>You could argue that the housing bubble got a new lease on life after
>the stock bust because people thought "at least real estate is
>solid!" But it's just tangible. Values can collapse, just like stocks.
>
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In the context of this thread, it's important to point out that "the housing boom" means two distinct things. One was the bubble in house prices, which certainly falls into the category of speculative frenzy generating fictitious profits. The other was the boom in house *construction*, which doesn't really fall squarely into that category.
The first category is exemplified by the investor who bought an existing house and then flipped it for a (fictitious) profit - fictitious in the sense that the profit didn't correspond to any actual production, it just redistributed money from the guy who bought low and sold high to the guy who did the reverse.
But the second type of activity is not purely speculative or fictitious because it yielded real, honest-to-god houses that are useful will provide shelter for somebody for decades to come. It's true that, because of the bubble, the market misallocated resources and built too many houses, so for a while there will be a glut (not a general glut, just a glut in this sector). But in principle that's no different, except in degree, from normal capitalist production, which is always "speculative" in the sense that the capitalist cannot know in advance with certainty how many people will buy his output, meaning that the economy is always in ("temporary") disequilibrium. In this case the disequilibrium just happens to be a lot bigger due to the price distortions caused by the bubble.
Seth