Jay worried about a real estate bubble last week, now Fortune is asking the same question. Are we seeing a real-estate bubble? Here were I live, I definitely think so. But I don't see a crash coming, just a decade of minimal growth.
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The affordability issue acts as a natural regulator on the real estate market. When folks can’t afford to buy a more expensive house, they just won’t buy one. Period. But a dropoff in new purchases doesn’t necessarily translate to a popping of a bubble.
Will most folks just decide to sell their homes and move into apartments? I know one guy who did that three years ago, assuming that he’d be able to buy a nice house for cash once the real estate bubble burst. He’s still renting.
It will always be extremely easy for anyone to buy into a stock-market bubble. If a high-flying stock is too expensive, you can just buy fewer shares in the same company, or wait for it to split its stock. The same cannot be said for real estate: one product, one price, one buyer. There is no such thing as a stock split to make property easier to buy.