Here we go again: bubble, bubble, toil and trouble

I know it’s really: Double, double toil and trouble;
Fire burn, and caldron bubble. (Macbeth).

When I read articles like Is Massachusetts headed toward another housing bubble?, I am reminded of the saying that economists have forecast 10 of the last 3 recessions.

I have just finished a fascinating book by Kevin Carey called “The End of College”. As somebody deeply interested in the possibilities offered by online education (buy me a beer and you can listen to my thoughts at some length), the book is really fascinating – except for the forecast in the title. But that’s a marketing ploy. College education will change dramatically but there will still be colleges, if not as many as now.

I am glad there are people who can make a living producing formulae of such matters as the relationship between rent and home prices and “home replacement value”, whatever that may be. And for large areas over an extended time such formulae may be useful to report on what has happened. Maybe.

But how much of headline and forecasting is based on saying something outrageous in order to get publicity?  I can remember a man who became famous in England some 30 years ago by predicting that London housing prices would fall 50% – or was it 90%? Since that time house prices have increased by a factor of at least 10.

What happened in the early years of this millennium was the result of a perfect storm of suspended disbelief. When the stock market recovers after a bear market progress is often described as climbing a wall of worry, with pessimists pointing out that another fall may be imminent. I see the same phenomenon in housing.

It is easy to assume that housing markets in, say, Cambridge, are over-extended because prices have gone up 80%. But if what is driving the market is demand from all the people making oodles of dosh in technology companies, and from more people moving to the area, why should we assume it will all end in tears? And Cambridge and Boston are not Massachusetts.

One factor that I rarely see mentioned by those who claim that say renting is better than buying is the one, biggest reason most people buy a house: to have “a place of my own.” How much is that worth?

I believe that both lenders and home buyers are still pretty cautious in their approach. And there are many. many places in Massachusetts where prices are still below their prior peak.

So yes, do your homework, consider what you can afford to buy, maybe even go to the next town if you think prices are too high, but beware headline seekers.

If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or Andrew.Oliver@SothebysRealty.com.

Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated

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