I ran across this statement while looking at several housing bubble blogs. It was repeated, in some form or another, several times.
Is it a valid truism?
Sure, tulip bulbs returned to their pre-bubble price. Dot-com stocks, too, I think. But, what about US housing?
Judging by news reports and the bubble-bloggers in some overheated markets, such as Sacramento for example, it looks like prices are in free-fall. It's easy to find stories about people losing 5 to 6 thousand dollars a month on a speculative house purchase. That's if they succeed in selling it at a deep discount from the purchase price.
There are stories cropping up about newly constructed "ghost towns" that have only 10 - 20 percent occupancy in new developments. Many of the empty houses are owned by speculators who are trying to figure out an exit. The rest were built by the developer in hopes of finding more speculators to buy them. Below market rent is thought to be the next step for these ghost towns, filling the empty houses with people who might not even own a lawn mower.
Here in Minneapolis, a few condominium projects are changing over to office space or are "on hold" -- a euphemism for "the pre-sold money dried up". There is still some construction in the exurbs and many late-stage condominium projects are going to be completed. Locally, housing starts were reported down by 49 percent in September. This was labeled Great News! by local realtors, thinking that an inventory reduction can somehow help to maintain sales momentum.
The bursting of this bubble is going to damage a lot of peoples' finances. What's the larger outcome? Will the pain be limited mostly to the amateur real estate speculators and the small number of firms that serviced their greed? If that's the case, we'll see a ton of ink devoted to their pain, but the economy will continue to stumble along without a huge disruption.
If you look at the real estate web pages, it seems they are either in deep denial or maybe they really can see a wonderful recovery just over the horizon. If you look at the bubble-bloggers, it's 100 percent gloom and doom -- sometimes a little gleeful in their criticism of realtors. MSM just seems to look for human interest stories, both cautionary tales and stories of survival, with a little hard-edge reporting starting to appear.
I am reminded of the days when I watched Maniac Cramer pushing stocks on the CNBC morning show and then I went to the fuckedcompany.com website to see which companies were tanking. This housing market has a similar feel to it.
Keith