Housing

Bubble or not? I have thought speculative to say the least for quite some time. Most likely bubble even. But assume I am totally wrong and this is totally based on fundamentals. I have heard the arguments that it is all based on the interest rates being so low.What then? Are all the gains safe?

The answer might be no.

Now, the first thing to note about this equation is that a small change in either the interest rate i or the growth rate g can have a big effect on the market fundamentals house prices, and stories that try to explain the surge in house prices in the frothiest communities solely in terms of market fundamentals rely on a combination of the two effects. However, the math works just the same going the other way. If we suddenly see a big move back up in mortgage rates, or if the communities where population growth has been outstripping the construction of new housing run into a slump, the same equations predict that house prices could go down just as impressively as they went up.

I think this is going to be bad. Real bad.