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No Asset Pricing Bubble

Updated: Sep 28, 2021

What do valuation dynamics tell us about pre-/post-Covid markets?

Common characteristics of asset pricing bubbles:

(a) detachment from economic fundamentals

(b) information asymmetry

(c) herding

(d) expectations of others' expectations

Currently, Hawaii housing is not experiencing a meme bubble (GME, AMC, cryptocurrencies)

  1. Fundamentals consistent: low-interest rates, economic recovery, strong balance sheets

  2. Transitory biological event; investors looking to longer-lived assets as safe havens

  3. Unique Covid Impact: The Donut Effect, *demand moving to suburbs, exurbs, Zoomtowns

  4. Inelastic supply/regulatory barriers: fewer for sale listings, building (verb) constrained

Hawaii home price bubbliciousness in SH Kauai, Maui, Ohau, possibly Kona, but not condos.

Novel coronavirus SARS-Cov-2 novel factors affecting housing demand and supply

  1. Tourist absent for 6-12 months - zero vacation rental cash flow (drop-in condo demand)

  2. Remote work/work-from-home (WFH) new source of SF demand - vagabond workers

  3. Demographic change and net out-migration: medium- to longer-term factors (appendix)

Per Paul H. Brewbaker, Ph.D., CBE

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