Nov
18

The remaking of an American housing bubble: Home prices are up 78 percent since 2000 and 30 percent since 2012.

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You have to realize what makes a bubble tick.  People get caught up in a deep rooted herd mentality.  The absolute blindness that occurred between 2005 and 2007 was incredible.  Yet a decade later, people have forgotten many of the reasons why the bubble hit in the first place.  Toxic loans were merely a symptom of the bigger issue – and that bigger issue was that stagnant incomes need riskier debt to keep prices moving higher.  The system is built on everything moving higher and the Fed lives off of this.  Yet somehow, we had an enormous housing collapse.  Today, prices are being driven higher by investors and foreign money.  In a previous post we discussed how one housing development in Irvine had 80 percent of buyers from China paying all cash – all cash for a median price of $1.16 million.  Even a couple of professionals can’t compete with all cash offers.  The driver for pushing prices higher today is different but the result is the same – local families need to take on more precarious levels of debt to buy in today’s market.  And the homeownership rate shows that many simply can’t compete…

The remaking of an American housing bubble: Home prices are up 78 percent since 2000 and 30 percent since 2012.

 

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