Comparison to the Tech Bubble?

But the parallels are raising alarms among many
economists, even those who acknowledge that there are important differences
between homes and stocks that significantly reduce the chances of another
meltdown.

…As high as they might
seem now on the coasts, home prices nationally have not quite doubled over the
last decade; during the 1990’s, the Standard & Poor’s 500-stock index more
than quadrupled.

…”Analysts have
conjectured that the extended period of low interest rates is spawning a bubble
in housing prices in the United States that will, at some point, implode,” Mr.
Greenspan said in a speech in New York, adding that real estate speculation had
shown a “marked increase.” Nevertheless, he said he did not expect a
“destabilizing” drop in prices, in part because home prices across the country
have never fallen significantly.

The
sizable demand for homes in our market combined with the shortage of inventory,
leads me to believe that prices will not “bust” but may level off a little
bit.

Nobody can know whether the housing boom of
the last decade will end as the dot-com frenzy did. But the parallels are
raising alarms among many economists, even those who acknowledge that there are
important differences between homes and stocks that significantly reduce the
chances of another meltdown. For one thing, houses are not just paper wealth:
you can live in them.

When making
the comparisons, it is refreshing to see this particular statement –

As high as they might seem now
on the coasts, home prices nationally have not quite doubled over the last
decade; during the 1990’s, the Standard & Poor’s 500-stock index more than
quadrupled.

Front page of the New York Times today.
Basically, when an investment becomes fodder
for cocktail party conversations,

“Analysts have conjectured that
the extended period of low interest rates is spawning a bubble in housing prices
in the United States that will, at some point, implode,” Mr. Greenspan said in a
speech in New York, adding that real estate speculation had shown a “marked
increase.” Nevertheless, he said he did not expect a “destabilizing” drop in
prices, in part because home prices across the country have never fallen
significantly.

The sizable demand
for homes in our market combined with the shortage of inventory, leads me to
believe that prices will not “bust” but may level off a little bit. This would
not be an altogether bad thing for the market or for many of my clients who have
been priced out of the market.

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