posted by PaulNoonan at
The thing I don't get about the housing bubble is, really, what the hell is an average person supposed to do about it? It's not like we can change the fact that we have to live somewhere, and even if there is a bubble I think you're better off owning than renting. So my opinion of the housing bubble is basically the same as Mark Twain's opinion of the weather.
By MDS, at 5:27 PM
Well, the average person can not overspend (borrow) on their house when they do get one. They can also not unnecessarily renovate their current house. A lot of the bubble is increased reliance on a house as an investment instead of just as a home. My question is whether the housing market as a whole can actually burst instead of just cooling off. I mean unless many people are buying unecessary houses they fill a continuing need. People are going to continue to need housing. Perhaps certain local markets can bust, but probably not on the whole unless something else in the market fails and they can't pay off their mortgages.
By Scott H, at 7:06 PM
I fully agree Scott. I was reading this offer a few months ago about how the market is so screwed in San Francisco right now that it is actually much more profitable to rent a home for 30 years than to buy one. But of course that had to do with many local effects - primarily the cost of housing outstripping wage growth - and the impending bubble burst there has nothing to do with the rest of the country.Or sane homebuyers in the Bay Area.
By Rashid Muhammad, at 8:00 AM
One of the problems with the housing bubble is that we are comparing apples to oranges. About 7 years ago (hey that matches the change in housing) they changed the tax code so you could exclude gains on the sale of your home up to $250,000 if single or $500,000 if maried. This radically increased the value of owning a home, encouraged repeated buying, selling, and home improvement, and the markets are still adjusting to these factors. What I think you will see is a slow down in the growth in the suburbs, exurbs, and downtown city condos, but I think the next big thing will be the buyout and redevelopment of innercity communities such as the proposed gated community in Milwaukee.
By Rod, at 12:05 PM
It is definitely not the same, everyone is right about that. Owning a home is probably still preferable to renting (except in certain areas of the country, especially in California). However, it is still important to know. Waiting to buy right now is probably a good idea (at least for a bit). But this bubble will not burst like the tech bubble did. People don't live in stocks. They don't sell houses by simply pushing a button on e-trade. Real estate comes with transaction barriers built in, and houses provide extra utility.Still, buying anything when the market is high is a bad idea.
By PaulNoonan, at 12:14 PM
I just bought my first home last month, so obviously I hope there's not a bubble that's about to burst. But even if the value of my home goes down, as long as it goes down by less than I would have paid in rent, I've still come out ahead. Two months ago I was paying off my landlord's mortgage; now I'm paying off my own. That's progress.
By MDS, at 1:57 PM
That's ture. I think you're unquestionably better off than if you rented indefinitely, I just think it's likely that you could have been better off still by buying a year from now. But what do I know? Housing prices may continue to rise for a good while longer.I've actually been trying to figure out whethr or not it's a good idea to take out a home equity loan if you think a bubble is about to burst. It seems to me that doing so would basically be insurance against your house losing value. But I've heard some commentators say that it's a bad idea without any support for that position (I suppose their point is that you'll be paying back money for equity which no longer exists, but this assumes that you reinvest the cash in that house). In general though, you're right. Owning is still always better than buying (one of my real estate agent friends told me not to worry. If the bubble bursts and housing prices drop by 50%, simply buy another house.), this is mainly a question of being well off or being very well off. Unless you're a real estate investor. Those guys are screwed.
By PaulNoonan, at 2:09 PM
If you have concerns about the general economy, the bubble bursting could hurt some large businesses. One large retailer that I can't disclose, for instance, has most of its assets in real estate. This is becoming a common practice among large retailerss in general.
By PaulNoonan, at 2:11 PM
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