This week’s voiceofsandiego.org piece deals with a flawed (though very common) approach employed by housing bulls: citing the fact that people have been warning of a bubble for years as evidence that there was never a bubble in the first place.
This week’s voiceofsandiego.org piece deals with a flawed (though very common) approach employed by housing bulls: citing the fact that people have been warning of a bubble for years as evidence that there was never a bubble in the first place.
Rich,
You had brought up the
Rich,
You had brought up the fact that Chris Thornberg seems very bullish these days compared to previous years. I thought the same, but looked it up and found that, although he has mentioned the housing bubble many times over the past few years, he always mentioned “hissing instead of popping” and flattening prices (at least from the articles I was reading).
However, Ed Leamer (also of the UCLA Anderson Forecast) was more bearish, even in 2002, and brought up the p/e ratios being being out-of-whack even then.
I could be wrong, but Thornberg’s “bullishness” confused me as well.
Thornberg has been careful
Thornberg has been careful on what he says about this. If you listen to this interview from NPR:
http://www.kcrw.com/cgi-bin/db/kcrw.pl?show_code=tp&air_date=5/20/05&tmplt_type=show
You’ll hear him refer to Southern California as being in a “world-class housing bubble”. But later in the show he tells listeners the market won’t melt down. Instead, they should think of housing as a low-return asset for the next decade or so.
I’m not sure how a world-class asset bubble slowly deflates without leaving a messy ring of soap scum, but maybe Thornberg knows something we don’t. At any rate, it’s fun listening to him on the show debate (and eviscerate) an NAR senior economist, who manages to do little more than parrot the “Bubble? What bubble?” line using the tired arguments we’re all familiar with.
Are any economists
Are any economists predicting price drops?
Nice article Rich – it does
Nice article Rich – it does bring back memories of 1999 and early 2000, where, after Y2K, everyone thought the coast was clear. That it really was a new era.
Here’s a suggestion for a future article – defining the word “bubble”.
You touched on it a bit, when you talked about prices being “driven to unreasonable heights based on exaggerated expectations of further price gains” and of course the alternate and independent definition about the correction, which many people feel requires a “popping”, like a soap bubble, rather than a hissing or deflating.
Just a thought.