The last six months have seen much pundit-tifocating about the housing “bubble.”
Is there a bubble?
If there is, is it going to pop, stabilize, or slowly deflate?
One the columnists for the local rag, I forget who, but I think it was Andrew Cassel, wrote a while ago that, once people start wondering whether there’s a bubble, there probably is. (If someone has a better memory or citation than I, please let me know.)
From wondering mode, we now seem to be entering affirmation mode. That is, developers are starting to blame the press.
This morning brought this news:
A major condominium developer put plans for his 30-story Marina View Towers on hold yesterday, complaining that a softening market has made it hard to hold prices high enough to cover rising construction costs.
“It has suddenly become a buyers’ market,” said developer Louis A. Cicalese.
Further down the story, the developer stated that “‘(a)ll deposits will be refunded,’ . . . . Prices for the condos ranged from $300,000 for the smallest one-bedroom unit, about 800 square feet, to $2 million for the larger units.”
And, towards the end, came the “shoot the messenger” portion of the program:
(Tim) Mahoney (another developer–ed.) grumbled that media coverage pondering whether the boom would soon cool has, at least for now, produced a “self-fulfilling prophecy.”
Joanne Davidow, manager of the Rittenhouse Square office of the Prudential Fox & Roach real estate firm, said “the demand is still there” but the market has quickly changed.
“One minute we’re amazingly busy, then there were a lot of articles asking, ‘Is this a boom or bubble?’ I’m not surprised some are taking a step back… to see if prices will go down,” Davidow said.
Davidow and others predicted that the pause would be brief. “Nothing else has happened. I don’t see interest rates going up significantly. My thought is if you are an older baby boomer and you want to do something, how long are you going to wait?” Davidow said. “There is an awful lot of demand out there.”
So, just so I understand:
- People kept buying higher and higher priced real estate thinking that prices will rise forever–recently we passed a development in lower New Castle County, Delaware, USA, where the billboard screamed, in huge letters, “From the low $410s.”
- Developers kept building more expensive properties,
- Interest rates are starting to nudge up, the cost of fuel and building supplies has increased significantly, while personal incomes have not increased significantly for the great majority of persons, so, therefore,
- It’s the press’s fault that the market starts to cool.