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)
Fundamentals consistent: low-interest rates, economic recovery, strong balance sheets
Transitory biological event; investors looking to longer-lived assets as safe havens
Unique Covid Impact: The Donut Effect, *demand moving to suburbs, exurbs, Zoomtowns
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
Tourist absent for 6-12 months - zero vacation rental cash flow (drop-in condo demand)
Remote work/work-from-home (WFH) new source of SF demand - vagabond workers
Demographic change and net out-migration: medium- to longer-term factors (appendix)
Per Paul H. Brewbaker, Ph.D., CBE