Tuesday, August 09, 2005

The beginning of the end?

Paul Krugman has a very interesting piece today on the housing bubble. I don't know how I feel about this. As someone with a very cheap home in Krugman's "Flatland" I have nothing to lose if the bubble bursts and everything to gain because if I want to move in the next couple of years I need housing values to deflate beforehand, and not after, so that I can buy a nice house in a more exciting town. However, my mother's house is her only real retirement asset, so I worry about her. I'll have to afford a REALLY nice house if my mother is going to have to come live with me. :)

P.S. Sorry that I haven't posted lately - I'm back from travelling! More regular posts now that the semester is beginning.

2 Comments:

At 2:31 PM, Blogger romeotheBT said...

Interesting... but wrong! I can argue every point this guys makes. In fact, I'll start off with a question. Paul, what do you think the people of Chicago would say about your assertion that they can just build suburban houses indefinitely because they are in a "Flatland"? What the hell does that even mean? Don't have traditional downtowns?

Comparisons of the housing market over the last five years to the stock market in the mid 90's are some of the most ridiculous assertions I have ever heard. It is reasonable to assume that some markets are way overvalued, Southern California, Northern California, California in general. But even in markets like Miami, there is still a lot of evidence that the market is undervalued. There are only a couple of areas in the country where housing markets have completely outpaced income (which is one of the indicators of a bubble). San Diego, Los Angeles, New York, and Boston were cities indicated in an article that I read that were in danger of a drastic drop in housing prices. From what I have read, the biggest difference between the stock market boom and the housing market boom is that housing prices have traditionally been depressed and are just now catching up with where they should be... especially in Florida. Well that, and people live in their houses. It's not as easy to sell off a comodity that you live in as it is a house.

 
At 11:01 AM, Blogger romeotheBT said...

I had so much to say on this; however, I have been having a lot of difficulty bloggin in peace lately.

 

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