Wednesday, November 09, 2005

Will a Bursting Bubble Trouble Bernanke?

Dean Baker and David Rosnick from The Center for Economic and Policy Research (CEPR) have released one of the most compelling papers on the housing bubble yet.

I won't paraphrase or summarize the paper, this is a *must read*.

Will a Bursting Bubble Trouble Bernanke? The Evidence for a Housing Bubble

Caveat Emptor,
Grim

10 Comments:

Blogger grim said...

If anyone has questions on the paper, please ask and we'll try our best to answer.

grim

11/10/2005 06:22:00 AM  
Blogger grim said...

Should the bubble burst, no amount of rate cuts will reinflate it. It didn't work for Japan, and it most certainly won't work here.

grim

11/10/2005 08:57:00 AM  
Blogger grim said...

Well said.

On another note, thanks to everyone that got the message out and handed the link to the blog out. Traffic the past week has been at a record high, amazing really, and each day that passes it only gets higher. Please keep it up, we need to get the message out!

Thanks!

11/10/2005 10:22:00 AM  
Blogger grim said...

Boston researchers predicting a 3% decline next year with a flat market until 2007..

Housing forecast: downturn until '07

At least these folks are now acknowledging that prices are going to decline.. Now only if we could get them to really take a look at the numbers.. Only a 3% decline, sounds highly unlinely to me, the numbers I've come up with are significantly higher (for the entire Northeast).

Media and public sentiment is changing by the minute.

Caveat Emptor,
Grim

11/10/2005 11:50:00 AM  
Anonymous Anonymous said...

The damn house prices went up 80-100% last 5 years. Normally 5% is good growth so lets say 7% to be very generous.

So lets say a house that sold for $350 5 years what rationally should it be worth?

$490,000 at a generous 7% increase in prices. They want $750,000 right now. FU!

If you go back to 1995 prices this houses sold for about $250k. 4 bedroom colonial in N. NJ. $350k in year 2000 at a generous 7% increase.

SO I AM SAYING TO GET THINGS BACK TO 7% TRENDLINE WHICH IS VERY VERY GENEROUS HOME APPRECIATION OVER TIME HOME PRICES NEED TO DROP ABOUT 34%. CONDOS JUST FORGETIT UNLESS DROPS ARE OF 50%!

11/10/2005 04:43:00 PM  
Anonymous Anonymous said...

Do not waste your time looking at houses now. Do not bid nothing.
SELLERS AND REALTORS NEED TO BE DRIVEN INTO THE GROUND TO BECOME DESPERATE.

Prices need to drop 34% and 50% for condos to RATIONAL LEVELS. WHICH IS STILL GENEROUS AT THE 7% TRENDLINE COMPOUNDED GROWTH LINE.

PEOPLE ARE NOT GETTING 7% INCOME INCREASES.

IF YOU TAKE 5% TRENDLINE HOME APPRECIATION HOME PRICES NEED TO DROP ABOUT 43%!!!!

11/10/2005 04:47:00 PM  
Anonymous Anonymous said...

The real estate industry including greedy Bob "Fast Talker" Tol are trying to convince buyers that you must spend a higher % of your take home pay to buy a house. I say they are conmen.
do not listen to them. Buy a house be a debt slave? Yeah okay Bob.

11/10/2005 04:49:00 PM  
Anonymous Anonymous said...

I remember a friend bought a condo in flemington for $120 in 1988 and 3 yers later was lucky to get $85k for it.
The mron in morris buy 2 bedroom for $400's going to get huge harcut.

11/10/2005 08:21:00 PM  
Blogger grim said...

Now, I realize, it's always been a stretch to afford housing. All of us here understand it. While it might have been marginally easier to afford a home in earlier years, it was never a trivial move.

But Today? What can you say? It's not even a stretch anymore, difficult doesn't describe it. It's just about impossible without using risky (funny money) lending. Even then you don't own your home, you are simply paying interest to the bank for the privilege of living in their home. Homeowner? Never. A lifetime homedebtor.

You know, they say homeownership is at an all time high in America, it's the American Dream (tm). Unfortunately, it seems very few Americans really own their homes anymore, the banks do..

grim

11/10/2005 09:04:00 PM  
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