Armchair Economists

Even though I am one, I hate economists. Insert old joke about how economists predict the state of the market the way meteorologists predict the weather, but it's true. We apply simplified models to an immensely complicated real world, and we're not always right (in fact, we're usually not).

But if you had asked me six months ago, a year ago, or even 5 years ago what I thought was going on with the real estate market, I would have told you the exact same thing: we're in a bubble, that won't last forever, and it will burst, sooner or later. So why had I been hearing, from economists no less, that the real estate market is not in a bubble? That high home prices and low interest rates were here to stay? They took the same classes I did, studied the same models and theories I did, why the disparity in our predictions?

I really don't have an answer to that question, other than the aformentioned joke about predicting the weather. What really pisses me off, though, is that once a month for the last six months or so, every time I open the business page, I see another report on the state of the market. The first report, about six months ago, was something along the lines of "Prices continue to rise, no end in sight." Next month, it was, "Prices will continue to rise, just not as much as expected." Then, "Prices beginning to level off, but still increased." It was about this time that the Fed increased interest rates for the second quarter in a row. The next report was like, "Prices rise slightly, but will most likely not decline." Then, "Median prices remain the same." Finally, the Fed raised rates again, and I saw, "Prices fall slightly, but may bounce back soon."

Do you see a fucking trend here? I sure as hell do, and you don't have to be an economist to recognize or understand it. Home prices cannot keep rising indefinitely, not when rent is staying the same, more houses are constantly being built, and the Fed keeps raising interest rates. Sooner or later, Joe and Nancy Shmoe aren't going to be able to afford the payment on a 30 year, $600,000+ mortgage. The only reason they have been able to is due to low, fixed rates. Once folks can't afford the payments, they aren't willing to buy new houses. Once enough folks stop buying new houses, while construction on new houses continues, prices come down. When prices start falling, the speculators who thought real estate was a "good investment" start selling, which forces prices down further. This phenomenon is called a feedback loop, and it could go on for a while. That's where the bubble bursts. How far will prices fall? I have no idea, but they will fall.

So, getting back to the armchair economists that seem to think this real estate bubble is any different than previous bubbles, I have a question for them. What the fuck is wrong with you? Did you get your degree online, is that it? Or were you too busy drinking and partying with your frat buddies to actually learn the material? Or maybe you're just too fucking stupid to apply the theory, so you spout the same nonsense every other non-economist is spouting about how it's a "new economy." It wasn't a new economy then, and it's not a new economy now. Dipshits.