The decline in spending on travel, entertainment, and the like is temporary, so the “nothing else to spend it on” effect has already diminished and will disappear entirely.
I disagree that we’ll ever get back to pre-COVID levels on a lot of these issues.
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[quote=phaster][quote=Rich Toscano]Totally, if we took out the bubble, current valuations would dwarf prior peaks.
But I’m not sure that chart alone can prove it’s a bubble. For one thing, I could see there being a long term uptrend in the “fair” or sustainable valuation (due to supply constraints, globalization of the housing markets, or what have you).
But a much bigger thing is the interest rate factor. Given that people finance their purchases with fixed rate mortgages, and that rates are super low, it could be rational in some cases to buy at these prices. (See the monthly payment graph). And if it’s rational to buy, at least sometimes, can it truly be a bubble?
My take is: it’s expensive, and if rates go up, it will likely prove to have been unsustainably expensive. But that’s not the same as a speculative bubble, which in my view requires a certain level of behavioral craziness we aren’t seeing, and also (in my view) implies an inevitable price crash.
Thoughts?
Just for giggles here is your requested graph. It doesn’t change the median; it would change the historical average but I don’t chart that. However, it changes the historical standard deviation quite a bit, so taking away the prior bubble would put us comfortably above Grantham’s “2 sigma” rule of thumb for bubble-spotting. For what that’s worth…
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what we are seeing w/ local RE prices “rising” makes sense IMHO because I am thinking about the dollar being the global reserve currency
IOW since the dollar is the global reserve currency, this means the world needs dollars to settle accounts,… so the amount of “credit” dollars out there is ever growing,… when there are more “credit” dollars out there chasing a limited supply of RE (as in the case here in San Diego) the price of RE goes up
BUT we have to consider the idea that all good things come to an end (i.e. some day the dollar will no longer be the global reserve currency)
I’ve also been I’ve been wondering about is RE prices during the 1930’s Great Depression,… where we see RE prices as expected during the roaring 1920’s went up and during the depression, prices of RE went down
the reason I bring the idea up of RE prices during the 1930’s Great Recession is because I’m pretty sure if the dollar was not the global reserve currency,… prices of local San Diego RE (as well as RE in other parts of the USA) would not be as high as they are now[/quote]
wondering what other piggs think the new normal for the next decade or so will be for: interest rates, RE prices, what will be trends/fads for those on the “low” and “high” end of the income scale, etc.
