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Old 09-02-2010, 12:55 PM   #1231
AFireInside
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Quote:
Originally Posted by Slava View Post
That is what I'm saying. The conditions were ripe for a bubble in 2007 (particularly) and we are now three years removed. Not saying that prices can't go down from here, but prices are certainly not sky-rocketing at this point.



The lowering of the interest rates should feed the bubble (and as a result delay the bursting). That didn't happen here though because the rest of the economy was also dropping and so what we've seen is more of a "deflation of the bubble" as opposed to a "popping of the bubble". (I'm using the word deflation here as in a balloon and not in its economic sense).

Its also important to recognize that a correction in prices doesn't equal a bubble bursting either. Corrections are part of the natural economic cycle and shouldn't induce panic and hysteria...which is what takes place in the sector where the bubble bursts.
I think you are right. The conditions were right in 2007. I think it would have burst in 2008 if the interest rates weren't lowered. There will be a correction, however it will be more drawn out because of government interference with the interest rates. Will it pop? I don't think so. But I do think you will end up with at the same place with housing prices, whether there is a bubble or not.

If the bubble would have popped in 2007, I think you would have ended up at point A for housing prices within a year or two. Now I think you will eventually end up at point A, but it will likely take several years.

The market will regulate itself, by lowering interest rates, the government encouraged people to buy, it will just draw out and delay any correction. While numbers may not have increased at that point compared to 2007, had the government not lowered interest rates, it would have been a much much larger decline at that point.

I don't know, just my opinion.... People who own, or affiliated with the real estate industry, or even the financial industry, tend to have bias, because a major decline in housing prices hurts their business.

Those who can't afford a house right now are biased because they want prices to come down. No one is going to sway the other side...

Almost everything I'm seeing points to a pretty significant correction right now. Call it a bubble, call it a correction, it is what it is. Thats RIGHT NOW though, this could all change within months.....
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