Rational Expectations and the Housing Bubble

“More than 70% of U.S. consumers believe a national housing bubble will burst and home prices will collapse within the next year, although 56% believe it’s unlikely to happen in the area where they live, according a new survey.”

Morrissey, Janet. 2006. “Consumers Expect Housing Bubble to Burst.” Wall Street Journal (20 April): p. D 3.

3 comments so far

  1. Foreclosure Alternatives on

    It’s always remarkable how people do not think it will happen in their area. Granted, some neighborhoods like Manhattan, NY (It’s an island, there isn’t going to be any more room on it, any way you cut it) may not see housing prices drop, most of US is already in the middle of housing price bubble collapse. It’s also going to mostly effect the middle class to lower end home owners who are the ones with loans that are about to reset at new payment levels they can’t afford.

  2. Rojo on

    Whenever, I travel around the country, I’m always amazed by the geocentric boosterism of even the most forsaken metro. The opening montages of the local news are the worst with their sweeping aerial shots and Hollywood blockbuster music. Watching one of these, you’d assume that all roads lead to Bismark or Wheeling or Carson City. But its not limited to small towns. My friends here in San Francisco tell me that the Bay Area is a special place and the housing crash won’t be too bad here. My folks in San Diego tell me the same thing as do my cousins in Atlanta.

  3. mperelman on

    Thanks for the interesting comments.

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