Robert Shiller: Unlearned Lessons From The Housing Bubble
Finally, someone is talking sense about the real estate crisis. Human nature and the consistent miseducation of citizens indicates the likelihood of future real estate bubbles. Let me give you a personal example-I live in a small town and during the real estate bubble we were plagued with phony real estate seminars and get rich schemes. All of these ponzish schemes stressed the same idea, “buy real estate (preferably with a lot of debt) after all they aren’t making any more of it”. This group think doesn’t make sense. Luckily, Robert Shiller has a good article dispelling common real estate myths. Enjoy!
Click Here To Read About Why The Real Estate Crisis Is Likely To Happen Again
Introduction (Via Gulf Times)
There is a lot of misunderstanding about home prices. Many people all over the world seem to have thought that since we are running out of land in a rapidly growing world economy, the prices of houses and apartments should increase at huge rates. That misunderstanding encouraged people to buy homes for their investment value – and thus was a major cause of the real estate bubbles around the world whose collapse fueled the current economic crisis. This misunderstanding may also contribute to an increase in home prices again, after the crisis ends. Indeed, some people are already starting to salivate at the speculative possibilities of buying homes in currently depressed markets.
Additional Article Excerpts (Via Gulf Times)
There are often regulatory barriers to converting farmland into urban land, but these barriers tend to be thwarted in the long run if economic incentives to work around them become sufficiently powerful.
Most of the benefit from land for investors has to be from the profit that agribusiness can make from their operations, not just from the appreciation of the price of land.
Shortages of construction materials do not seem to be a reason to expect high home prices, either. For example, in the US, the Engineering News Record Building Cost Index (which is based on prices of labour, concrete, steel, and lumber) has actually fallen relative to consumer prices over the past 30 years.
The kinds of expectations for real estate prices that have informed public thinking during the recent bubbles were often totally unrealistic.
The sobering truth is that the current world economic crisis was substantially caused by the collapse of speculative bubbles in real estate (and stock) markets – bubbles that were made possible by widespread misunderstandings of the factors influencing prices.
Click Here To Read About Why The Real Estate Crisis Is Likely To Happen Again
