{"id":30446,"date":"2015-04-01T13:00:50","date_gmt":"2015-04-01T20:00:50","guid":{"rendered":"http:\/\/seattlebubble.com\/blog\/?p=30446"},"modified":"2015-04-01T13:01:29","modified_gmt":"2015-04-01T20:01:29","slug":"housing-bubble-2-0-the-perma-bears-respond","status":"publish","type":"post","link":"https:\/\/seattlebubble.com\/blog\/2015\/04\/01\/housing-bubble-2-0-the-perma-bears-respond\/","title":{"rendered":"Housing Bubble 2.0: The Perma-Bears Respond"},"content":{"rendered":"

Ben Jones, who has been blogging about the housing bubble from down in Arizona since late 2004 at The Housing Bubble Blog<\/a> linked to my “Welcome to Housing Bubble 2.0<\/a>” post yesterday, prompting an interesting discussion in the comments<\/a>.<\/p>\n

Here’s a selection from the conversation that ensued:<\/p>\n

Comment by Ben Jones<\/p>\n

I’ve called this the ‘it’s not 2000-pick your year’ excuse. Sure, house prices are up up UP! There are people camping out for pre-construction houses, multiple offers over asking, investors running wild. Shortages, man, shortages! But; there are not the exact circumstances of the pick your year.<\/p>\n

The bubble is in the minds of the participants, and it couldn’t be more clear. All the proof you need is in the prices. It doesn’t matter how you get there.<\/p><\/blockquote>\n

I disagree with the premise that “all the proof you need is in the prices.” If that were true, then New York and San Francisco have basically been in a perpetual housing
\nbubble since the middle of the twentieth century. There is a lot more to recognizing a housing bubble than just the prices.<\/p>\n

Comment by bink<\/p>\n

“more all-cash buyers, almost no zero-down buyers”<\/p>\n

Since home price increases aren’t being built on top of suicidal financing like last time, we\u2019re not likely to see a dramatic burst when things finally slow down.<\/em><\/p>\n

So he thinks that those all-cash buyers will just sit things out instead of stampeding towards the exits like a stock market crash? At least with mortgages the home owners can’t just liquidate. They need to find a new place to live. “Investors” do not.<\/p><\/blockquote>\n

First, many all-cash buyers are purchasing a home to live in themselves, not as an investment. Those buyers would have no reason to “stampede toward the exits” if the housing market were to soften again.<\/p>\n

As for investors, the only reason they would be looking for a way out would be if rents were to also take a dive, which is only likely in the case of another overall economic crash. I’m not saying that we definitely won’t see another economic crash, but if we do, where would these investors be moving their cash to?<\/em> Certainly not back in the stock market…<\/p>\n

Comment by sleepless_near_seattle<\/p>\n

From the comments:<\/p>\n

“Something else that’s different this time around is that the price to own has not diverged as much from rents. Rents have been growing at double digit rates in neighborhoods near downtown Seattle like Capitol Hill for a couple years now. During the last boom, home prices were about the same but I’d guess rents were 60-70% of what they are now.”<\/p>\n

Doesn’t this scream out to anyone that we are in a much worse bubble than we were 10 (wow, has it been that long?) years ago?<\/p><\/blockquote>\n

Comment by Rental Watch<\/p>\n

Doesn’t it scream that we have a shortage of supply?<\/p>\n

If both rents AND homes prices are going up substantially faster than inflation or wages, doesn’t that seem to be evidence that there is not sufficient supply of any type of housing?<\/p><\/blockquote>\n

Comment by sleepless_near_seattle<\/p>\n

I don’t know for sure. What I do know is that I’ve started writing letters to “owners” of vacant houses in Portland. What I’m finding is that they are everywhere if you look closely, here in a supposedly low inventory, “everyone is moving there” city.<\/p><\/blockquote>\n

I would love<\/em> to see some actual data<\/strong> on these supposedly empty homes that are “everywhere.” I realize the commenter was talking about Portland, but this is the same old discredited “shadow inventory” myth<\/a> that perma-bears have been clinging to for years. If you had a vacant house to sell right now, what possible rational reason would you have not to sell it in this market?<\/p>\n

For perspective on where Ben and most of his commenters are coming from (and to explain my use of the term “perma-bears”), in early 2012 when I was saying that “I suspect that we’re basically at ‘the bottom’ for home prices<\/a>,” here’s what Ben was saying<\/a>:<\/p>\n

It’s difficult to understand where we are with the global housing bubble, because the media ignore it. So anyone interested has to glean what they can from various sources. IMO, many countries or entire regions are either at all time highs, or just barely off the peak. I don’t have time or space to post them all…<\/p>\n

I read the NAR economists saying prices were up in the US in almost every state. I don\u2019t know about that, but even if it’s true, they are up in Jakarta too. So what? What should matter is are house prices too high. Are lending standards where they need to be. Again, if ‘affordability is at an all time high’ as the NAR says, how come the govt is doing all the lending at under 4% with little to nothing down?<\/p>\n

I don’t see how this situation isn’t ringing alarm bells around the world. I guess it is, but not many are listening.<\/p><\/blockquote>\n

The focus of Ben’s blog is typically on the “global housing bubble,” which he seems to believe is still going strong. I’m not making any particular claims about anything global since the focus of my blog is local, but I do try to do my best to stay aware of what’s going on in the big picture.<\/p>\n

To reiterate my point, I do think we are currently in the beginning stages of another housing bubble. However, I think that it is building up very differently than the one that inflated 2004-2007, and will therefore have a very different outcome than the last one. I don’t yet know what that will look like (no one does), but I strongly suspect it will not include a dramatic increase in inventory, a flood of foreclosures, and rapid decreases in home prices.<\/p>\n","protected":false},"excerpt":{"rendered":"

Ben Jones, who has been blogging about the housing bubble from down in Arizona since late 2004 at The Housing Bubble Blog linked to my “Welcome to Housing Bubble 2.0” post yesterday, prompting an interesting discussion in the comments. 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