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The Bubble Is Back

6 posts in this topic

WASHINGTON — IN November, housing starts were up 23 percent, and there was cheering all around. But the crowd would quiet down if it realized that another housing bubble had begun to grow.

Almost everyone understands that the 2007-8 financial crisis was precipitated by the collapse of a huge housing bubble. The Obama administration’s remedy of choice was the Dodd-Frank Act. It is the most restrictive financial regulation since the Great Depression — but it won’t prevent another housing bubble.

Housing bubbles are measured by comparing current prices to a reliable index of housing prices. Fortunately, we have one. The United States Bureau of Labor Statistics has been keeping track of the costs of renting a residence since at least 1983; its index shows a steady rise of about 3 percent a year over this 30-year period. This is as it should be; other things being equal, rentals should track the inflation rate. Home prices should do the same. If prices rise much above the rental rate, families theoretically would begin to rent, not buy.

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Wait, I thought those on the left claimed that the whole cause for the crash as detailed in the OP was a myth - government policies had nothing to do with it and it was all racist predatory lenders.

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Wait, I thought those on the left claimed that the whole cause for the crash as detailed in the OP was a myth - government policies had nothing to do with it and it was all racist predatory lenders.

Evidently it did not, because this time it seems to be happening despite restrictions. So the government could not have had anything to do with it.

Except that the government first abolished the restrictions and then put so much money into circulation that it can restrict whatever it wants: Until we get to a sane amount of money again it will be bubble after bubble until the great bust.

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Posted (edited)

I just sold my home to a builder who is going to be building a 1M dollar house on the property. I also work for a mortgage company. Additionally, I'm looking to buy a small in-city condo.

Here's what I can see in my area:

1. There are crap tons of buyers right now.

2. There's VERY little for sale, with some of the lowest inventory I've seen in 20 years.

3. Prices are WAY up and nothing is staying on the market for more than a handful of days. And what is on the market, is staggeringly expensive.

4. The re-fi market is tapped out, so much so that droves of loan officers are giving up their professions and moving to other careers. They can't make any money right now with no re-fi's and no homes on the market. I don't expect to see the re-fi market come back until a good 5-7 years after interest rates come up significantly.

I'll be moving to an apartment, I can't find anything for sale.

Now, that's just my experience in Seattle. I don't know what's going on in the rest of the country, but here, so many folks are still under water in their mortgages they actually can't afford to sell.

Edited by MissMelsWell

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Posted (edited)

I just sold my home to a builder who is going to be building a 1M dollar house on the property. I also work for a mortgage company. Additionally, I'm looking to buy a small in-city condo.

Here's what I can see in my area:

1. There are crap tons of buyers right now.

2. There's VERY little for sale, with some of the lowest inventory I've seen in 20 years.

3. Prices are WAY up and nothing is staying on the market for more than a handful of days. And what is on the market, is staggeringly expensive.

4. The re-fi market is tapped out, so much so that droves of loan officers are giving up their professions and moving to other careers. They can't make any money right now with no re-fi's and no homes on the market.

I'll be moving to an apartment, I can't find anything for sale.

Now, that's just my experience in Seattle. I don't know what's going on in the rest of the country, but here, so many folks are still under water in their mortgages they actually can't afford to sell.

In the larger Des Moines area at this point you can only sell under assessed value, there are many short sales and many owner under water.

Edited by questionmark

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