by Mish

Image placeholder title

Let’s take a look at some quotes from the New York Times Article Trading Places: Real Estate Instead of Dot-Coms

Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors says that “South Florida is working off of a totally new economic model than any of us have ever experienced in the past.” He predicts that a limited supply of land coupled with demand from baby boomers and foreigners will prolong the boom indefinitely.

“I just don’t think we have what it takes to prick the bubble,” said Diane C. Swonk, chief economist at Mesirow Financial in Chicago, who was an optimist during the 90’s. “I don’t think prices are going to fall, and I don’t think they’re even going to be flat.

I look at this as a short-term investment,” said Mr. Farquharson, 36, who works for a venture capital firm, “and plan to unload it as soon as things look dangerous.

Now there’s a laugh. By the time it looks dangerous will there be anyone looking to buy? Doesn’t it look and feel dangerous now? Is he blind or am I?

MoneyPenny on Silicon Investor writes: “I live in this fantasy land. SW Florida seems to believe that we are immune from any financial difficulty. I have a friend that is positive that real estate values will appreciate 20% a year for the next 10 years as Baby Boomers move to Florida. …. I stand in amazement but I am enjoying the amazing increase in my interior design business. I have never seen anything like it in my long career (37 years).”


Free money shills are everywhere: “Who Else Would Like to Learn How To Make Over $100,000, in 6 Months, With an Investment In Preconstruction Real Estate?”

Who needs models? “The demand for the product was so high that we could actually sell it without having a model to show them,” said Glen Stegeman of Paseo Home Sales. “It is kind of crazy. It’s a good crazy. Obviously the demand is there,” said Stegeman.

The real estate bubble is not just limited to the US either. Brad Sester talks about the Trans-Pacific Real Estate Bubbles in China and how that is related to the housing bubble in the US.

Is this really a totally new economic model or is it just the same old story: Mammoth greed and speculation fueled by easy money and an intense belief that “nothing can possibly go wrong”? In the meantime I am getting “hate emails” from people bragging about flipping in Florida. I guess we should all retire and flip houses, sight unseen of course. Who needs to see a model? Heck, any plot of land with a 5 year plan to “build something really nice” on it is all it takes these days to get people interested. Then again, perhaps random taunts out of the blue from “true believers” are another sign of topping action.

**Talk of “new paradigms” or “new economic models” has been associated with every major bubble in history, typically near the peak.**Wasn’t it just 5 short years ago that Greenspan proclaimed the “productivity miracle” and everyone was counting “clicks” on dot coms as the “new economic model”?

Just as soon as I finished writing this post, I found a new quotation to add.
It’s perfect.

Gregory J. Heym, the chief economist at Brown Harris Stevens, is not sold on the inevitability of a downturn. He bases his confidence in the market on things like continuing low mortgage rates, high Wall Street bonuses and the tax benefits of home ownership.
“It is a new paradigm” he said.

Scroll back up and take a look at that first chart again. Current talk of “New Paradigms” and “New Economic Models” should tell you exactly where we are and where we are ultimately headed.

Mike “Mish” Shedlock

Party On Through 2030 Dudes! Nothing Can Possibly Go Wrong

I have official guidance that a party is on through 2030. Nothing can possibly go wrong.

It’s time to shift the arrow.

Yes, Mish readers I am pleased to announce that housing has now reached “A permanently high plateau”. I offer the following quotes from a New York Times article as evidence:

Rich Dad’s Demographic Crash Thesis vs. Mish’s “Pain Trade” Thesis

Author and real estate mogul Robert Kiyosaki, better known as “Rich Dad“, is predicting a stock market crash starting in 2016.

Rate Hike Cycles, Gold, and the “Rule of Total Morons”

In response to Janet Yellen’s everything is OK speech following today’s balance sheet reduction notice by the FOMC committee

Bitcoin Debate: It's a Bubble! No, It's Not, It Cannot Be a Bubble!

The bitcoin debate goes on and on. Some claim it's a bubble. Others say it isn't. Still others say it can never be a bubble.

Productivity Measurement is Totally “FUBAR” Yet Certainly Overstated

The BLS report on preliminary Productivity and Costs, Second Quarter 2017 shows nonfarm business productivity increased 0.9 percent during the second quarter of 2017.

New York Times 10th Annual Year in Ideas; #1 Idea: Do-It-Yourself Macroeconomics

For the past 10 years, at the end of the year, the New York Times discusses 10 ideas for the past year. The ideas vary widely and may pertain to social trends, sports, or war. The lead-in idea for 2010 was “Do-It-Yourself Macroeconomics”.

Don’t Worry: “It’s Only 1997” Besides “It’s Different This Time”

Two articles in the last two days, one on Bloomberg, the other on the Wall Street Journal, provided key reasons we should not worry about stock market bubbles. 1. It’s only 1997 (P/E valuations have not exceeded the dot-com bubble in 2000 yet) 2.It’s different this time (always a classic argument)

Fed vs. Fed: New York Fed to Issue Its Own GDP Nowcast; Atlanta Fed Too Pessimistic?

It’s Fed vs. Fed in the Nowcasting business. The New York Fed has decided to issue a FRBNY Nowcast, clearly in competition with the Atlanta Fed GDPNow forecast.