by Charles Hugh Smith
Of Two Minds
Putting this all together, it’s clear that the source of the current housing bubble is the explosion of financial speculation fueled by central bank policies.
Those benefiting from speculative bubbles have powerful incentives to deny the bubble can bust. Rationalizations abound as bubbles inflate, and the continued ascent of speculative bets seems to “prove” the rationalizations are correct.
But bubbles arise from speculative excesses, and once these reach extremes and reverse, bubbles burst and all the self-serving rationalizations are revealed as rationalizations.
Let’s start with some caveats I’ve already covered in Is Housing a Bubble That’s About to Crash? (May 2, 2022):
1. Housing is local, so there may be locales where prices are still rising due to unquenchable demand and low supply and other places where demand is low and supply ample where prices plummet.