Infinite MonkeysHugh Hewitt makes a good point in a post on real estate bubbles that "The housing market is too vast to proclaim the presence or absence of a bubble across its entirety. The key seems to me to be regional population growth and housing supply." Then he goes on the make a ridiculous point about how if current trends continue, by 2025 the equivalent of the state of New York will move to California.
Of course, any time you hear "if current trends continue..." you should be skeptical. Based on past trends, President Bush will win the 2008 election with 57% of the vote. Based on the trends of the past four months, the temperature in Phoenix will be 200 degrees by December. Based on our hit counts on this blog for the past four months, we should pass InstaPundit by 2007.
What would change current trends in population growth? Well, for one thing, the fact that no one will be able to afford a $&!@ing house. For another, the fact that the baby boomers are getting older, and might want to retire somewhere less crowded, safer, and where--and I cannot emphasize this enough--they can afford a $&!@ing house. Even people who own homes and want to trade up are starting to wonder why they get so little here, and can get so much more elsewhere.
The only thing that is really keeping the migrations lower than they were in the 90's, when a number of Californians moved to the Pacific Northwest or Colorado, is that any market that begins to heat up is descended upon by speculators, so prices go up even faster. When interest rates go up (and they always do, eventually) there's going to be a lot of people with wacky loans in big trouble, and a lot of speculators (and lending institutions) looking to get out. Will the bubble burst in a terrible crash? Not in most places--and Hugh is right that it's a lot of very small markets. Places in La Jolla or Newport Beach may dip for a while, but there's only some much property near the ocean. $600,000 condos far inland or in dodgy areas (and that really is what they cost) will drop a lot, and may not recover for years. And then, if the whole economy doesn't tank, some young Californians might actually be able to buy a…well, you know.
Posted by David at June 23, 2005 02:05 PM | TrackBack