Bubble Talk Can't Drown Out "Media Effect"
A MSN Money article reveals that even the insiders know people are getting rushed into the housing market, out of fear and greed. "'There is certainly a media effect that is keeping demand for housing high,' said Bob Moulton, 'a real estate broker in Manhasset, New York. 'People who think they are missing out on something want to get in on real estate even more right now.'"
"'Even with the Federal Reserve in a tightening cycle, consumers aren't deterred, housing remains very strong,' said Bob Walters, chief economist at Quicken Loans. 'For home buyers and those considering refinancing, defense is the name of the game right now. Mortgage rates are expected to rise, so acting now and locking in a low rate is an advisable strategy.'"
Did you ever notice these organizations have in-house economists who just happen to predict exactly what is best for their employer?
7 Comments:
Economics is not considered a "real" science.
In fact, there is no official nobel prize for economics, because alfred nobel maintained it was bullshit and voodoo.
the economic prize "in memoriam" of nobel is paid for by private companies and they elect the winner they want, which always happens to be an employee of one of their firms.
I wouldn't agree that economics is a real science. More than anything, great economists provide the rest of us with a language and a vision that completely changes the way we see the world. For example, Adam Smith's "invisible hand" concept isn't really scientific, but it completely changes how people looked at markets. The use of statistics and other math doesn't make economics a hard science any more than statistics makes history a hard science--the essence of both economics or history is interpretation of statistics, and that interpretation is very soft and unscientific.
None of the important economic insights require any math beyond the simplest algebra, but nevertheless most people don't understand those concepts. Consider the concept of supply and demand. An economist will tell you that supply and demand are always equal in a free market (at least at the microeconomic level--Keynes showed that they may not be equal at the macroeconomic level) and yet people continue to say things like "supply of houses is not equal to the demand". Which is absurd, the supply is exactly equal to the demand, and the point of the intersection of the two curves sets the price. The only way supply can be less than demand is if the price is controlled by the government.
I agree that the media has contributed to this everlasting bubble. Of course the papers and news stations are now being run by real estate and mortgage companies. This mindless dribble about how people are going to miss out on the chance to buy a house is ridiculous. As in any economic situation, you need a buyer or consumer for your product. Am I supposed to believe that never ever from now on am I or anyone who hasn't bought yet, will never ever be able to buy in the future?
From discussions with RE agents, it seems that if we are to buy now, we will be competing with people with half our household income and half the down payment. I am not so worried that we will miss the chance to buy.
If we buy now, we will probably miss the chance to sell.
[Real economics is actually as scientific as other sciences. I'm not an economist, but I happen to have read some statistics and learning theory papers published by economists, as lots of sciences are all connected at the end.]
Economics employs scientific principles but is far too complex to meet the predictive standards of traditional sciences. Physics, Chemistry, Biology and some types of Psychology work well because they are very narrow.
Science starts falling apart as it gets more complex, so sociology, economics, anthropology, etc tend to shoot in the dark.
I respect their goals, but am realistic (pessimistic) about their findings.
"Did you ever notice these organizations have in-house economists who just happen to predict exactly what is best for their employer?"
I agree with you Ben. They are there to perpetuate the propaganda machine. How can it be a good buy right now EVEN with the low interest rate and the home price going to thru the roof. It's only for people who can't do the math.
I bought my house 4 yrs ago in OC for $540k and 20% down and a 7.75% interest 5/30 mortgage. The same house is now selling for $1.25M. With a 5.0% interest mortgage and 20% down, my payment will still be much much more than my original monthly mortgage.
HOW CAN IT BE A BETTER BUY? Maybe someone can explain that to me.
Anon 6:23,
Are you considering doing what Deb has done (selling and renting with a view to repurchasing when prices drop)?
AJH
Post a Comment
<< Home