Over the years we have come to depend upon the stunning flights of optimistic fancy regularly delivered by the chief economist of the National Association of Realtors. For such masters of pollyanna as David Lereah and his successor, Lawrence Yun, either the current boom will never end or the next boom is nearly nigh. But this latest tidbit from Yun, from New Orleans City Business via The Housing Bubble Blog, outblushes all previous efforts to paint a rosy outlook.
Yun is explaining why he believes that the current sequence of interest rate declines orchestrated by the Federal Reserve will not precipitate the same real estate bubbiliciousness as was catalyzed by Alan Greenspan's easy money policy of the early 2000s. This time around, said Yun, the world will be warier.
"...Global capital providers will not be taken for fools again." Yun said. "German mutual funds or the Chinese government or the Florida's teacher pension fund will no longer buy toxic subprime loans."
Well, O.K., if they're labelled "toxic," with a scary skull-and-cross-bones icon appended, maybe global investors will behave more prudently than last time around. But Yun's thesis is based on the assumption that markets learn from their mistakes, and history does not appear to support such analysis. If a steady diet of rate easing breathes new life into the housing and credit markets, new investment opportunities will emerge that are every bit as toxic as the last round. They'll just have different names.