"Get your facts first, and then you can distort them as much as you please." (Mark Twain)

Wednesday, June 15, 2005

Bubblicious 

I was previously agnostic (well, sorta) about whether there was actually a real estate bubble fixing to pop some time soon, but now I'm pretty sure that we're thoroughly hosed. The turning point for me came last night, when I was having a beer with a friend of mine who works in the mortgage industry. Apropos of nothing in particular, he expressed his opinion that here in Seattle, at least, there is no bubble (this in spite of double-digit appreciation in home values for each of the past several years). I took this as a supremely bad sign - the mere fact that my friend used the word "bubble," that he thought about it at all, implies to me that we're in trouble.

Whether or not you believe there's a bubble, if you're interested in the subject you ought to check out The Housing Bubble 2 (what happened to The Housing Bubble 1?), a blog devoted to the subject. Lot's of provacative information there, including this tidbit (emphasis supplied):
A reader sent in this PDF link by The Northern Trust Company. It has some data that goes straight to the core of the housing bubble debate. "The performance of the housing market has played a visible role in payroll growth. Employment in housing and related industries (sum of employment in the establishment survey under various categories related to housing industry) accounted for about 43.0% of the increase in private sector payrolls since the economic recovery began in November 2001...."

It has been often said that some external event, like sudden job loss, would have to occur in order to for home prices to fall. This data indicates that the US economy is so reliant on RE that even a flat market will wipe out millions of jobs.

Interestingly enough, one of the reasons my friend last night was so sanguine was his belief that the employment picture locally is rosy. Hmmm.

 

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