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Bubbles Burst and Cradles Fall

The Absurd Real-Estate Market.

by Everett Wilson
May 6, 2006

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Bubbles Burst and Cradles Fall
One of my favorite things is my memory of two years as  Barnabas in  this journal, commenting on absurdity and ethics in the news.   Barnabas retired, but he isn't dead, and he has been poking me with his elbow recently to get another turn. So I am giving it to him today. I will be back with one of my cheery  favorite things next time. 
         
I am sorry I missed my turn two weeks ago. We were away on personal business, in an area with limited internet access, and I had run out of tuits (as in "getting a round tuit").  
 
–Everett Wilson
 
Bubbles Burst and Cradles Fall 
The Absurd Real Estate Market
 
By Barnabas
          
Rock a bye baby on the tree top,
When the wind blows the cradle will rock,
When the bough breaks the cradle will fall,
And down will come baby, cradle and all.
 
One theory of the origin of these words is that early American settlers were fascinated by how native Americans could fasten their baby-boards, with babies on them, high in the trees.   So the lullaby may have been a sweet reflection on this practice; but the way it comes out, it sounds more like a cynical criticism of a dangerously short-sighted system of child care. And down will come baby, cradle and all.
 
If the natives put their babies in the treetops, it's likely they knew what they were doing and were even more careful about them than we are about car-seat buckles. But it is not a practice for any parent to be slapdash about. Boughs break and cradles fall, inevitably, even with safeguards. We can't keep the wind from blowing. Harder than we expect.    
 
I have been predicting the collapse of the real estate market for some time now, and am sticking to my guns—notwithstanding the specious argument that if the bubble were going to burst it would have by now. That is the sort of logic that led up to Katrina; of course it was foreseeable. A market collapse in real estate is foreseeable. It just isn't desirable. 
 
I will withdraw my gloomy prediction if somebody will answer wisely the following stupid questions.  
 
·       How can family income   go up at a lower rate than real estate    prices without running out of customers for the homes? 
·       Isn't everybody who buys low and sells high  counterbalanced by somebody else who buys high and sells low?
·        Just where are the losers in this business going to live?
·       Where are the service people on whom the homeowners depend—and who are required to earn less, else the homeowners cannot afford their services—going to live? 
 
I get the impression that profit, not product, drives the real estate market. When it is perfected, no one will have to build any houses at all. 
           
 
 

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Frank from Ventura, California writes:
May 11, 2006
The below quote is from a Bloomberg piece yesterday. It's becoming widely recognized that people writing about a supposed housing bust have been attempting to create a herd mentality. More and more the financial press is realizing that if they fall prey to the negative market makers, they will continue to lose credibility:

The report is a nice antidote to the inevitable hysteria surrounding the bull market in real estate. Anyone who has visited a bookstore or magazine stand lately has seen the usual crop of alarmist titles and headlines screaming about how we are all going to go broke.

Hysterics make good storytellers and lousy forecasters.



Everett Wilson from The Partial Observer writes:
May 12, 2006
When there is a real estate bust, only those inside the bubble go broke. Those who clean up afterward make a killing from foreclosures and defaults. The estate is real property, not paper promises, and so is worth real money to those who can afford to wait for the price of it to return to its true worth (or less) and buy it up.



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