Signs Of The Time, Part 86

Back in 2007 when I was running Boom2Bust.com, “The Most Hated Blog On Wall Street,” I came across an article which illustrated just how ridiculous the housing bubble had gotten. Several California homeowners were asked about future price appreciation for their homes. Most, if not all, had wildly optimistic expectations about how much their properties would be “worth” down the road.

Fast forward to July 24, 2015, and Robert Shiller, the Yale professor who correctly-called the “dot-com” and housing busts, wrote the following in a New York Times piece entitled “The Housing Market Still Isn’t Rational”:

Extravagant expectations do lurk in parts of the market. In the 2015 Yale School of Management survey of recent home buyers that Karl Case of Wellesley College, Anne Thompson of Dodge Data and Analytics and I direct, our preliminary results confirmed the overall Pulsenomics conclusion yet found that some people have strikingly unrealistic expectations.

In San Francisco, for example, we found that while the median expectation for annual home price increases over the next 10 years was only 5 percent, a quarter of the respondents said they thought prices would increase each year by 10 percent or more. That would mean a net 150 percent increase in a decade. These people are apparently not thinking about the supply response that so big a price increase would generate. People like this could bid prices in some places so high that eventually the local market will collapse…

(Editor’s note: Bold added for emphasis)


“The Nastiest Wife on Television”
Uploaded April 11, 2006.
And we all know what happened to housing right after that…
YouTube Video

Irrational exuberance is alive and well, it seems. You can read Dr. Shiller’s entire article on the Times site here.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Tuesday, July 28th, 2015 Crash Prophets, Housing, Signs Of The Time

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Survival And Prosperity
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Christopher E. Hill, Editor

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