Tuesday, November 4, 2008
Was this one of the biggest speculative manias of all time?
The Great American Housing Market Nightmare Next Phase
One of the greatest blunders of our time is made by those who blindly assume home prices are so low they couldn't possibly go any lower....The end of the decline in home prices will come only when there are no new economic forces driving them down.
Posted by whostolemyendowment @ 02:08 PM (1253 views)
14 thoughts on “Was this one of the biggest speculative manias of all time?”
Add a comment
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
timmy t says:
Why is there an advert for Property Mentor on the HPC website? Is someone taking the p1ss?
jack c says:
Google ads nothing more as I undersatnd it.
beartil2010 says:
That’ll be Google’s intelligent software associating this site with the property market then – well done them!
I liked the old ‘get a a loan, only 173% APR’, I thought that was more appropriate 🙂
whostolemyendowment says:
Come on guys…any comment or thoughts on the article?
Membrane says:
What like your one???
jack c says:
@whostolemyendowment – (IMO) a very good on topic post – it will be interesting to see if the predictions play out in the UK
dohousescrashinthewoods says:
This is an interesting one, notwithstanding that the source article was posted yesterday.
It’s a pretty clear and pretty simple read and the bit that really struck me is that we are only just reaching the point where a housing crash would normally start, so chances are that it’s about to start in earnest, despite the fact it has already broken records. In other words, it may be the worst we’ve ever seen, but we ain’t seen nothin’ yet.
Chilli says:
Just before 1929 there was a housing bubble. Especially in Miami. It collapsed, about 1925 I think. I have a feeling that the collapse of ‘brick and mortar’ at the time caused a rally on the stock market. The initial rally caused many to look up and note the ‘profits’ to be made on the stock market. After that, many people invested in the stock market on the automatic assumption that stocks can only ever go up. And the rest is history.
Not that different from today. In a speculative bubble, I don’t really think the underlying asset really makes a difference. Some might argue that houses are less liquid, but what does that matter when mortgages are securitized? My point is securitized mortgages start to look an awfull lot like stocks from a liquidity perspective.
Orcusmaximus says:
Wow. The article predicts a 90% drop in bubble areas. That’ll be the South East then!
beartil2010 says:
I read the aource article from Patrick.net, and thought it was excellent. Very clear, simple.
It reminds me of the many discussions on here about the experts and their expertise, all so good at knowing everything that they do not get the basics. The basics are that debt structures will collapse if allowed to run rampant, and that this is the biggest ever bubble.
Many ‘sophisticated’ investors do not get this, and they manage the vast bulk of money in the stock markets. Consequently there are still people buying, when value has not really been achieved. Conversely, companies that own real assets (commodities) are undervalued based on their asset ownership due to the volume of selling.
I await things becoming more interesting…
quiet guy says:
“any comment or thoughts on the article?”
I agree with the broad thrust of the article – it’s hard to any reason for the correction to stop in the forseeable future.
On a more bullish note, there are two factors that the article does not address:
1) Mortgage repayment rates will meet rent rates if they keep dropping at which point some new buyers will emerge.
2) We don’t have non-recourse mortgages in the UK so homedebtors can’t easily walk away from their debts.
planning4acrash says:
Good to see the old language, it used to be called; mania, panic, crash. I call it, manipulation, mania, panic, crash, then consolidation/takeover. Starts and ends with goverment intervention/corporate profit.
icarus says:
Since he writes about the South Sea Bubble and about the lessons of history, let’s learn from the SSB itself.
The fraudsters were mainly Cabinet members and South Sea Company directors. The Chancellor of the Exchequer was imprisoned, other Cabinet members were impeached and the Company directors had their estates confiscated, with proceeds used to compensate their victims. Applegarth et al., watch out.
notaneconomicsguru says:
Print it out, underline it and put it up on every wall all over the land.
Based on this article, my judgement is that the US is indeed in a worse state than we are even though our housing bubble is proportinately bigger. I guess its just because it seems like there was more lax lending to folks who can much more easily walk away than here and I suspect more in the way of securitisation of risky mortgage products than here. The BTL issue here looks very shaky, but I just don’t think it looks as bad as the US situation
The 90% falls are clearly not predictions, they are observations of past bubbles, but there is one thing inherently different about houses to slaves, tulips and stocks and that is in the end houses are to meant to be lived in and people really do need houses to live for which you either buy one or you rent one that someone else bought. That means there will definitely be a firm level of resistance for prices and barring catastrophic economic collapse, whatever that level turns out to be I would very strongly doubt it to be as low 90% below peak.