Housing Bubble 2005

[SariesNightly]

Greenspan is sad.

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Manias share four common characteristics:

* A feeding frenzy sends prices parabolic. In March, 2000 the Nasdaq Composite briefly touched 5000, up 44% per year over a five-year period. Homebuilding stocks today are up 46% annually in five years. The median price of a home is up 8.2% per year over the same period. Adjusted for 5-to-1 leverage on a typical mortgage, the humble abode has appreciated 41% annually.

* The public jumps in with both feet. During the late 1990s, stock ownership climbed to roughly 50% of households. Today "home ownership" has passed 70%, a record.

* Valuations detach from economic reality. In 2000 many tech stocks traded for over 50 times earnings. Today, in some of the hotter markets such as Southern California, home prices command as much as 50 times their rental incomes.

* Rationalizations abound for why valuations are reasonable and the trend will continue. Talk of a "New Economy" has been replaced by the politically-sanctioned euphemism "Ownership Society." Then, as now, favorable demographics and an accommodative Fed were expected to keep the party going.
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http://www.lewrockwell.com/orig5/duffy3.html

[Warpy]

1. This is mostly a bicoastal phenomenon

and mostly within a two hour drive of the major cities.

Flyover country has seen little of a housing bubble, although a very slow appreciation has been seen in some urban areas.

[Sugarbleus]

2. "Homeownership stocks" and "Ownership society" are two

four letter words in my world. The whole thing pisses me off to no end!

I think it's CRIMINAL to value housing as so much gold or stock. Doing it removes any possiblity of the common person to ever own any property of their own, however modest. :grr: