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Alan Greenspan

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Irrational Exuberance?

February 13, 2013

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If you followed Alan Greenspan during his tenure as chairman of the Federal Reserve then you are probably quite familiar with the term “Irrational Exuberance.”  This term often used by the chairman refers to a “heightened state of speculative ferver” as explained by economist Robert Shiller (widely known from the Case/Shiller home price index).  While the numbers are too few at this point to confirm this irrational exuberance in the current Valmonte market, there are signs that certainly point in this direction.  With only two listings currently on the market and many buyers combing the MLS for new listings, there is clearly evidence of demand far outpacing the supply.  If the party-like atmosphere at this weekend’s open house on Via Solano is any indicator, then we certainly are on our way to a speculative ferver.  How long this will last is anyone’s guess.  Human nature tells us that when something is hard to get, we tend to want it more.  And when we feel that something is scarce, we tend to act more irrationally than when there is a feeling that time is on our side and we have multiple options to chose from.  My advice, take a deep breath before you go plunging off the cliff and make hasty decisions.  Patience is typically rewarded.  While it may not seem like it today, there will be other homes for sale.  This will be especially true if prices continue to rise – as there are emotions stoked by scarcity, there are emotions provoked by the opportunity to make money.  Good luck.