[quote=Escoguy]Personal theory, Rich may have liked watching the market go down while it did, and of course seeing a recovery is also interesting up to the normal level, but then it keeps going. Somehow it seems distasteful that the same scenario could play out again. But it takes a lot of work to show why 2015 is different from 2005.
Higher population, tighter lending, lower energy prices, lower interest rates.
Makes for a mix which any rational economist may find annoying and unpredictable, but when all’s said and done, the Fed is afraid to raise rates, the stock market keeps going, there is not enough new supply and more and more folks both legal and illegal are coming into Cali.
So, no I don’t think Rich is bored, I just think it’s hard for him to be excited about seeing things develop exactly the way they are because it doesn’t quite fit with the world view. Just thoughts.[/quote]
Hi Escoguy — Yeah, I’ve been pretty up front about the fact that the RE market isn’t as interesting as it used to be… first it was an insane bubble, then it was an unprecedented crash that followed that bubble. Now the whole thing is a bit more pedestrian.
However, I don’t agree that the current situation is even remotely comparable to 2005. Homes are nowhere near as overvalued as they were at the 2005 peak:
Eyeballing it, aggregate home prices would have to rise 50% from here — with no commensurate increase in incomes or rents — to become as expensive as they were at the 2005 peak. 50%! (That’s before even considering the impact of low rates… which could very well be transitory, but for as long as they do last, it’s plausible that they could support a higher-than-normal level of valuations).
Yes, the market is overvalued compared to its history for sure — but it doesn’t hold a candle to 2005.
You seem to be ascribing a “world view” to me… I’m not sure what that might be, but as it relates to this kind of thing, I would sum up my views thusly: market prices frequently become dramatically disconnected from their fundamentals… and when they do, it’s really interesting.
Because bubbles don’t usually hit the same market twice in a row, a 2005-style housing bubble would be surprising to me — but it certainly would not be boring! 🙂
