a housing bubble means housing prices are far above what the "logic" of the market can defend, let alone any material basis.
bubbles, under capitalist ideology, are driven by speculators leveraging debt, making them unstable and prone to "softening", "deflating" or, in the worst case "bursting". this would be driven by less credit being available for purchasing homes, making them hard to sell and slowing the pace of price increases... so they become less attractive as a speculative asset. basically, this is an instance of deflating/softening.
bursting would imply the failure of loans on a bunch of already purchased homes, so this would mean banks failing/home foreclosures, and this radiating out to affect other types of credit access that would maybe shutter businesses seemingly unrelated to housing, increasing unemployment, reducing tax revenues, and driving down home prices.
this can have a knock on negative effect for people close to retirement, public sector employment, and result in people who owe more on their house than they could sell it for. it wouldn't be permanent, but people/corporations with lots of cash could make a killing buying up whatever they can during the bankruptcies. basically, this happened after 2008 and concentrated wealth into even fewer hands.
It's not a bubble. Real estate prices are accelerating because US Treasury Bond (aka t-bond) rates have been kept too low for too long, not because of speculation like it would be with a bubble. Allow me to explain :theory-gary:
Usually investors will "diversify their portfolios," which means make some risky investments with a potentially high payout and some safe investments with lower payouts. Traditionally, t-bonds filled the role of the safer investments, because the only way they don't pay out is if the US government defaults on its debt, which means that the entire world economy has probably collapsed and you have bigger fish to fry. The Obama administration lowered the bond rate to make them a less attractive investment so the money would circulate and stimulate the economy after the 08 crash, which tbh was probably necessary; the Trump administration kept it low because Trump is a big wet boy who wanted to win political points for having a bustling economy. This meant that investment firms were looking for somewhere else to park their money that was a relatively safe investment that would give better returns than a t-bond, and they settled on real estate. Something like 18% of all homes sold in the US in the last quarter of 2021 went to an investment firm.
In the last crisis there were huge spikes in mortgage defaults as the adjustable rate loans that were common at the time readjusted to higher rates in the months leading up to bottom falling out. I’m not sure if we’re seeing that kind of activity yet.
I hear a lot of stories about all cash offers / non-traditional financing swooping in to get houses as soon as they are listed, making it so regular buyers are having to offer no inspection contingencies to get the owner under contract, in addition to $10s of thousands over asking being some kind of norm.
that says, to me, that people are buying shit literally without even knowing what they are getting, especially in the context of constant price increases. and that is a bubble.
will it deflate or burst or balloon further up into the stratosphere? who knows. trust no one.
a housing bubble means housing prices are far above what the "logic" of the market can defend, let alone any material basis.
bubbles, under capitalist ideology, are driven by speculators leveraging debt, making them unstable and prone to "softening", "deflating" or, in the worst case "bursting". this would be driven by less credit being available for purchasing homes, making them hard to sell and slowing the pace of price increases... so they become less attractive as a speculative asset. basically, this is an instance of deflating/softening.
bursting would imply the failure of loans on a bunch of already purchased homes, so this would mean banks failing/home foreclosures, and this radiating out to affect other types of credit access that would maybe shutter businesses seemingly unrelated to housing, increasing unemployment, reducing tax revenues, and driving down home prices.
this can have a knock on negative effect for people close to retirement, public sector employment, and result in people who owe more on their house than they could sell it for. it wouldn't be permanent, but people/corporations with lots of cash could make a killing buying up whatever they can during the bankruptcies. basically, this happened after 2008 and concentrated wealth into even fewer hands.
This makes sense.
Do you think this is what's happening or are the news media just hyping it up for clicks?
It's not a bubble. Real estate prices are accelerating because US Treasury Bond (aka t-bond) rates have been kept too low for too long, not because of speculation like it would be with a bubble. Allow me to explain :theory-gary:
Usually investors will "diversify their portfolios," which means make some risky investments with a potentially high payout and some safe investments with lower payouts. Traditionally, t-bonds filled the role of the safer investments, because the only way they don't pay out is if the US government defaults on its debt, which means that the entire world economy has probably collapsed and you have bigger fish to fry. The Obama administration lowered the bond rate to make them a less attractive investment so the money would circulate and stimulate the economy after the 08 crash, which tbh was probably necessary; the Trump administration kept it low because Trump is a big wet boy who wanted to win political points for having a bustling economy. This meant that investment firms were looking for somewhere else to park their money that was a relatively safe investment that would give better returns than a t-bond, and they settled on real estate. Something like 18% of all homes sold in the US in the last quarter of 2021 went to an investment firm.
In the last crisis there were huge spikes in mortgage defaults as the adjustable rate loans that were common at the time readjusted to higher rates in the months leading up to bottom falling out. I’m not sure if we’re seeing that kind of activity yet.
I hear a lot of stories about all cash offers / non-traditional financing swooping in to get houses as soon as they are listed, making it so regular buyers are having to offer no inspection contingencies to get the owner under contract, in addition to $10s of thousands over asking being some kind of norm.
that says, to me, that people are buying shit literally without even knowing what they are getting, especially in the context of constant price increases. and that is a bubble.
will it deflate or burst or balloon further up into the stratosphere? who knows. trust no one.