On Mon, Feb 23, 2009 at 6:50 AM, [email protected] < [email protected]> wrote:
> > > The bubble was that clear, particularly where housing prices skyrocketed up > on the coasts, in NV, etc. There is no way that a doubling in price is > anything but a bubble. What's your definition of a bubble? Artificially inflated prices (not related to supply and demand)? A large price increase that is sure to correct? It seems like a mushy term. I'm asking not to argue, but to get at what this really means. There is no doubt, is there, that sometimes prices (of some things, at least) shoot up for legitimate reasons. When we get a sharp rise followed by a sharp correction, we can point backwards and say "Bubble!" But how do we know that a doubling in price is a bubble unless it is followed by a big correction? Wikipedia: An economic bubble (sometimes referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, or a speculative mania) is "trade in high volumes at prices that are considerably at variance from intrinsic values". Has the real estate volume been high in recent years? Or may that's not the right question - the volume of mortgages certainly has been high, but the price of mortgages hasn't shot up. "Intrinsic values" is a problematic term, since economic value is generally defined in terms of how much of one thing we're willing to give up for another. Apparently people have been willing to give up a lot of money (or do I mean solvency?) for real estate lately. Banks have been, at least. In the stock market, we talk about fundamentals and technical analysis. It seems like fundamentals have been forgotten in the real estate market... such as the relationship between rents and valuations, which somebody here, as I recall, pointed out was a pretty good indicator that we were in a bubble. Nick
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