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> We’re in a bubble that’s ready to burst IMO. Not necessarily. Bubbles are based on speculation. The last bubble was powered by sub-prime mortgages, which is
by AceJohnny2 9y ago
> We’re in a bubble that’s ready to burst IMO.
Not necessarily. Bubbles are based on speculation. The last bubble was powered by sub-prime mortgages, which is what burst.
The Bay Area has the problem of ongoing immigration, a very highly paid demographic, and housing market that isn't keeping up. Simply, Offer < Demand.
Offer isn't looking to catch up any time soon [1], and demand crashing would mean the tech economy will have crashed as well (or, you know, The Big One).
[1] I'll have to sleuth up the link from 6mo-1y ago about how maximizing consctruction at this point would only keep up with demand, effectively only preventing a further increase.
- usaar333 9y agoRents are flat the last three years. Values are up by over 30%. That difference feels speculative..
- charlesdm 9y agoThe question also is, have sales kept up at those values?
- refurb 9y agoLooking at the Case-Shiller index for SF, I would agree it looks speculative.[1] SF home prices went from an indexed 219 in Mar 2006, down to 120 in May 2009. That's a 45% decrease over two years. Right now the index is at 259 and that's inflation adjusted. [1]https://alfred.stlouisfed.org/series?seid=SFXRSA https://alfred.stlouisfed.org/series?seid=SFXRSA
- nshelly 9y agoI believe the Case-Shiller index is "seasonally-adjusted", not "inflation-adjusted"[1]. What makes you think it's adjusted for inflation? [1] https://www.advisorperspectives.com/dshort/updates/2018/03/27/home-price-surge-continues-in-january https://www.advisorperspectives.com/dshort/updates/2018/03/2...
- e3b0c 9y agoNot necessarily. I am afraid that such sentiment would be priced in as well. If people are so certain about the market, the price would be led by the expectation rather than the fundamental.
- erik_seaberg 9y agoThe median family can't remotely afford the median house; we've left the fundamental value way behind.
- paxys 9y agoIt may or may not be a bubble, and honestly I don't know which outcome is worse. That is what really scares me.
- tehlike 9y agoThe thing with subprime mortgages is, noone saw it coming. How do you know some other forces are at play in todays market? Forces that may not be true in the blink of an eye? Not saying it is gonna burst, and i see the factors, but theyw ere there in 2008 too.
- AceJohnny2 9y agoPeople absolutely saw it coming. I remember Geithner making comments to the effect of "we aren't ready yet!" when the bubble finally broke. The Fed was already making plans to shore up the affected banks, but hadn't yet built up the funds to do so effectively. But then it depends on which timescale we're talking about.
- tehlike 9y agoWhen did they notice, and why did the housing prices go up and away years leading to 2008?
- AceJohnny2 9y agoIt's a long timeline, but I'd say things started getting specific late 2006: https://en.wikipedia.org/wiki/Subprime_crisis_impact_timeline#2006 https://en.wikipedia.org/wiki/Subprime_crisis_impact_timelin...
- newfoundglory 9y agoIn December 2007 in Australia I saw a presentation on the coming collapse of the US subprime housing market - in a lunchtime seminar given by a (tech) colleague for interests sake.
- jandrese 9y agoBasically, everybody wanted to ride the gravy train and nobody wanted to be the killjoy that pulled the brakes before it flew off of the cliff. There was a lot of money to be made and nobody thought they would be the ones left holding the bag. The movie The Big Short explained this pretty well.