“Envy” fuels real estate bubble talk

With all the bubble talk of late, this was a refreshing analysis from Lou Barnes at Inman News.

The financial press is now on official Bubble Watch; CNBC might as well have a bubble ticker scrolling along with stock prices, and the Wall Street Journal last week ran four prominent Bubble-related stories. One had some merit, arguing The Bubble as an artifact of too easy mortgages.
I am going to try to start collecting the bubble articles – there seem to be at least two or three.


I have no doubt that low rates and easier underwriting (enlightened, says here) are the cause of some of the price run-up; nor doubt that interest-only loans are now facilitating higher prices. However, to be a bubble, home prices must be unsustainable; for foolish mortgage terms to be the culprit, mass default would have to be in prospect.
There is no evidence whatever that home prices are unsustainable, nor any evidence of widespread default. The bubble is in commentary coming from the financial markets, and the gas inside is envy.
After foolish lending and borrowing, the market types’ critique of housing: too many investment and second-home purchases. Must be dangerous speculation. Prices are unsupported by buyer income or market rents. Tisk, tisk. The Fed should put a stop to this. Call in the regulators.
That line of argument sets a record for hypocrisy. You stock-market guys, the ones who gave us the biggest bubble in financial history, are suddenly the Bubble Cops? High prices versus lower incomes and rents? That’s what you call a “healthy price-earnings ratio.” Riding prices up is a crime? In your market, you call the same thing a skill, “momentum investing,” and “market timing.” Millions of American families are taking advantage of an epic demographic mis-match of land versus 3 million new Americans every year; you call them irresponsible Bubbleheads, while the exact same behavior among yourselves is called “value investing.”

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