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Monday, August 28, 2006


NYTimes: READ BETWEEN ALL THOSE FOR-SALE SIGNS 

Different theories abound on the varying clues in the real estate market. Many observers ask will there be a hard landing or a soft landing?

New York Times: Read Between All Those For-Sale Signs



The collapse of most bubbles does not have a single obvious starting point, like a bad corporate earnings report or an interest-rate rise. Instead, the psychology of buyers and sellers shifts, slowly at first and then sometimes in a cascade.

“It’s always mystified people about why these things turn,” said Robert J. Shiller, a Yale economist and author of “Irrational Exuberance,” a history of speculation. “People want something concrete.”

There seem to be three major paths that housing could follow over the next year: a soft landing, the start of a long slump, or a crash. A soft landing is the one predicted — and preferred — by most economists on Wall Street and at the Fed. A long slump is what many past real estate booms turned into. A crash is the outcome that a small group of analysts say is the only possible ending for the biggest housing boom of all.

Their prediction looks better than it did a few weeks ago, but even they aren’t sure whether this is the beginning of the end or another false turning point. “The funny thing about bubbles,” Mr. Shiller said, “is that you never know when they’re over.”

For a crash to happen, prices would have to decline significantly in some once-hot markets. So far, as sales have slowed and the number of houses on the market has soared, many owners have chosen to sit tight. If they were instead to decide that selling later would be even worse than selling now, this could change quickly.

The doomsayers’ strongest argument may be that too few families can afford prices in some metropolitan areas. In Las Vegas, Los Angeles and Miami, prices have almost doubled since 2003, and they have risen about 50 percent in New York and San Francisco, the National Association of Realtors says.


New York Times: Read Between All Those For-Sale Signs

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