> Jordan Hayes wrote:
>
> >California real estate, I maintain, is not (yet) a bubble.
>
> There are ways to value real estate - against, say, local incomes. I'm
> guessing those numbers are high in California now, but not off-the-charts
> high; maybe someone with good stats can correct me. The U.S. stock market
> is off-the-charts high.
Precisely.
The only point of my post was to undercut an already-faulty analogy.
Jordan criticizes me for not offering a full-fledged empirical refutation of his claim:
> The Antelope Valley, scene of recurrent white racist violence,
> is in part a product of one such burst, driven by Reagan's
> military buildup during the 1980s. It left plenty of folks
> high and dry with upside-down mortgages -- owing more than the
> value of the home.
>
> The plural of anectdote, my logician friends tell me, is *not*
> "evidence" ...
The fate of a whole community is more than the plural of anecdote. And Antelope Valley was only ONE example I gave.
Besides, getting down with the logical, a single anecdotal observation, IF CONFIRMED, can indeed be all the evidence science needs. (See the case of meteorites, ridiculed as superstitious fantasy for solng by the French Academy, until they finally appeared almost on the Academy's doorstep.)
But all this quibbling misses the point: Even granting Jordan his faulty analogy, the presence of a strong long-term increase IN UNDERYING VALUE (California's infrastructure today, from aquaducts to computer, entertainment and bio-engineering industries is certainky WAY more valuable than it was 150 years ago) doesn't mean that speculative
bubbles haven't appeared and then burst along the way.
On the other hand, If Amazon's stock is through the roof, not from a high IPO value, but from being bid up afterwards, then, unlike California, NONE of that value accrues to the entity that supposedly HAS that value. Building aquaducts to Ulan Bator would NOT have sustained California's growth, or the concommitant growth in the (use or exchange)
value of its real estate.
> California real estate, I maintain, is not (yet) a bubble. It
> continues to command a premium for no apparent logical, rational
> reason.
That's hardly the definition of a bubble, as Doug's comment makes clear. Besides, the last time I looked, scarcity was a "rational [economic] reason" for the price of a good to be high.
> A bubble, when it bursts, is when a seemingly unrelated event
> reveals this irrationality and crushes the market. Your example of an
> massive earthquake misses the point: the destruction would be *actual*
> -- the value of the land would be destroyed, not merely shown to be
> irrationally inflated.
If properly insured, the task of rebuilding, while sbustantial, would be fully financed in advanced, and could conceivably result in substantial INCREASE in value, by creating a more efficient, much lower-maintenance regional infrastructure.
I never bought your premise that California real estate represents a speculative bubble, only that it shares aspects in common (and has given rise to speculative bubbles on a smaller scale than that of it's historical developmental trend.) I was simply trying to illustrate the deleterious effects that flow from overheated speculation EVEN WHERE
THERE IS A VALUABLE, DEVELOPING UNDERLYING ASSET.
> For all the troubles the LA has seen in the last decade, it's still
> 50% more expensive to buy a house in LA than it is in Cincinatti.
Doug has already answered this, and so have I: "The last time I looked, scarcity was a "rational [economic] reason" for the price of a good to be high."
150 years ago, what Cincinatti had to offer was relatively scarce compared to LA. Now the situation is reveresed. Is there an irrational component in there? Well, of course! There ALWAYS is!
But, tell you what, Jordan. Get the folks in suburban Cincinatti to start themselves a Petunia Parade on January 1 every year. If it doesn't get snowed on once for 90 years, you just might find those housing prices evening out!
Ooops! I forgot! There already IS a parade on January 1. It's gonna take an INCREDIBLE amount of capital to become competititve. Well, maybe you can use all that money in Amazon stock to turn things around, you think?
-- Paul Rosenberg Reason and Democracy rad at gte.net
"Let's put the information BACK into the information age!"