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As an economist articles like this strike me as pretty bizarre. Okay, so an asset class is more affordable than it used to be. Why does this indicate the existe
by yanderekko 6y ago
As an economist articles like this strike me as pretty bizarre. Okay, so an asset class is more affordable than it used to be. Why does this indicate the existence of an asset price bubble rather than normal supply/demand dynamics?
- beforeolives 6y agoCan't you look at any bubble and call it supply/demand dynamics?
- deleted 6y ago[deleted]
- TuringNYC 6y agoOne sign of a bubble -- to me -- might be purchases which are out of line with income/yield. One could theoretically make growth assumptions, but even with that baked in, sometimes the PEG ratio is irrational and that suggests a bubble.
- 0xfaded 6y agoThese house prices greatly exceed the value provided by a house (basically shelter from the elements, access to employment). An economist would call such margin a rent, and reason that supply would increase to take advantage of the profits to be made. A bubble is driven by price momentum, which in this case is a result of poor policy (zoning), too big to fail dynamics (what would happen to the pension funds in a crash?), and a blind eye to illegal activity (money laundering). Supply is going to have to increase to almost illogical levels to temper this momentum. I could imagine a public construction company tasked with nothing but building new towns outside the cities, complete with universities and subsidized employment opportunities, could begin to make a dent.