Are we on the verge of a bubble?

by MPA10 Dec 2015
I would agree that there is such a thing as being too optimistic. During the financial crisis, many of us were so optimistic that we ignored warning signs and pushed ahead – believing that the wave of succeed we were riding would never break. Clearly, we need to always be vigilant; and we must always keep our expectations in check so that they do not become too inflated.

That being said, what I'm seeing right now in the mortgage industry is a bit of the opposite. Several years after financial crisis, it feels like the pendulum may have swung too far in the other direction in terms of how the health of the mortgage industry is perceived by industry analysts and pundits. For example, I recently had a discussion with a real estate expert who argued that the market in my home-base of Austin, Texas is at the epicenter of a bubble that is about to burst.

The way I see it, the strong demand and limited supply make it unlikely that we'll see a bubble in the US housing market again anytime soon. Moreover, it does seem like the economy is improving, however slightly. Unemployment is low, rates are great, and we're seeing greater home price appreciation.
All of the observations are admittedly humble economic observations from a non-economist. But I do think it's important to stay optimistic in order to bring ourselves out of the slump. Inflated expectations, I believe, did lead to a disaster during the housing crisis. But expectations that were too low will keep us in the same hole we are trying to get out of. We can't ignore the good things that are going on for fear that we might create another bubble. We've got to temper our cynicism with a bit of optimistic every now and then, especially when – as I believe is now the case – we have good reason to do so.


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