Tuesday, May 02, 2006

Why We Won't Know If There's a Housing Bubble Until It's Too Late.

Just look at pfblogs.org, and you can see lots of posts on an impending housing bubble bursting or one that has already happened! The problem to me about all this talk is that it's just that...talk. Look at the newspapers and you'll see, "Housing Bubble Bursts!" But "Housing Prices Go Up!" What the hell? How can that be? Unlike the stock market bubble that burst, we have no way of really seeing a housing bubble burst. There are no Indexes that plumet 100 points or NASDAQ Level 2 quotes on houses. On top of that each local housing market has it's own bubble. In a way, it's like a big bubble bath...one bubble pops, it may or may not cause the bubble next to it to pop as well. We may not realize a housing bubble has burst until a couple months or even a year AFTER it has happened. Right now, I think we are in that period. The bubble has burst in some locations, but people just don't know it. Sellers are selling for ridiculously high prices because they don't realize it, and buyers are buying because they don't want to miss out on the boom. I'm not speaking for every market, because there are some that are still relatively in control. I worry about those that are markets that are over inflated...people will get hurt. It doesn't sound fun. That's why I'm waiting a year just to see how things are going. I guess I have the luxury of time on my side, but many others don't. I really hope there's a "soft landing" to the housing market because real lives are going to be affected.

1 comment:

LAMoneyGuy said...

Bingo. It doesn't all happen at once. Even with stocks, remember many stocks began the decline in '99, others held up until 2002. Regions will likely act like sectors did in stocks, with the "hottest" regions dropping like the dot-coms, etc. Not as much, of course, but in the same order.