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Bubble. No Bubble.

So the bubble debate continues. Sunday was the one year anniversary of the Southern California Real Estate Bubble Crash blog. One of our favorite blogs, the SCREBC blog has chronicled the anticipated downward spiral of the housing market, watching report after report signal the doom and gloom sure to come. We're still waiting for that official announcement of the "pop". Maybe in the second year.

Or maybe never, according to three wacky professors from Pomona College (wacky is used as a term of endearment). Jonathan Lansner of the Lansner on Real Estate blog links to the report (in PDF) which offers a careful analysis of how these nutjobs reached their conclusion (we use the term nutjobs lovingly). From the report titled, "Bubble, Bubble, Where’s the Housing Bubble?", the professors use economic mumbo-jumbo to determine the fundamental value of a home.

"Evidence of a housing bubble has been suggestive, but indirect, in that it does not address the key question of whether housing prices are justified by the anticipated cash flow. We show how to estimate the fundamental value of a house and use a unique set of rent and price data for matched single-family homes in ten metropolitan areas to illustrate this approach. Our evidence indicates that, even though prices have risen rapidly and some buyers have unrealistic expectations of continuing price increases, the bubble is not, in fact, a bubble in most of these areas in that, under a variety of plausible assumptions, buying a house at current market prices still appears to be an attractive long-term investment."
Most importantly, as Lansner summarizes, the report concludes that there is no housing bubble in Los Angeles. Feel free to read the report and reach your own conclusion.
· One Year Later - What it all means [Southern California Real Estate Bubble Crash]
· Pomona profs: 'No bubble!' [Lansner on Real Estate]