Is the Real Estate Bubble Really a Bubble?

The most common cliché one hears amid a "bubble" (an irrational buying frenzy) is "This time's different!"

This time, the market (or asset) will remain super-high forever!

This time, it will be all boon and no bust!

This time, the music won't stop!

The irrational exuberance isn't the side-effect of a bubble. It IS the bubble. (Framing!)

My parents kept moving farther and farther from NYC, but kept finding, to their utter disgust, that each time the area would fill up with goddamned city émigrés. It never, ever occurred to them that we were the city people. We were the problem.

Recognizing this is not sufficient, however. As Thomas Harris depicted so memorably, comprehension and self-awareness do not fireproof you from deluded thought or action.

Hello, Clarice.

With all that firmly in mind: I don't think the current real estate frenzy is a bubble.

I've been trying to complete necessary work on my house in order to sell it before home prices crash back down again. A race against the clock. It's taken months, and I still have a couple months to go. I've been watching prices very carefully, and they've stopped shooting up super-fast. They're now rising very slowly.

And my theory is that bubbles don't slow down. They accelerate - massively! - until they suddenly pop. I can't think of a bubble that ever decelerated. Irrationality swells until the fever breaks, whereupon punters scan their surroundings realizing, to their horror, that they've run off a cliff.

Lots of people have tried to buy houses lately, escaping crowded cities post-Covid, and as professionals embrace work-from-home. This flow is starting to slow. Eventually, home prices will plateau, and, surely, as with all cycles, descend a bit. But since this isn't behaving like a bubble, I don't foresee a crash.

Famous last words, though. I know.