Manic Behavior
Shrinking Inventory
Millennial Demand
Some Thoughts on Inflation
I Can’t Wait to get on the Road Again

Recently I searched the Thoughts from the Frontline archives to see how often I used the word “bubble.” It was more than I thought, and I wasn’t quoting Don Ho. The bubbles I talked about were anything but tiny. Most of them subsequently popped, too.

For most people, buying a home is the biggest single purchase they ever make. It continues to represent the largest part of their net worth. It is also the most leverage most people ever take on. The risk of loss is very high if you have little equity in the home and need to sell it.

Housing has other effects on the economy, too. Booming home values contribute to a “wealth effect” that increases consumer confidence, making people spend more freely. Some homeowners tap their equity to finance other purchases. Some of it finds its way into the stock market. The industries that feed on all this—construction, building materials, mortgages, title companies, real estate agents, etc.—are huge employers.

All of which says the housing sector is far more important than many realize. They notice only when it falls apart. Today home prices are being compared to the pre-2008 period, which was clearly a bubble that ended painfully for many. Are we setting up for the same again?

I don’t think so. Yes, the housing market is a bit overheated, but for reasons that make far more sense than the rationalizations of stock market bulls. Some buyers are certainly overpaying and may regret it. Nonetheless, I don’t foresee another 2008-style housing crash in the near future, nor anything like the subprime crisis. There are altogether different fundamentals working here.