Jonathon sent in a link to this great ‘blast from the past’ interview with developer Sam Zell about whether there was a real estate bubble in Miami. He makes some very compelling arguments about why there is no real estate bubble, and some of them sound remarkably familiar somehow.
Q But U.S. home prices are up about 40% in three years. How can this not be a bubble?
A Econ 1001: Prices have gone up because the demand has been much greater than the supply. The country is producing all it can in terms of supply, but what you see is more demand. Over the next 10 years we’re going to add a million new household, much of that’s due to immigration.
Econ 1001 is very advanced, so you may not understand that. Here’s something you will understand:
Q How bad could it get?
A Worst-case scenario? A flat housing market. Look, all I can tell you is we’re the largest owner of apartments in the U.S. and among the largest converters of apartments to condos. If there was a danger of a bubble, would we be in this business? I’ve never been accused of being a Pollyanna, I’m the Gravedancer. Americans don’t understand that we have the cheapest housing in the world. London and Tokyo are more expensive than New York. Why do you think everyone is going to South Florida from Europe? It’s because prices here are cheap compared with there.
Understand? South Florida is cheaper than other places, and everyone wants to live there. Ergo, there is no housing bubble in Miami condos. All of those arguments just happen to be applicable to Vancouver BC as well.
Here’s the ‘flat market’ in Miami since that argument was made, but always remember: ‘it’s different here’.