Reply to Federal Reserve: signs abound that housing market is entering bubble territory

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]“Our evidence points to abnormal U.S. housing market behavior for the first time since the boom of the early 2000s. Reasons for concern are clear in certain economic indicators—the price-to-rent ratio, in particular, and the price-to-income ratio—which show signs that 2021 house prices appear increasingly out of step with fundamentals.”

The whole article is about how there is a bubble - the fallout might not be as bad as as 2008 but bubble nonetheless.  Warning signs are flashing all over.[/quote]

Market cooling &lt;&gt; bubble

You think there will be a bunch of bankruptcies? Foreclosures? 
[/quote]

I think when people’s homes are underwater they walk away.  Especially second homes - vacation or rental.  [/quote]

I don't understand why you think people just walk away if their house is underwater, second homes included.  If you need a place to live or don't need to sell your second home, you wait it out until the value rises again.  It isn't like your home is a checking account where you suddenly have less money to spend. [/quote]

Ask the masses of people who did it last time.  Say you bought a vacation home in 2021 for $1.5 million.  Suddenly the value is down to $1.1 million.  You’re not using it as much as you thought and renting it will not cover then mortgage.  Walking away at that point starts to make sense to people.  As with the last downturn it can take a loooong time to get back to break even when you buy at the peak.  [/quote]

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