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What another waste of time and effort. This thread seems to be stuck quibbling about the term "cycle." Instead it might be useful to understand what is actually happening with the housing market and what is likely to happen with the market. Certainly there are enough interesting and powerful factors involved, to list just a few:
Aftermath of 2008
Interest rates
Housing supply and low housing starts for many years
Demand with changing demographics with fewer traditional families
Rental prices and supply/demand
So is there any possibility of a useful discussion beyond those who just want to argue and those who believe the sky is always about to fall?
BTW, the original topic was "real estate" which would include commercial as well as housing.
Usually, the cycles are accompanied by loosening and tightening of lending standards. When the NODs and foreclosures tick up, lenders start to tighten lending to avoid losses. The cycle turns down. Sources of funding for loans started to dry up in 2007 which fed the downturn in the last cycle.
The government stepped in a big way in 2009 and 2012 during the downturn. They started buying up mortgage securities to bail out the banks and financed the sale of bulk foreclosures to private equity to keep them off the real estate market for at least five years. In 2012, the states legislatures and the courts slowed the banks' processing of automated foreclosures because of the undocumented mortgage scandal. They forced the banks to offer workouts to troubled borrowers for at least 2 years before proceeding to foreclosure.
We have a case in the bubbling of several markets (stocks, bonds, and real estate) where the supply has been artificially restricted or reduced as a result of government policies, much like the government did with foreclosed farms in the GD.
I would think the federal reserve can continue to prop up the real estate market for longer than most people can hold out for. In addition given the tighter lending standards there is a bigger pool of renters who are at the mercy of rent hikes (supply/demand) to justify the high real estate valuations (given a home is a basic necessity) can sustain the market for a long time.
The poor infrastructure of a shrinking middle class, growing income inequity, government fiscal deficit, younger generation with increase debt, less people with retirement savings, etc... something is going to have to give at some point.
HEY , at least when an economist is on the unemployment line they understand why .. ha ha ha
1. Non-economists often don't understand economics.
2. They often don't understand much of anything else either
3. Neither of these things will keep non-economists from posting babble in an Economics forum.
First Law of Economics: For every economist, there exists an equal and opposite economist.
Second Law of Economics: They're both wrong.
Which is why Harry Truman said he wanted to find a one armed economist - because all the others would explain what was happening, but then say "on the other hand..." (I used to share this with my students back in the day when I taught Econ..)
Last edited by Buckeye77; 05-21-2015 at 12:23 PM..
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(I used to share this with my students back in the day when I taught Econ..)
