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FROM MY DESK TO YOURS

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


Comments


Super knowledgeable! Communication is excellent!!! We didn't just go look at homes but we experienced different parts of island life. It was above & beyond any other showings I've attended. Mahalo

Ana-Maria Contis Steers Oahu Realtor

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