The Property Grunt takes a modified academic view of the real estate bubble theory today and issues words of caution for real estate buyers. He cites a recent issue of the Economist:
"The increasing riskiness of mortgages is not the only sign that America is experiencing a housing bubble. The ratio of house prices to rents is well above its historical average, as is the ratio of prices to median incomes. And people seem increasingly to be basing their house-buying decisions on the notion that the large capital returns of the past few years—house prices in America are up by 65% since 1997—will continue indefinitely. As with a stock market bubble, if this confidence is shaken, prices could begin to fall rapidly."
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