Elon Musk talks about the housing market bubble: ‘They dug their own graves’

Tesla CEO Elon Musk recently added the housing market to his Twitter comment mix.

Musk burdens housing: Musk’s comment stemmed from a tweet by Dogecoin co-founder Billy Marcus (who uses the Twitter name Shibetoshi Nakamoto) saying that the cryptocurrency was “created as a statement against central bank control” after the Great Recession that followed the fallout from the 2008 housing bubble burst, triggered by the subprime mortgage crisis.

Marcus wrote in a tweet on Twitter, that the global financial crisis was “caused by predatory lending practices and other irresponsible nonsense, resulting in the bursting of the housing bubble, rampant money printing, bailouts, etc.”

In response to Marcus, Musk said the “intuitive mistake” was a common assumption that “home prices are only going up.”

“I don’t support predatory lending, but many of these lenders have been badly injured or not survived,” Musk wrote in a tweet. “They dug their own graves – a lesson we should all take seriously, myself included.”

The Big Picture: The housing bubble that preceded the market crash of 2007 and 2008 was fueled by the subprime mortgage crisis depicted in films like “The Big Short” and “Margin Call.”

At the time, the United States carried out excessive home buying while risky lending practices fueled an unsustainable rise in home prices. Eventually, major banks were hit by mortgage defaults, foreclosures and write-downs on housing-related securities, and the market crashed.

The housing bubble emerged after prices peaked in early 2006, then began declining in 2006 and 2007 before hitting their lowest levels in 2012.

what is happening now? Today, the US housing market continues to see a sharp rise in home prices, surpassing 2006 levels. Home prices accelerated dramatically more than two years ago, when the COVID-19 pandemic disrupted the market as many Americans reassessed their lives.

Researchers and economists in Federal Reserve Bank of Dallas They were warned Seeing Early Signs of a Housing Bubble Brewing But they also say it’s different from the 2006 housing bubble that preceded the Great Recession.

“Nevertheless, there is growing concern that US home prices are once again detaching from fundamentals,” Dallas Fed researchers wrote in a blog post in March.

The big culprit is what they called “abundance.” This leads to “expectation-driven and explosive” price increases, and this can have consequences, including “misallocation of economic resources, distorted investment patterns, individual bankruptcies, and broad macroeconomic effects on growth and employment”.

The researchers wrote that home prices can “diverge from market fundamentals, when there is a widespread belief that today’s strong price increases will continue.” If most buyers believe that prices will continue to rise, then “purchases arising from ‘fear of missing out’ can raise prices and raise expectations” of continued price increases.

Is there a housing bubble in the West? Domestic housing experts say it is difficult to understand the emergence of a housing bubble High growth states such as Utahwhich was already battling a housing shortage before the onset of COVID-19.

The pandemic has stimulated more internal migration and housing demand as more young people in Utah hope to buy homes. Demand continues to far outpace supply, and the result is what housing experts have called a “Severe” defect in housing This fuels housing price growth and unaffordability.

Diane Skitch, a senior researcher at the Kim C. Gardner Institute for Policy at the University of Utah who specializes in housing research, told Deseret News in March that the typical understanding of the housing “bubble” – or what Americans saw in 2007 and 2008 – is not the same as what Happening in the market today, where there is still Real demand for housing, especially in western states like Utah.

He said a lack of inventory is driving the demand, while in 2006 irresponsible lending practices were enabling “everyone and their dogs” to buy homes. Today, it is not easy to obtain a mortgage with tighter lending requirements.

“So our market is being driven by real people who want housing,” Skitch said.

Leave a Comment