Eminent bubble fatigue set in for me a long time ago. The Toronto housing market has stayed irrational -- based on a fundamentals analysis -- longer than I expected. Given how severe the recession seemed in 2009, I expected that policy makers would seek to reign in easy money to bring some equilibrium back to the financial system, but the opposite happened with long term emergency rates and openness to offshore investors. I underestimated how much my peers were willing to sacrifice to own a home. Who knew how much offshore money was seeking safe keeping in real estate, and how much our politicians were willing to go in supporting those investments? I've learned a lot. I guess the emergency rates and debt binge was the short-term solution by the Fed (with other Central banks following along), and I guess the long-term view was that inflation and economic growth will correct the debt imbalance. Will housing prices eventually stagnate while inflation occurs in other things? The housing related wealth enjoyed by retiring baby boomers will be gradually transferred to younger generations through inflation (and inheritance), and an eventual correction (someday) will also help younger people buy homes.
