March 9, 2014

Operating In Very Rarefied Air

A reader suggested a topic on bubbles. “What factors are deriving the Stock Market to go up and up. Even the Fed is tapering, the EMs are doing even better than before. What has changed? Is it sustainable? Housing Bubbles are still in full force in more than 20 countries across the world.”

A reply, “The market is going up because the market is going up because the market is going up … This will continue until it stops, then the market will go down and it will continue to go down because it continues to go down. Think Price equals Value and it will all make sense (sort of).”

And finally, “Realtors tell us there is a shortage of houses. Over a couple of decades of mania we built tens of millions of houses above ‘normal.’ The prices of houses doubled from ‘normal’ and so did the debt associated with them. Ironically, the size of these houses kept getting bigger and bigger. Wages have been sideways and we have ten million fewer people in the workforce. This big fat possum is way out on a fragile Persimmon limb.”

The Napa Valley Register. “Leslie Appleton-Young, chief economist for the California Association of Realtors (CAR), delivered her ‘2014 Housing Market Forecast’ in Napa on Tuesday. Commenting on housing market trends, Appleton-Young described the general economic conditions at the end of 2013 as ‘lackluster with moderate growth.’ She said she believes that 2014 will be better, based on the fact that long-term growth of housing is tied to job growth. The economist cited improvement in the rate of unemployment and said that the Bay Area in general leads the state and the nation in creation of jobs requiring highly educated workers who are more highly paid, and able to buy, instead of rent, homes.”

“‘California operates in very rarefied air, with a median home price of $410,990, compared to the national average of $188,000,’ said Appleton-Young.”

Bits Bucket for March 9, 2014

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