Saturday, February 16, 2008
of chickens and eggs
I managed to bust my head out of the box ever-so briefly this afternoon, and wondered what really drives the RE market.
There are lots of boffins - be they economists, policy wonks, finance ministries, schools of business, etc., and we hear from them all the time. But what justifies their positions? I did not hear many of them predicting price reversals in London or San Diego, or Paris, Texas for that matter. I don't really remember anyone saying that prices would ratchet up so much before it began, either.
I really doubt that people who bought in 2001-2003 really thought that they would see the values sky-rocket as they did. Few who bought in 2004-2008 were likely see the impending correction in values either.
Seems that the market may have a mind of it's own.
Corporations are considered as "persons", and are afforded rights and privileges commensurate to actually being a living human being. Of course, corporations are made up of a bunch of people, all performing more or less correctly, who are made up of a bunch of mindless cells that perform their functions more or less correctly. Those cells are in turn made up of atoms made up of protons and electrons, which are made up of sub-atomic particles.
So, back to the macro - All of those corporations seek growth, and the RE related companies do likewise. Pretty soon it is rolling on it's own, and all of we perform our functions more or less correctly to keep it going. The problem is, the market is feeding on us, rather than feeding us. Pretty soon, the cells are not able to function correctly because of the stress on them, and they turn bad. The body becomes tired and ill, and ceases to function correctly. Then the vultures and bugs come to pick over the carcass.
So, does the market drive "us"? or do "we" drive the market?