Our Thoughts

Why Smart Money Can’t Stop a Housing Bubble

Robert Schiller, the Sterling Professor of Economics at Yale, believes that the real estate market is even less rational than the stock market.  “First, most investors find it difficult to understand how housing supply responds to changes in demand.” And, “second, it is very hard for the minority of smart-money investors who do understand such matters to bet against bubble-level prices in real estate markets”…..”Short selling helps prevent bubbles from forming, but such negative bets cannot easily occur in the housing market.  You can’t routinely borrow a house and sell it, promising to buy back the same house later to repay the loan.”  Subscribers to the New York Times may read the entire article here.  For a contrary view from Ross Kaplan, a realtor in Edina Realty’s City Lakes (Minneapolis) office, click here.