Nine of ten leading brand-name economists say “there is no bubble to be anxious about”. Actually, only one, the economist in charge of the S&P Case-Shiller home price indices, said that, but he looks sincere and I trust him.
But seriously folks, the Wall Street Journal asks the question on everyone’s lips, “is another bubble forming”. No, say economists, even though national home prices have been climbing for 35 consecutive months, because:
- the rate of growth in home prices has slowed [except here in lovely Silicon Valley]
- far fewer new homes are being built, so there’s less danger of an oversupply [although there’s not much danger of oversupply here in built-out Silicon Valley]
- and buyers are paying cash [or using big down payments, here in affluent Silicon Valley] or using thirty-year fixed-rate loans instead of exploding ARMs [which were never a factor in Silicon Valley’s midrange and top-end neighborhoods]
“To be sure”, hedges the Journal, “some markets, such as San Francisco and Denver [and a little slice of heaven called Silicon Valley] have seen staggering gains”. “But some economists said that’s a sign of a normal housing market,” says the Journal, “because in a bubble prices typically rise in tandem across the country, rather than responding to the strength of local economies.”
Even Lawrence Yun, chief economist for the Evil Empire, sometimes euphemistically called the National Association of REALTORS, who’s “been among the loudest sounding the alarm that prices are too high” (apparently Yun didn’t read his job description) isn’t worried about a bubble. He’s just worried that people who haven’t bought yet will get discouraged and give up.
You might think that, but I hadn’t noticed. What I have noticed is that the more prices go up, the more determined people seem to be to get in before prices go up even more.
Bubble? “Ain’t no bubble here”, say economists. And, for once, they might be right.
copyright © John Fyten 2015