>So on this definition of a bubble, it's perfectly possible for there to be
>a bubble in housing. The price of houses could be bid up much higher than
>the value they ought to have, with the value they ought to have being
>determined by how much people can afford to pay. Specs can have driven
>the market up in the same way as daytraders drove up the NASDAQ. The
>difference here, though, would be that normal people who still need houses
>would feel compelled to buy at prices far beyond what they can afford over
>their lifetime earning cycle, simply because they are convinced of the
>basic postulate that housing prices always rise over the long term. On
>the push side, such a postulate entails that waiting will always cost them
>more so everyone should get in sooner rather than later, or maybe they
>won't be able to get in at all. And on the pull side, it means they can
>pretty much count on either making money or at worst it being a wash, so
>if they can just get in, they really don't have anything to worry about.
Not that I necessarily disagree with this, if you're talking about people who are investing, but I did want to point out something else based on the research I started doing for my dissertation. As I said, we'd decided to buy. Because we were low income, we had to attend training seminars in order to qualify for a loan. I became fascinated with the process and decided to do a sociology of the real estate market: Buying and Selling the American Dream. I figured with a sexy, cool title like that, I just _had_ to do it.
Among several themes that emerged was the tension between buying a home and buying a house. In the workshop, they would talk about the importance of buying a home -- for its use value. And for those people I talked to (and I'm going to guess for most people), buying is about buying a home to live in, something they can call their own, and do what they want. They don't see it as something they're going to sell down the road. They see it as something they intend to keep. The workshop leaders, of course, play on this a great deal.
But, because the target audience was composed of low-income families, they are also careful to constantly talk about buying a house -- house=buying an investment; hoome=buying a place to live, buying the American Dream. It's one of the things that sparked my curiosity -- how real estate agents navigated the tension between the two ways of thinking of real estate--how they created a market. The used the word 'home' to talk about it in terms of use value and the word 'house' to talk about it in terms of its exchange value. Buyers, though, didn't naturally think of it that way. They had to be taught to think of buying a home in terms of buying an investment.
Now, at the time, the bubble wasn't as big as it is now. The idea of making money on a home didn't seem likely. We looked at a few homes, for instance, that people had bought just 2-5 yrs. prior but, because of divorce or other life changes, they had to sell. The houses went for about what they'd paid for them. That wouldn't be the case, today. Then, if you wanted to get more out of a house in a couple year's time, you would have to also invest a significant amount of sweat equity and cash to fix up that starter home -- most of which need fixing up in the low income market. But, what was really at stake, which probably wouldn't have been mentioned if the target audience had been middle, erm, class, was the constant reminder to remember to keep the value of your house up. IOW, don't build a chicken coop in the backyard, don't park the abandoned hulk of a 85 Impala in the side yard, don't build a ramshackle shack in the back, etc. A significant portion of time was spent on constructing the purchase as an investment, but mainly to make sure people didn't do anything 'low class' to their house.
So, I guess I'm wondering how many people actually think in terms of exchange value. Is the issue, sorta like Doug suggested, that while its just a few people, no problem. But, once even today's equivalent of a shoe-shine boy is talking about buying in terms of exchange value, then it's time to jump ship?
kelley
"We live under the Confederacy. We're a podunk bunch of swaggering pious hicks."
--Bruce Sterling