Bubble FAQ

[rose-colored-coolaid]

For over twenty years, I have been figuratively making billions of non-transactions in frothy real estate markets worth literally trillions of dollars. In short, that makes me an expert in real estate bubbles. Given my lofty position, I get asked questions all the time about real estate bubbles. To reduce the number of duplicate questions I see, I've decided to distill my answers into this FAQ.

Q: What is a real estate bubble anyways?
A: We've come a long way since the when people used to live in stacks of hay. Those hay homes were drafty. Now we build homes which do a much better job keeping drafts out. The problem is that we've come too far. Homes now are having trouble regulating pressure zones between the inside and outside. Occasionally, a high pressure zone will form inside a home and a low pressure zone will form outside. This causes the house to act like a balloon or bubble. It is regularly damaging because most homes aren't designed to stretch in such a way. Sometimes, it is catastrophic, when the pressure differential is too great and the home actually explodes.

Q: Are homes near where I live (or even my home) at risk?
A: This depends on where you live. If you live in an older neighborhood, one built prior to 1982, your risk is greatly reduced. You may still be at risk in an improperly upgraded older home however. Second, some regions are safer than others. Seattle and Portland rarely see the kinds of extremely low pressure weather that causes catastrophic home bubbling, so you might say these areas are immune. In other regions like southern California, Florida, Phoenix, and Las Vegas, dangerous low pressure days are much more common. It is now almost certain that these low pressure days are caused by global warming.

Q: Some people are saying 'this time is different.' Are they right?
A: Nope, same as it ever was.

Q: Isn't immigration somehow related to this issue?
A: Yes, of course. Immigrants entering the USA cause a small amount of wind blowing into border states. This adds pressure to those regions and helps reduce the natural bubbling phenomena we are all seeing. If not for immigrants, bubbling in many states would be much worst than it already is. Net import of goods causes the same effect, which also reduces the likelihood of a bubble occurring.

Q: This is all very frightening, how do I protect my family.
A: The best solution is to make a central room in your home a 'safe room.' If any member of the family hears inflation of a neighbors home or - God forbid - your own home, everyone should rush to the safe room. I recommend making your kitchen the safe room. Some easy ways to make a kitchen safer are to install granite countertops and stainless steel appliances. These upgrades will increase the stress that your kitchen can take. This should be enough to protect you from any housing bubble issues in your region.

[uwp]

[laxtosnoco]

You may have done trillions in non-transactions, but are you classy?

I am a classy Bubblehead. I wear diamonds, Rolexes and necklaces. I am NOT a real estate bum. If you don't believe me, my diamond anklet and yellow pages advertisement declaring me a "Multi-Million $$$ Non-Producer" should assuage any of your concerns about my knowledge of speculative markets.

Now you will have to excuse me as I have a date with the $7 all-you-can-eat meatloaf at the diner next to Kmart.

[rose-colored-coolaid]