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

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[quote=Anonymous]I’m in the it’s too complicated to predict bucket. Economists seek out historical patterns to form predictions. Those predictions fail when too many factors that don’t have historical data points are present.

1. Demand - lower or higher population in the buying demographic, interest rates rising or lowering above an unknown affordability or ROI ceiling

2. Supply - inventory increases or decreases based on costs/ROI building new houses, demographic bubbles ie seniors retiring/dying, climate change (flood or fire zone changes)

While all of the above is definable, getting the definition right isn’t as easy anymore. For example, seniors were afraid to move into assisted living or condos during the pandemic. Hard to predict whether in a year or two they will exit en masse or not. On supply, will the cost to build come down or are there other factors at play? One of the reasons lumber is so expensive is that climate change has allowed infestations of tree killing beetles to destroy large portion of Canadian forests. Has zip to do with stimulus checks, interest rates or shipping costs.

Climate is the big wild card because it creates more demand with people migrating out of impacted areas while reducing supply as others don’t move into the impacted area.

Foreign investment is another unknown. US real estate is basically a parking lot for foreign money laundering and tax evasion. Tighten up the regulations and demand will drop while supply goes up. [/quote]

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