I think that your intuition is correct and Eisinger is ignoring a key difference between the equities market and the housing market. It's true for the former that in the last stage of a bubble, the "widows and orphans" (inexperienced speculators) rush into the "Market" and shoeshiners give stock tips. But this last stage does not seem possible in the housing market, since it takes a lot of money to enter.
The last stage also isn't a necessary part of a bubble bursting, since all that's needed is a shift from everyone delaying selling until right before the peak to everyone deciding that the Market has peaked. The music stops and everyone rushes to sit down, but there aren't enough chairs.
> I did recently run across this peculiar thing
> called the VIX index, which apparently measures how much people are
> willing to pay to be cushioned (with puts and calls) from a volatile
> stock market. Apparently it is now at an all-time low, meaning no one is
> much worried about volatility. For contrarians this overconfidence of
> the masses signals that the last fools are now entering the market, that
> there will soon be no one left to sell to, and that the Ponzi scheme is
> near its end.
Alternatively, people may be responding to the lack of volatility of the Market in the recent past by "rationally" expecting low volatility in the future. The problem is that the Market might be stable _per say_ but lose its stability over night due to collapse of other markets, e.g., housing.
> Is Eisinger, as it were, giving us his reading on the
> housing VIX, saying it has not reached its lows yet, so there's still an
> upside?...
I don't know.
> Anyway, while it's an ingenious theory, it don't think it holds up to
> the facts. I found the following quotes in my folder on the housing
> bubble. From the Wall Street Journal: "7 in 10 consumers expect housing
> prices in their areas to increase over the next year. Significantly, one
> in three of those who expect rising prices think they will go up by 10%
> or more during the next 12 months. In fact, nearly 1 in 10 expect
> housing price increases in the 20%+ range in their areas." And from the
> LA Times earlier in the year: "A widely followed University of Michigan
> consumer survey, released Friday, showed that 24% of respondents
> nationwide said it was a good time to buy a home because prices would
> rise. That was the highest percentage since 1988 — right before prices
> peaked in the previous real estate cycle. ( "It's Not a Bubble Till It
> Bursts," May 29, 2005).
>
> Judging by these surveys, I am afraid the housing VIX may well be at an
> all-time low as well, and that the Ponzi scheme IS about to unravel (if
> you believe this whole theory). Eisinger may be living in a bit of a
> bubble himself judging by how he is overgeneralizing from his WSJ
> readers. On a housing blog about Washington, DC, that I happened across
> the other day, an average Washingtonian came on and said: "I have been
> following this discussion with fascination. ...This discussion is the
> ONLY place I have heard ANYONE say they think there is in fact a bubble
> and it will burst." And the above WSJ article noted that "Only about one
> in three consumers recognize the term housing bubble."
It's the popular extrapolation of current upward trends of housing prices that means that the bubble isn't over. But one can never accurately predict when a bubble will pop. (Someone might, but that would be luck. Bubbles, by their very nature, are unpredictable.)
-- Jim Devine "Come back next Thursday with a specimen of your money." -- G. Marx.