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So Why Are Housing Prices Still Rising Here?







So Why Are Housing Prices Still Rising
Here?

So Why Are Housing Prices Still Rising
Here?
03/08/2004 11:18 PM

SF Chronicle: Offshoring's giant target. Jobs are more likely to be shipped overseas from Silicon Valley than any other region in the nation, placing the Bay Area's economic engine directly in the path of the global freight train known as offshoring.




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So Why Are Housing Prices Still Rising Here?

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  • Mercury News (reg req): Median home prices pass half-million mark. The median price of resale houses sold in the Bay Area reached $520,000 last month -- the first time that figure has exceeded the half-million point.
  • Lunacy.


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    The Housing Bubble, Continued 06/19/2004 12:14 PM

  • Mercury News (reg req): Economy boosts valley home prices. The median price of a home in Santa Clara County reached $590,000, up 20.2 percent from May 2003, according to DataQuick Information Systems. A total of 2,149 resale houses changed hands in the county last month, a nearly 30 percent increase from a year earlier.
  • It's much more than the economy at work here. It's a mindless, dangerous bubble that shows what a short attention span human beings have when they are infected with greed and/or panic. This particular news story ends witha local public defender who found a lender that offered a "zero-down" loan -- that is, loaned the full selling price with no down payment. I can understand the borrower's motive, though I think it's an incredibly risky move, but the bank making this loan is just irresponsible. So is the real-estate industry that promotes this kind thing, but that's par for the course. Of course, the lender will now push this mortgage into the national market, offloading it to some other company. This is how we have such liquid markets, and the system was a boon in the past, greased as it has been by the likes of Freddie Mac and Fannie Mae, the giant federal home-loan operations that act as though they have the full faith and credit of the U.S. taxpayer behind them even though they do not. But it is not sustainable, yet nobody in power dares mess with this machinery. What we'll see eventually, if we don't find a way to slowly deflate this bubble, is a massive collapse of the housing market that will in turn spark a severe recession. The truly scary scenario, still not the most likely but growing in probability every day, comes when falling prices for housing lead to massive collapses in the financial industry. But if that occurs, the Fannie Maes and Freddie Macs and the money-center banks with big exposure will be considered too big to fail. We taxpayers will bail them out to the tune of several trillion dollars, an amount that'll make the S&L bailout of the 1980s seem tiny. And the only way that will work will be to re-ignite inflation on an absolutely massive scale, because the only way to make it work will be to ratchet up the money supply in unprecedented fashion. This is a bubble. It will deflate. If it doesn't deflate gently, the nation is in for the worst kind of pain.


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  • Mercury News: As offers pour in, cutthroat market a boon for sellers. The fast-paced, competitive nature of this spring's Bay Area housing market has participants and observers alike speculating on the reasons -- particularly after three years of severe job losses.
  • The story goes on to offer all the usual reasons, such as a shortage of houses and low interest rates. But there's another very good explanation: rampant speculation of another kind, inducing panic buying like the kind that occurred in the stock market in the late 1990s. This is a bubble that will deflate eventually. It's happening elsewhere, as this NY Times story notes today. The mania will end here, too, and it'll be ugly.


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