I'm always struck by the fact that pundits universally proclaim times of rising real estate prices as "good times" and falling ones as "bad times".
Sure, rising prices are great for banks, for sellers, and for builders. But they are surely not great for buyers, especially not first time buyers. In much of the world right now, young buyers have simply been priced out of the market.
If the price of bread was rising 15% per year, it would be proclaimed a big crisis. But when it's real estate, that's somehow considered a big party.
Another thing which is striking is how little historical awareness pundits display, either by ignorance or duplicity. There are never more than 20 years between big falls in the real estate market (or any other market), and yet when trends are upwards, the feeling always seem to be that these Golden Days will continue forever. It's stupid and dangerous, it creates bubbles and "hard landings" as the Danes call them. This behaviour goes back to the Tulip Bubble in 1637!
Hans Lysglimt talking about markets. Relevant for stock owners.
The Danish economist Svend Jørgen Svensen says that the last real credit market crunch in the USA was in 1929, and that this was, along with a housing market crisis, actually what led to the more famous stock market crisis. Spooky.
The difference with real estate prices is when the prices are up the home sellers make out. It is a case of fake money (like stocks). If the value of the home I might sell is higher, then I think I am rich, even though it doesn't matter until I actually sell.
ReplyDeleteAnd when house prices are up, we think how we will never be able to get a bigger house, coz if our dinky little one is touching 500,000 then how much is the one we want to move to?
ReplyDeleteHousing price boom is only good if you are at the point in your life where you can down size, or take on a fixer upper.
Yes, exactly. So basically it's good for real estate agents and lenders.
ReplyDeleteI think I read about the Tulip Bubble in "Confessions of an Ugly Stepsister" by Gregory McGuire. A fun read, Cinderella for grown ups.
ReplyDeleteLooks like Svend is definitely a worldly thinker. Yes, the market crash was in 1929 - Svend must have read the New York Times. Danish economist. That's an oxymoron if I ever heard one. Like plastic silverware.
ReplyDeleteA tulip bubble? My, that must've been a very pretty sight. So poetic!
ReplyDeleteEolake said...
ReplyDelete"Sure, rising prices are great for banks..."
We'll see!
Interesting, thanks.
ReplyDelete