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How Far We’ve Come: America’s House Party September 25, 2009

Posted by John Watch in Uncategorized.
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I found a very interesting article from Time.com dating back to 2005 detailing the frenzy that was theAmerican Housing Market. Reading the article, it’s clear that things were certainly a “party” in every sense of the word compared to today. Although a long read, it’s amazing to see how times have changed since then. It just goes to show that Real estate is certainly cyclical, seasonal and emotional. The now somber,  prophetic undertone towards end of the article clearly defines this fact. The signs were there, but most preferred not to take heed;

“This is the $64 billion question of the 21st century’s first boom: Are today’s real estate revelers partying like it’s 1999–just before the stock-market bubble burst? To Edward Leamer, economist and director of the UCLA Anderson Forecast, the housing market, especially in hot coastal areas, is a bubble just as ripe for popping. “We’ve had a more than doubling of housing prices in the past three years here in Southern California, for instance, and there’s no fundamental driving it,” he says. “There isn’t some big crush of people coming to California. That’s ridiculous.”

Instead, say Leamer and other bubbleologists, what’s driving the market is low interest rates, herd psychology, speculation and the expectation of unending price increases. (One study found that Los Angeles homeowners expect their home values to grow 22% every year for a decade.) Meanwhile, promiscuous lenders are throwing money at buyers like beads during Mardi Gras. “Anybody who can crawl in off the street can get a loan with 0% down at three or four times their income,” Leamer says.”

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