See How Exuberant Your Housing Market Is!
Back in the mid-1990s, former Federal Reserve Board chairman Alan Greenspan used the phrase “irrational exuberance,” which served as a warning that the stock market may have been overextended.
This was around the time of the dot-com bubble and there was increasing worry that investors were piling into tech stocks with no regard for their actual value. It turns out this was indeed a reason to worry.
The housing market in the early 2000s mirrored this atmosphere, with everyone and their mother buying houses for the sole purpose of turning a quick profit.
If they already owned a home, they were refinancing their mortgage early six months (in serial fashion) and pulling cash out each time they did to purchase Hummers and other luxuries, all the while banking on further home price appreciation to absorb the cost.
I’ve mentioned before that I was renting a house with some friends during that time and was told by the owner that, “Oh, I refinance every six months, I have my rep at Countrywide, no worries.”
Click here to continue reading!