Earlie, the size in the "bubble" is not much more then what we had in the mid sixties and seventies with the nifty fifties, and a lot of air has already been pulled out of the bubble. More will come out, but I do not see a catastrophic punching, just a very long period where new balance is reestablished. That is actually good, much better than the massive dislocations and misery to a lot of people that a sudden readjustment would bring. Some commentators talk about the mortgage "bubble" of $6 T, that is not a bubble, assume 100MM mortgages (just an easy number) that is $60,000 per house and the average "value" is around $120,000, that is manageable. The point is that a rational mortgage to gross income of a factor of 3 is quite acceptable, and $60,000 (or even $100,000) is well within the factor of 3 of the average household yearly earnings.
Zeev |
