2010/08/23

Born-again Home Buyers

This is hilarious, and a testament to the lack of financial education in the Untied States of America.  (It's no better in my country, Cana-dumb.)  Today I came across the following:


In an annual survey conducted by the economists Robert J. Shiller and Karl E. Case, hundreds of new owners in four communities — Alameda County near San Francisco, Boston, Orange County south of Los Angeles, and Milwaukee — once again said they believed prices would rise about 10 percent a year for the next decade.
With minor swings in sentiment, the latest results reflect what new buyers always seem to feel. At the boom’s peak in 2005, they said prices would go up. When the market was sliding in 2008, they still said prices would go up.
“People think it’s a law of nature,” said Mr. Shiller, who teaches at Yale.


 At least that's an improvement from the survey done in SoCal in 2005 which I referenced in a previous article, wherein the average estimate for increase in house prices for the next 10 years was 20% per year.  And we all know what happened next.


These are definitely born-again house buyers because their estimate has to be based on nothing but faith.  There is no logic in such an estimate based on fundamentals.

There are places for faith in a person's life, but a home purchase is not one.


Faith... Must be enforced by reason...When faith becomes blind it dies.-- Mahatma Gandhi

1 comment:

  1. i live in australia, western australia - currently in the grip of a resource mining boom (primarily iron ore) to fuel the furnaces of chinese steel makers. our local 'reputable' economic think tank have just issued a report advising the property prices here will rise some 20% over the next three years! leading to an average house price of near $700k!!

    two things - if the demand for mining commodities declines, so too will house prices and an issue often overlooked by those comfortably ensconced in the property market - it is already difficult for young people to afford to purchase and service mortgages at current levels (around $500k average house price), let alone at $700k.

    something has to give...

    to my mind, a rebalance is definitely in order, rather than neverending increases in house prices.

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