rejectomorph (flying_blind) wrote,

Link to Impending Disaster

Here is an opinion piece in The Economist, in which the editors anticipate a collapse of the housing market sooner, rather than later, and around the world, not just in a few nations. In fact, price declines are already underway in Britain and Australia. Prices are not yet declining in California, though, even in this backwater. A few days ago, I picked up a copy of one of those real estate magazines they give away around here, and was astonished to discover that some rather ordinary local houses, of the sort built for eight or ten thousand dollars in the 1950s, on lots that then cost two thousand or so apiece, are currently selling for a third of a million.

Even accounting for inflation, the increased value of the land due to the growth of the town, and the value of any upgrades to the houses themselves and of the town's public facilities, these places are probably selling for at least double the amount one would expect in a rational market. Over the last year, prices in Sacramento, the region's metropolis, have risen even faster than they have here, despite the fact that sales there have already begun to flatten out (indicated by the fact that houses put on the market are taking longer to sell.) I'm wondering how long this bubble can be sustained, and whether it will burst in the major cites before it does so here. Sales in this place are dependent on sales in the cities, as so many local buyers are transplants who have cashed out their houses in the metropolitan areas. The economy here practically runs on that infusion of capital. If it dries up, this town is screwed.

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