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This is a by product of the bond bubble, IMO. Housing prices are up a fair amount in the last 18 months but let's not forget that interest rates have dropped so much that it is not that much of an increase on a financed monthly payment basis.
If rates stay super low for a few years with a not terrible economy, I do agree you could see a secular bubble forming. But right now I think a lot of investors are buying real estate because they don't want to be in equities and can do better than a crappy rate they are getting in bonds. But in a lot of ways real estate IS a bit of a leveraged bond investment, because if rates go back up to 6-6.5% for a 30-year mortgage (esp if it takes hold in a fashion that would be the bond bubble bursting), it is pretty likely the value of real estate will drop alongside bonds.
With home prices rolled back to mid 1990s levels and 30 year mortgage rates at historic lows this does appear to be an incredible time to buy a home or a rental property. Could prices go lower? Sure. But, it certainly appears that most of the downside risk is priced in.
Last edited by shaker281; 02-07-2013 at 12:08 AM..
I think the next buuble to go it the fedweral government redistribtuion of wealth.Not just to individuals but to local and state governamtn also. No different than what europe si startig to experience.Its eeffects even on business will be huge.
You believe politics and financial advice from Rolling Stone magazine? Wow.
Rolling Stone editors and prognosticators have the least to gain by disinformation and distorted data, therefore less incentive to promulgate wishful thinking. Cf., e.g., CNBC, WSJ, etc.
Quote:
Originally Posted by jimhcom
Bubbles require two things, speculation and irresponsible lending policy.
Things have to be able to be bought and resold in a relatively short period of time at a profit, and people need to be able to finance those purchases in order to facilitate the prices rising beyond whatever is its intrinsic value.
Doesn't Student Loan meet that test? The Speculation is the presumption by students that the investment will yield dividends. This is being loaded artificially, with unfounded shouts that only education can improve the economy, such as every stockboy having at least an AA from the Junior College to learn skills he cannot be taught on the job. Then comes the irresponsible lending policy, in which the stockboy has been loaned the money which he can never pay back from his minimum-wage job.
Doesn't Student Loan meet that test? The Speculation is the presumption by students that the investment will yield dividends. This is being loaded artificially, with unfounded shouts that only education can improve the economy, such as every stockboy having at least an AA from the Junior College to learn skills he cannot be taught on the job. Then comes the irresponsible lending policy, in which the stockboy has been loaned the money which he can never pay back from his minimum-wage job.
Not really, speculation is the act of buying in order to sell at a future time at profit. It is pretty difficult to flip an education.
People may be over investing in education, but without the ability to resell an asset, you cannot get the kind of thoughtless exuberance you saw during the dot com or housing bubbles. That kind of frothing comes from people making the kind of profits that entice them act with complete disregard for caution and to become part of mass hysteria.
There are a class of securities (student loan asset-backed securities/"SLABS") whose underlying value is backed by student loans. The market for those things is somewhat opaque, so, it's hard to say if they might pose a bubble problem in the future.
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