Posts filed under “Real Estate”
Greenie agrees that there is no Housing Bubble (which makes me nervous).
Interesting observation from reader Rita:
"Being a baby boomer that have bought my primary residences from 1982 to now, I think apart from the extremely low interest rates, the change in tax law in ~1997? that allows the homeowner to keep up to $500K tax free capital gains from selling your primary residence and $250K for individuals is a key to the rapid shotup in prices.
Before this change in tax laws, we had to roll our house into a larger house to avoid the capital gains. My problem is: is there a cap for $1-2M homes in NJ that normal people cannot afford to buy even with the tax fee gains."
In other words, the change in tax policy is partially implicated in the home price runup.
CPI versus Home Prices
click for larger chart
Do note the spike at the right end of the chart
25 YEARS OF HOUSING AND THE ECONOMY. Click on the tabs to see how the
national average 30-year fixed-mortgage rate and CPI compare to the
growth in median existing-home prices.
Home Prices March Higher
Is this the Magazine Indicator at work? First Fortune, now Time Magazine: We’ve seen some terrific Contrary market calls from magazine covers: Time magazine naming Jeff Bezos man of the year in December 1999 marked the top of the internet bubble; The March 21st 2005 Newsweek cover story, “The Incredible Shrinking Dollar,” marked a key…Read More
UPDATE: The original version of this is still available on Real Money (subscription only). The 2005 article details was a pushback against the gloomers predicting a Nasdaq like collapse in RE prices. Instead, we detailed why this was a CREDIT (not a HOUSING) Bubble, and that while we should expect a 25-35% peak to trough drop in prices, it would not be a Nasdaq like 80% debacle. (35% was bad enough). We also noted that an extended period of high unemployment might make those numbers even worse.
In writing it, I decided to forget everything I thought I knew, and look at housing from scratch. Consider the factors that make Real Estate very different than stocks. Lose the assumptions, check out the numbers driving Real Estate, and see if Housing is truly the bubble everyone claims it to be.
Turns out there’s much less of a bubble than commonly believed by many people believe. While anecdotal evidence of regional excesses are interesting,
they doesn’t mean we are about to see home prices get cut in half (or worse) over the next few years.
There are three key drivers hardly discussed by pundits opining on the U.S. housing market “bubble”:
1) Purchase prices don’t matter to buyers — monthly payments do;
2) US has the fastest growing population of industrialized nations;
3) “Only 3% of all buyers sell their home in a year or less,” a survey found.
These issues, taken together, suggest that while Real Estate may be an extended asset class (i.e., two standard price deviations above historical trend) that doesn’t maeke it a bubble.
Of course, its interesting to note that a Playboy bunny gave up her modeling career to go into real estate speculation (mentioned previously here), it doesn’t mean the end is nigh.
Now if I can only figure out how these columns end up at Yahoo . . .
Don’t Buy Housing Bubble Propaganda
RealMoney by TheStreet.com, Thursday May 26, 2:04 pm ET
UPDATE June 12, 2006 9:39am
I just noticed that the Yahoo page expired; The full RM article is after the jump . . .
Category: Real Estate
Tony Crescenzi had an interesting article on RealMoney this week. In it, he notes that as the housing market soars, it ends up knocking rents lower. After all, why rent if ultra low real interest rates allow you to buy for the same price, and with nearly no money down? So what’s the problem with…Read More