The Nattering Nabob has a very pithy (and astute) observation of what makes a bubble:
Manias share four common characteristics:
• A feeding frenzy sends prices parabolic.
• The public jumps in with both feet.
• Valuations detach from economic reality.
• Rationalizations abound for why valuations are reasonable and the trend will continue.
There are several reasons I have been reluctant to call the Real Estate market a bubble — yet.
- The market is regional; San Francisco, NY and Boston do not = the entire US;
- Its an illiquid market, and properties take a while to sell (as opposed to being flipped intraday);
- Most buyers care little about purchase price — they are concerned with monthly carrying costs. Insurance and Taxes have remained fairly stable;
- 40 year low interest rates allows people to buy more expensive homes, so long as they can afford the monthly nut.
I do expect the hottest areas to fall by as much as 30%, if rates keep rising (as many expect they will) . . . Is that a bubble popping — or merely a retracement of outsized gains?
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.