Bubble Mania

by Jay Thompson on January 21, 2006

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“Bubble Mania” — it’s here. You can’t escape it. Bloggers around the world post something on “The Real Estate Bubble” every hour. Just Google “real estate bubble” and in 0.30 seconds, Google will return 455,000 results. In 0.14 seconds, you’ll get 1,750,000 results for “housing bubble”. At this moment in time, there are 596 bubble related news stories that can be found on Google News.

A quick look (sorry, I didn’t have time to surf all 1,750,000 results) shows that proponents of a housing bubble outnumber the opponents about 4 to 1.

What does this mean? Heck if I know. Is there a bubble? As blogged here, I think it depends on how you define “bubble”. Will appreciation rates continue at the staggering rate of last year? Again I’ve already provided my opinion on that. (They can’t..)

Greenspan coined the term “irrational exuberance” in the crazy days of the dot com stock market. And there is no doubt that a lot of people lost a lot of money on dot coms stocks. (Ahem, ask my wife how much we lost on PSI Net, a now defunct ISP.) But what is often failed to be noted is that a lot of people became, and still are, filthy stinking rich from dot com stocks.

Few will argue that the dot com bubble popped. Some will say it exploded. I say it deflated. And like a deflated balloon, it CAN (and is IMHO) being reinflated. Just take a peek at these stock charts from the last five years (Google only goes back to the time of its IPO in late 2004). Would you be sad if you’d invested in any of these “dot com” stocks five years ago?

Markets, be they stock markets, commodity markets or real estate markets fluctuate. They rise, and they fall, sometimes seemingly on a whim. There’s no doubt the real estate market has risen, a lot, lately. And there’s no doubt it will “fall” (I prefer to say it will adjust). But the long term trend in real estate, just like in the stock market is up. And real estate, bubble or not, will rise over time.

Yes, some real estate investors will lose their shirt. Just as some will be filthy stinking rich. You don’t want to look back five years from now at a real estate price chart and say, “If only I’d bought then….” Do you?

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azrob

I'd be pretty embarrassed to have written this in 2006!

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Randall James

The perception of the bubble also depends on what market you are in. Some markets where investors make up a huge proportion of property owners and wherespeculation has driven housing prices up will most likely see a significant retrenchment in pricing... irrational exhuberance at its best. In other less saturate markets, prices will stablilize for a few years and continue to rise.

-Randy
www.4mysales.com

The AZ Real Estate G

Ted Ted Ted... The stock charts were just meant to illustrate the fact that the "dot com" bust wasn't the end of the universe. It *is* bouncing back. Just like real estate will bounce back **if** the "bubble bursts" as many like to proclaim.

I appreciate your reading and commenting!!

Jay

Ted R.

Oh come on AZ Real Estate Guy! You can't honestly be comparing the real estate investment market to the stock market, can you?

I thought you were smarter than that!

Ted {who is really wishing he'd bought some of those damn stocks in '02!!}

kevin@Hsbc online ba

I think people would be happy getting the prices they did in 2006 compared to 2009. I would think most prices will go back down to 2002 or 2000 levels for awhile then come back in a few years.

TFH

If you go back just a little further than 5 years you will see that you would still be underwater if you bought those internet stocks. And if you bought those stocks 7 years ago (1999) you would just now be breaking even (2006). What the 5 years data proves is that it is smart to buy low and sell high. 5 years ago, those stocks hit their lows (good time to buy was 5 years ago - NOT 6 years ago).