The New New Old Thing

“It just seems like everyone is doing it.” Thus says a 26 year old Manattanite playing the real estate game—this year’s version of the New New Thing—in today’s New York Times.

After describing the eerie parallels between today’s Real Estate mania and yesterday’s Internet Bubble (for example, houses being bought and re-sold on the same day), the article quotes the scariest sentiment of all, from the president of a Miami real estate outfit predicting boomer demand and cheap foreign dollars will overwhelm the shrinking supply of land to create a nirvana for real estate investors:

“South Florida is working off of a totally new economic model than any of us have ever experienced in the past.”

The man was obviously not around in 1926, when Florida had the first of many real estate busts, following a boom based on the very same conditions underlying today’s bubble: cheap money and a get-rich-quick certitude that a Greater Fool exists out there for any property you can grab.

Thus the “New New” Thing—real estate speculation—is actually a New New Old Thing.

And it’s not just in Manhattan and Miami that people are snapping up properties almost as quickly as the Fed raises interest rates: in February, new home sales around the country had their biggest monthly increase—9%—in four years.

Buyers ought to consider one thing before plunking down those deposits: the cost of money. While long bonds yields have not risen very much in the last year, 2 year treasury yields have spiked from a bit above 1% to nearly 4%.

And that takes a good chunk of the “Greater Fool” buying power out of the market.

Everyone seems to be debating the question of whether we are or aren’t yet in a “Housing Bubble.” But we’re there already.

The real question is, how do we get out?

Jeff Matthews I’m Not Making This Up