one economist who has had to worry about where the next meal would come from.
Peter F. Drucker

It is better to have a permanent income than to be fascinating.
Oscar Wilde (1854-1900)

Everything in the world may be endured except continued prosperity.
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If money is your hope for independence you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience, and ability.
Henry Ford (1863-1947)

A dollar saved is a quarter earned.
John Ciardi

An economic forecaster is like a cross-eyed javelin thrower: they don't win many accuracy contests, but they keep the crowd's attention.
Anonymous

An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.
Laurence J. Peter

 

[The Warrior Monk]

Even if home prices dip...I'll be able to make just as much...maybe more because, there's suddenly more opportunity. Of course I'd stave off investing when prices begin to fall...I've an aversion to grasping @ falling knives (but then again...I don't have roots, and as Cramer says, "there's always a Bull Market somewhere!").

That's great Mike...I believe the same. When the market craps out I'll be happy to invest...very high interest rates will also be a plus...lots of money can be made when the rates head down all other factors being equal...

But once again...your posts having nothing to with an argument against a bubble.

 

[Randolph Kinney]

History is the version of past events that people have decided to agree upon.
Napoleon Bonaparte (1769-1821)

An economic forecaster is like a cross-eyed javelin thrower: they don't win many accuracy contests, but they keep the crowd's attention.
Anonymous

An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.
Laurence J. Peter

Your quotes indicate that you have the basic understanding of why you should not believe and put your trust in the written or spoken word, especially coming from the academic world for hire.

Now for that problem where you project on to other people ... that they believe in a conspiracy ... you need to work on that.

 

[Randolph Kinney]

Hedge Against A Housing Bubble With Housing Futures

Mike, I found the perfect investment for you to hedge your risk if there is a housing bubble and to maximize your gain if there isn't a housing bubble.

Hedge funds have been a big buzzword over the last decade as investors seek to "hedge their bets" in financial markets.

Now there are ways to hedge your bet in the housing market. Well, maybe not you personally - this is a pretty expensive proposition for an individual homeowner - but ways that mortgage companies, home builders, and others heavily invested in the future of the housing market can protect themselves against market fluctuations and investors can take advantage of rising prices without actually buying and selling homes. And maybe there will soon be opportunities for individual homeowners and small investors.

The Chicago Mercantile Exchange recently followed the lead of a small San Mateo California derivatives exchange in offering housing based futures contracts to investors. These contracts are not quite like commodities and not quite like options contracts but have some of the features of both.

Now for that conspiracy, you don't suppose it is really Wall Street that is behind all this talk of a housing bubble, do you? It might make sense. They hype the concern over the housing market and then they come out with a product they want to sell to you that will protect you against that bad old down down, "bubble pop" turn in the housing market.

But what if you don't believe all that hype? Not to worry. You can exploit the fools who believe there is a housing bubble. How? Just take the opposite position; buy when they sell. Or sell when they buy, whatever.

 

[Randolph Kinney]

From Merrill Lynch

Economy: The housing downturn has further to go


The housing sector is a key area to watch for clues to what lies ahead for the economy. The housing market has been wobbling for some time, and David Rosenberg, our North American economist, thinks that the slowdown is likely to take some of the momentum away from the consumer sector and be a major contributor to the more-moderate pace of economic growth that probably lies ahead. How long might the housing slowdown last? Our work with housing-starts data suggests that the economy probably is no more than halfway through the downturn in starts.

Housing starts have fallen at a sharp rate during the past three months. We went back into the history books and found that there have been 10 housing down-cycles in the past five decades. After starts peak, they tend to go down for about two years and by 42%. For the record, the current cycle probably peaked in January.

The “weakness” story is not confined to the housing sector. In recent cycles, seven of the 10 housing downturns foreshadowed an outright economic recession. The lead time was long — about 20 months. The three housing downturns that did not precede a recession presaged a discernible slowing in overall economic growth within a year of the peak in starts, on average.

 

[Mike Simpson]

David Wimpelberg: "But once again...your posts having nothing to with an argument against a bubble."

I've given plenty of support for my views "against a housing bubble." Problem is...not one thing I've said has swayed the Bubblicrats. They've poo pooed every fact or figure I've offered in the past...then conveniently forget I ever submitted statistics & data to back up my viewpoints to begin with. However, there remains one irrefutable, undeniable fact...a Housing Bubble HAS NOT occurred.

The first time I ever heard the term "Housing Bubble" was on MSNBC in the year of our Lord 2000. Roughly six months after the stock market bubble burst. Negative news sells (not to me, but it sells), and the sensationalist media began presenting this notion that, 'if it happened in the stock market...why couldn't it happen in the housing markets?'

To borrow one of George's own analogies; "The Chattering Monkeys" began to pick up the mantra here on the Forum back in 2002, and it's continued unabated ever since. The fact that the overwhelming majority of those contributing to these threads holds a strong belief in a housing bubble continues to interest me. It's my experience--that in the REAL world--the overwhelming majority of people (including experts) DON'T believe in an all destroying bubble.

I surmise the reason this is the case is because, "it flows downhill." That's to say, those with keyboard power, those with the most posts, those who spend the most time here...believe in the omnipotent bubble (I sometimes wonder if they don't pray to it).

"Now for that problem where you project on to other people ... that they believe in a conspiracy ... you need to work on that."

Oh Randolph! You haven't been paying attention!

The conspiracy is; anything or anyone who doesn't pay homage to the Great Bubble is either a liar, or a fool (in other words...they're covering up the truth). Politicians & The NAR are THEY'RE favorite targets. It's not MY conspiracy...it's theirs.

-Mike

 

[Randolph Kinney]

"Now for that problem where you project on to other people ... that they believe in a conspiracy ... you need to work on that."

Oh Randolph! You haven't been paying attention!

The conspiracy is; anything or anyone who doesn't pay homage to the Great Bubble is either a liar, or a fool (in other words...they're covering up the truth). Politicians & The NAR are THEY'RE favorite targets. It's not MY conspiracy...it's theirs.

-Mike

Oh now Mike, I for one have been posting what anyone can read for themselves and I sight my source. There are sources that portray the residential housing market as overly inflated in price with a downward correction most likely. Some on this thread agree with that point of view. I have posted some articles proclaiming there is no worry about the housing bubble and there will not be a devaluation in value of any consequence. Some on this thread agree with that point of view.

I don't see where anyone is calling you a liar or a fool. It is not important that you adopt any particular opinion or point of view, not to me anyway. Equally so, it is not of importance or consequence than anyone should agree with your point of view.

It is interesting to note how strongly and emotionally invested you are with your view and your denial of relevant factual data that would suggest that may be there is a problem.

Any way, keep posting. At some point in time in the future, may be a majority will let you know that you were right, there was no "bubble" and it was indeed a buying opportunity.

 

[Mike Simpson]

"I don't see where anyone is calling you a liar or a fool."

Why do I even bother? I didn't state that anyone called ME a liar or a fool.

"It is interesting to note how strongly and emotionally invested you are with your view and your denial of relevant factual data that would suggest that may be there is a problem."

Relevant factual data?...relevant factual data?

That so called relevant factual data has been peddled here for four years & counting (six years in the mainstream media). The Bubble Heads prediction of a dire future for the housing markets never changes, but the reasons (relevant factual data) do; "Hurricane Katrina's going to be the tipping point...no it's gas prices...no the Irag/Afghanistan War...no Greenspan's gonna raise the rates...I mean Bernanke...it's oursourcing...it's insourcing," and on...and on...and on.

There's no doubt that Changes are taking place in the markets. Some areas will fair worse than others...some areas are still appreciating (significantly). I've read some pretty wild predictions here for years now; up to 80% depreciation...stagnation in the housing markets lasting for 8-10 years.

I don't consider myself emotional over whether there's a housing bubble brewing for all these years. I've a pretty good track record @ being able to read the markets & draw a rational conclusion. I don't take a position & stand by it for years regardless of facts, and facts are...NO HOUSING BUBBLE...STILL!

I think it's far more emotional to take a stance, and stick with it year after year--while ignoring the changes happening in the marketplace (an Appraisal Principle by the way).

-Mike

 

[Couch Potato]

Nationally no, but Locally yes.

I don't consider myself emotional over whether there's a housing bubble brewing for all these years. I've a pretty good track record @ being able to read the markets & draw a rational conclusion. I don't take a position & stand by it for years regardless of facts, and facts are...NO HOUSING BUBBLE...STILL!

IMHO what this thread has affirmed is the local nature of real estate mrkets inspite of international participation. Where Mike is located and doing business, everything is still just fine and dandy. In the large number of markets where no major rise in prices occured over the past few years, there is no question bubble talk is nonsense. Here in Central Florida there many production builders grasping at anything to try to move inventory; including giving away cars. The city of Palm Bay has experienced a classic bubble that inflated and popped. The question in Palm Bay is no longer when prices will fall, but how far will they fall before finding bottom.

In reading this thread one can't help but think of the story of the blind men and the elephant.