Michael Olenick | Irrational Exuberance, Housing Edition

Michael Olenick: Irrational Exuberance, Housing Edition

By Michael Olenick, creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick or read his blog, Seeing Through Data

… how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions…
– Alan Greenspan, Dec. 5, 1996

In any context except a Gay Pride parade grown men wearing short skirts and carrying pom-poms look out of place. But if they’re cheering the artificial rise of housing prices we’ve seen lately, they seem to be not only accepted but welcome.

“Broward home prices rise 10 percent in May,” reads a typical headline for the Broward County, FL Sun-Sentinel, ground zero for the housing meltdown. The article itself mentions that the ten-percent increase was year-over-year, not month-over-month, and neighboring Palm Beach County suffered a month-over-month decline by a whopping four-percent, but – whatever – home prices are up; let’s party. In this spirit the article mentions Palm Beach sales volume increased, though a close look shows the increase amounts to 114 additional houses sold, out of 664,549 housing units in the county. This figure is so small that my calculator expresses it in scientific notation when I convert it into a percentage.

It’s not only reporters from areas decimated by the bubble that are looking for signs of a housing bottom. Bill McBride of Calculated Risk (CR) calls a housing bottom like clockwork. CR somehow fails to reconcile data about underwater homeowners being unable to sell with the low inventory levels. There’s fewer houses for sale so all is peachy; never mind that inventory is being manipulated by servicers and regular sellers are locked-out of the market through negative equity.

Rest here…



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