Watch out for complacent journalists

I wrote a story recently that revisited what happened during past housing bubbles (See,

I wrote a story recently that revisited what happened during past housing bubbles (See, "Getting Crushed in a Housing Collapse"). I received a flurry of emails from readers who worried that articles like mine would actually spark a downturn in real estate because it would make people rush to sell their homes.

Well, bubbles don't work that way. The dozens of recent articles about the potential for a burst real estate bubble are indicators -- not of a pending collapse -- but that the real estate bubble is unlikely to burst anytime soon. As any contrarian will tell you, articles such as mine show that there are still lots of skeptics out there unwilling to buy new houses because they are worried about a market top. It is only when those skeptics evaporate and people start talking about a "new paradigm" for real estate, that you really have to worry.

That's when the backlog of buyers will get used up. And, after that, there may not be enough new buyers coming into the market to keep prices on the rise.

I've covered the real estate market for the last three years -- ever since it started to really heat up. I would judge my own track record as pretty accurate so far. Three years ago I wrote that prices were rising at an unsustainable pace, but that there were no signs of speculative excesses. Two years ago I started pointing to signs of speculation in the housing market. And a year ago I started worrying that there could be a sharp downturn in the real estate market if (if!) mortgage rates spiked.

Well, mortgage rates haven't risen, I don't expect them to rise anytime soon, and thus I'm less worried about the real estate market crashing than I was six months ago. Last weekend I found myself looking in the newspaper at the listings of homes for sale. That in itself is reason for contrarian thinkers to start getting worried.

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