Affordability gap..
This makes sense to only the logical.
Beach property, San Fran Bay area, New York City, have markets that have sustained gaps that don’t pencil out either.
In the same way that many stocks don’t support the valuations that they are at, it’s a combination of I don’t care what it costs, I want what I want combined with the ignorance factor that will support markets forever.
Personally, I wouldn’t have bought a $300K house that rented for $1500 in 2003, but people who did saw gains of 100% in equity, with a minor increase in rental income.
They didn’t know that the increase was going to take place, but they gambled and won.
Those who bought in 2005-06 gambled and lost, at least for the time being.
I agree with you, but the balance that we want may never happen again.
When the market does finally bottom, we won’t know it until well after, but there is absolutely no reason for a bounce at that level.
So many people will have a bad taste and have ruined credit they won’t be looking to buy back in. After a few years, newbies enter the market with visions and rose colored glasses, and the cycle starts over again with new players.
Many people who got burned in the dot com crash and swore “never again” are have been back in the stock market for the last few years.
They certainly didn’t forget. Is there an explanation ?
It’s just human nature, controlled by fear and greed.
