Crowd Gathers To Watch Economic Train-Wreck
The home price increase has caused another economist to change his opinion on the housing bubble. "In a real estate seminar in January, I stated that housing price increases reflected underlying conditions of reduced costs to finance homes. What has changed my thinking about the housing bubble is what is happening in the financing of housing."
"Are home buyers not being smart? No. Lenders are being foolish. Some lenders believe that rising housing prices will soon justify whatever loan they offer the home buyer."
Mr. Donald Ratajczak of Georgia State University is joining the crowd of horrified by-standers. "Pundits, economists, and, yes, Warren Buffett have been rushing to get on the record saying that real estate has maxed out. The top may not be here yet, they argue, but it’s close."
"Paul Kasriel, chief economist at Northern Trust Corporation, "constructed a price-to-earnings ratio for housing. In 2004, that P/E ratio 'the highest since 1952, when the time series starts.' And we all know what happens when P/E ratios reach 50-year highs."
"David Rosenberg, Merrill Lynch’s chief North American economist, "We get nervous when we see things move parabolically north, because no asset class at any time ever failed to mean-revert after such an upside move."