The psychology of the bubble
(I started wrote a comment in Marin Bubble, and thought it would make a good post.)
When I was selling my house (Oct 2005), my mailman was curious how much profit I made. The wheels just spun in his head thinking he too could make $60K-$70K appreciation per year if he buys in now. I warned him that the whole reason why I was selling was because the market was going to turn. He nodded that off and $$$ filled his head.
The momentum of the bubble is, of course, driven by greed. On top of that, the tools (lax lending, low rates) have allowed for this to get out of hand.
The new home owner's sanity must decrease further as affordability drops. They risk more and more of their monthly income for this dream that they'll be rich someday. Do they think through the exit strategy and who their next buyer needs to get 1) even more laxed loan 2) even more desperate for the same dream 3) someone who is actually downsizing 4) someone relocating and does not even check rent prices for houses.
When I was selling my house (Oct 2005), my mailman was curious how much profit I made. The wheels just spun in his head thinking he too could make $60K-$70K appreciation per year if he buys in now. I warned him that the whole reason why I was selling was because the market was going to turn. He nodded that off and $$$ filled his head.
The momentum of the bubble is, of course, driven by greed. On top of that, the tools (lax lending, low rates) have allowed for this to get out of hand.
The new home owner's sanity must decrease further as affordability drops. They risk more and more of their monthly income for this dream that they'll be rich someday. Do they think through the exit strategy and who their next buyer needs to get 1) even more laxed loan 2) even more desperate for the same dream 3) someone who is actually downsizing 4) someone relocating and does not even check rent prices for houses.
posted by Out at the peak at
6:00 PM
3 Comments:
The median mailman wage is $57K which is better than other blue collar jobs, but I am at the white collar level and stepping away (along with other white collars). Hopefully his significant other earns enough to put them in the six digit range. Otherwise they will be over-extending themselves.
By
Out at the peak, at 6:37 PM
The minimum full time wage of a mailman is $37K. I totally goofed on my above statement. The average wage of a mailman is $57K, not the median! I bet the median is closer to $45K.
By
Out at the peak, at 6:41 PM
I tried to correct myself. $57K is the average wage. The real median is probably closer to $45K, and I believe the starting wage is $37K.
It is a shame that some of the smartest people (such as professors) make little. I hope you get a raise soon!
By
Out at the peak, at 6:39 PM
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