Herd About the Housing Bubble?
Yesterday econ/real estate guru Robert Schiller penned an article for the Times examining why Greenspan, market experts and individual investors didn’t see warning signs of the disastrous housing bubble: The failure to recognize the housing bubble is the core reason for the collapsing house of cards we are seeing in financial markets in the United…
Yesterday econ/real estate guru Robert Schiller penned an article for the Times examining why Greenspan, market experts and individual investors didn’t see warning signs of the disastrous housing bubble:
The failure to recognize the housing bubble is the core reason for the collapsing house of cards we are seeing in financial markets in the United States and around the world. If people do not see any risk, and see only the prospect of outsized investment returns, they will pursue those returns with disregard for the risks. Were all these people stupid? It can’t be. We have to consider the possibility that perfectly rational people can get caught up in a bubble.
Schiller concludes that the lack of foresight about the bubble has to do with “herd behavior” and “information cascade,” whereby rational investors’ individual decisions add up based on incomplete info. The phenomenon helps explain why an entire nation would be under the thrall of the notion that housing=a great investment. A cascade is possible when a whole country buys into the same belief despite individual analysis that refutes prevailing wisdom. The result? Rising prices and a big bad bubble. So what’s next? “It is now possible that a downward cascade will develop — in which rational individuals become excessively pessimistic as they see others bidding down home prices to abnormally low levels,” writes Schiller.
How a Bubble Stayed Under the Radar [NY Times]
Collage by Amy Jaz.
11.05/11.17/11:31 Brownstoner.
Biff Champion=Dickchewer.
Herd About the Housing Bubble? 80 comments of delusion.
“I know how – do you?
Or are all you are good at is hating?”
Did the IRS change the tax codes yesterday? Please tell so I can do some “exchanges” now. LMFAO
The What
Someday this war is gonna end…
I’ve been waiting for what seems like forever for a compelling 1031 debate. Thank you, Brownstoner!
11:28 – why do you say that a vacation home is not considered a “like property” and not included in a 1031 program?
If he buys a property for a similar or greater value within the 180 days and rents it out or attempts to rent it out, then it can be included in a 1031.
What is your position contrary to this?
hmm so vacation homes can not be considered investment property? Even if it is rented out?
Since you are brilliant in RE – tell us how a 1031 can be converted into a primary residence?
I know how – do you?
Or are all you are good at is hating?
11:25 – I dont care what you think or whether you are convinced.
I dont believe that no one is making money in RE now because you say so.
the point is many people are making money in RE now and will continue even if the market continues to soften.
People like you who claim the sky is falling and sit still will not make any money because you are blinded by your pessimism.
Busted!
One take-away from the Schiller article is that he (the one who had this bubble pegged way before anyone else) is suggesting caution should be taken on the downside. I think he is comfortable suggesting this as national average price depreciation has already exceeded his projections. While NYC is not absolutely immune to the downward cascade effect there are a number of dynamic conditions that prevent rapid price depreciation. I think it is fair to conclude that if Schiller is saying we are at or near the bottom, then NYC personal residential real estate might be escaping the fate other parts of the nation have suffered and therefore emerge from this credit debacle only slightly bruised.
11.05/11.17 AM;
You are FOS. If the property is a vacation home, as you claim, than it cannot be included in the 1031 program. The What is correct in calling you on your claim that you “netted” $1.4M.
Don’t waste your time on Brownstoner. A Carlton Sheets infomercial is the place for you! You can appear on a commerical and show everyone the check where you “netted” $1.4M. You can impress other people with your mentality.
Hi – I live in a shitty apartment in Brooklyn and have never invested in real estate or built a property but I am going to bag on everyone else who lives anywhere besides NY as a loser who will lose all their money.
also everyone in the world is much less green and environmentally conscious as I am because I shop at Whole Foods and take the subway to work.
I am great and the best green real estate genius in the world even though I rent.