From: "Elle" 
Newsgroups: misc.invest.financial-plan
Subject: Re: conservative home buying
Date: 28 May 2005 09:10:01 GMT
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Tad B. wrote
> I've also been pondering this idea: unlike in the securities market, in
> the housing market all you need is a relatively few ebullient buyers to
> establish high price levels. There really isn't a corrective mechanism
> and so the market is extremely inefficient.

How does one measure "efficiency" of a market?  If the market generally
follows the rule of supply and demand, it's efficient, as far as markets go.
And _of course_ there is a corrective mechanism. Perhaps you're too young to
be aware of the last major housing bubbles. Try googling for {"housing
bubble" 1970s 1980s}.

snip
> Last point on that Sowell piece - I can't tell if he sees the use of
> interest-only loans as consumers' way of coping with high home prices,
> rather than the cause of those inflated prices. I strongly believe the
> latter is the case

It's a simple supply and demand problem: Interest rates fell drastically,
making homes more affordable, making houses more in demand, pushing home
prices up (further). Whence some kind of equilibrium is reached. For the
moment.