I'll try to post a more-detailed post about the reasons why in a future post, but, yes, I do think we are in a housing bubble. Now, for the record:
- the bubble will not end when interest rates rise, the end will be from something completely unrelated that no one understands...except me and a few austro-libertarian economists (and possibly that guy outside Starbucks with the sign spouting various conspiracy theories);
- interest rates will not rise when Bernake (Greenspan's successor) raises interest rates (the inverted yield curve is proof of that). It will end when China, Japan and Korea stop buying US treasury bills and artificially subsidizing our idiot politicians who spend like drunken sailors in a Saigon whorehouse;
- the bubble will end, as predicted by the Mises/Hayek Austrian Business cycle theory when rising costs of capital goods make the return on investing in real estate untenable (just like it did for the dot-com and telecom bubbles);
- the cause of the bubble is not supply/demand or a housing shortage as real estate agents would like you to believe. It is because Greenspan, and now Bernake, have increased the money supply (M3) to unprecedented levels (like Weimar Germany did after WWI);
- Greenspan is an idiot, and Bernake is a bigger idiot. Paul Volker rulz!
Well, I think that because I bought a fixer-upper in an up-and-coming area of DC that I got it at a good enough price that I will still make money even if something happens to the housing market. Ditto for the house in Florida. My brother (a real-estate agent) found a house that was on a double-lot listed for, basically, a little more than the land was worth*. I bought a house with my dad in Florida a couple of years ago and despite him having to sell it because of a divorce (and overinvesting in improvements) we still did really well on it. So based on the past track record and knowing that their home-improvement skillz are way better than mine, I am pretty confident that things will turn out okay because, like in baseball, you have to wait for the good pitch and not just swing at everything you see. When I was telling people last year that they were crazy for bidding $50k over asking price, they would try to explain it to me...like I didn't understand real estate or something. Well, I understand that people who aren't on crack price things using a calculator and common sense, not your realtor's opinion, but what do I know? Or to use another analogy, you don't walk into a bar and start hitting on the first girl you see. You wait to see the one you want or wait until they are drunk enough that you become unbelievably handsome.
So I don't know what my point was with this, but I will try to post again about this (with charts and graphs) and explain it more detail when I am feeling extra geeky. I the mean time, just let me once again re-iterate who much I hate Home Depot. Everytime I swear I will never set foot there again, I do because it's way closer than Lowes or Harbor Freight, but this time I mean it...no, really!
*The agent had priced the house according to comparables on single lots in the area. If we had more time and money we would knock it down and build two houses for a lot more money, but I think it will be easier just to re-do the kitchen and turn the carport into another bedroom/bathroom to go from a 3 BR 1 BA to a 4BR 2BA, which should be worth a lot more.