Re: A note on the housing bubble

[Sabri Oncu <soncu@xxxxxxxxxxx>]

Michael writes:

> Here in Chico, housing has been booming for
> quite some time.  The realtors explain that
> majority of the increasing demand comes
> from people in more southern parts of the
> state whose houses have been soaring in value.
> They sell out, buy a comparable or bigger
> house here, and pocket a tidy sum.  We're
> expecting Jim Devine to move here soon.

If Jim moves there, I am coming too. But you need to find me a
job in your department, something like teaching a statistics or
continuous time finance course.

The situation here in Berkeley is somewhat different. Most people
(mostly tenured academics) in Berkeley have stable jobs and
incomes, so they are not willing to sell their houses for low,
unless there is a pressing reason. So supply has been short for
quite some time and demand, which was quite high until recently
because of dot.com incomes, is still okay, especially because of
the low mortgage rates. Over the past four to five years, most
Berkeley houses gained anywhere from 30% to 100% (these are the
ones in North Berkeley). I find this amazing. Despite the fiscal
stimulus from the military-Keynesian economy Jim mentioned, I
have doubts that this price level is sustainable. A two bedroom
Mediterranean house with a Bay view is selling at about $700,000
and we don't have Wall Street Bankers here. Who is going to pay
these prices?

Well. This is just one special city, so I stop here.

Sabri