Comments on: The Housing Bubble?

By: Blogeline

Blogeline — Wed, 31 Dec 1969 18:00:00 +0000

I completely agree with you.
When we were thinking about buying in the DC area we knew we would not have a problem reselling it in the next years.
This area is funny and a little unique I think because of the large military population. Those people come and go, and so houses are being sold and bought all of the time.
I also agree on the point you made about ARMs. We did the same mainly because of the fact that we will be in this house for about three years. For people planing on selling the house in the near future this is the way to go. It saved us about $400 a month.

By: Kevin Drum

Kevin Drum — Wed, 31 Dec 1969 18:00:00 +0000

I think you're missing the point about Greenspan. It's not really a question of whether ARMs are good or not, the question is why Alan Greenspan was recommending them. Giving consumer loan advice is not normally something the Fed chairman does. So what's his interest in trying to keep the refinancing binge alive?

By: James Joyner

James Joyner — Wed, 31 Dec 1969 18:00:00 +0000

Kevin, I'm not sure, to be honest. I didn't see/hear the speech, so I don't know what motivated it. Greenspan seems to go off the reservation on occasion, acting as the economic Yoda. This may well be along the lines of his "irrational exubberance" comments years ago on the stock market. After all, the Fed doesn't have anything to do with the stock market, either. Maybe he's just trying to break the conventional wisdom that people over 40 have that ARMs are bad?

By: David Sucher

David Sucher — Wed, 31 Dec 1969 18:00:00 +0000

So, Kevin, why do YOU think Greenspan advocated ARMs?

Neither the WA Monthly article actually grappled with that one except by conconcting a solution which violates Occam's Razor.

By: R Gardner

R Gardner — Wed, 31 Dec 1969 18:00:00 +0000

DC Metro is a strange puppy for real estate, particularly "Inside the Beltway." One massive fact is that many career civil servants will be retiring in the next decade, and much of their net worth is in their home in Annandale or Bethesda. The home they bought for $40-80K in 1980 is now $700K. But their replacements can't afford $300k.

So when all the retiring civil seervants dump their homes on the market, planning a move to Florida, there won't be enough new buyers to support the prices.

I don't see a problem for the under $500K, or over 2M properties, but severe problems for the inflated mid-priced places.

Just my two cents.

By: David Fitelson

David Fitelson — Wed, 31 Dec 1969 18:00:00 +0000

I am neither an economist nor any other sort of mystic, but I am mystified by Wells' argument about the disparity between rental rates and house prices, and particularly by Krugman's view that this disparity suggests a looming bubble. Last time I looked, the expectation that one's real estate assets will appreciate over time did not necessarily make one a speculator. Given the current national ratio of births/immigration to deaths, along with the well-worn truism that no more land is being produced, this expectation seemed altogether reasonable. Besides, are there not other good financial reasons to own rather than rent, not the least being the way the federal tax structure discriminates in favor of ownership? I guess I just don't get it. Somebody straighten me out, please.

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