Is There a Housing Bubble? 26


“Don’t worry folks”, says the report from Capital Economics, “if it looks like you’re making too much money from your real estate investments, it’s not going to last.”

Well, there’s a downer if I ever heard one.

And a not-true statement either.

Here’s what they’re worried about and here’s why it’s totally bogus. They say that housing price gains are rising twice as fast as gains in income and residential rents. What that means is it’s not sustainable and we’re looking at another housing bubble that’s about to burst.

Um, have they gotten so complacent in the recovery that they think it’s a done deal? And that counter-intuitively it’s bound to burst?

Such weird people out there.

Here’s why it’s total nonsense.

When housing gains are outpacing gains in income that’s a really good sign. It means investments are paying off. We’re not talking only about homeowners in their primary residence. We’re including investors, local and foreign, and the fact that they’re seeing gains means positive news for the housing market.

And anyway do you know how much can happen between now and when prices hit “bubble” levels? Tons! Income levels can rise, rents can shoot up, price gains can level off. It’s a complicated system and no one can be sure of anything.

Which is a good life lesson – if someone says they know it all, just ignore them.

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