A plague on both your houses
The housing bubble has burst. Those who ignored it and bought on the way up will get burned on the way down.
Housing is the business cycle. Or so wrote economist Edward Leamer in a 2007 research paper where he argued housing leads the economy. When prices go up, builders build. But the economy sinks when prices drop, and construction activity dries up. That's what happened when the housing bubble burst in 2006. Prices dropped, builders shut up shop, and the economy tanked.
Recently, the housing market has drawn mainstream attention. Prices are down from their peak. Recent homebuyers are nervous. Comparisons to 2008 abound. But are these price drops a minor blip on their way to loftier heights? Or has a bubble burst?
I’ve written 11 articles in this newsletter over the past two years, arguing we're in a global real estate bubble. Common sense tells us prices are ludicrous. The housing market, in particular, is a burning pile of garbage. But vested interests are trying to dress it up as a log fireplace. Rising interest rates have added some fuel to tha…