Housing price bubble and inflation risk
Morgan Stanley economist, Stephen Roach, has an interesting article on America’s housing price bubble dated December 1, 2004. Right underneath this piece is something about how investors believe that the risk of high inflation is growing. I’ve been poking at buying a larger/more open place to live here in Cambridge and Roach’s theory seems about right. Central Square is a place with pretty high crime rates (the city owns much of the housing in the area and fills it up with people they deem to be jobless and hopeless). The public schools are so bad in the city that almost every family with children who cares about education moves to Brookline, Newton, Lincoln, etc. I looked at a place for sale at 33 Bigelow St. the other week. It is just half of a house. All of the floors and stairs are sloped and creaking due to settling over the years. I went over with an architect friend and he took me down to the basement: “See this framework of steel bars and 2×4s that has been slapped together underneath the beams? That’s what is keeping the whole place from collapsing. I would be very worried about you buying this house.” Asking price? $1.25 million.
Of course, if there is enough inflation it will turn out to be a good deal because $1.25 million will be a normal annual salary…
