The housing bubble from mid-1990s until 2007 and the bursting of housing bubble in 2008 as well as the bond bubble from 2008 until 2012 and the bursting of the bond bubble in 2013 made me decide to refinance my 2,878 sqft. home at Greatwood Subdivision. Although the CMA tells me that my house is worth $464,854.00 ($161.52 X 2,878), I only refinanced it for $280,450.00 to avail of lower interest rate so that when the housing bubble bursts in 2022 or 2023, I will have a monthly amortization of only $1,201.00 which is very affordable. If I have 2 houses now, I will sell the bigger house and refinance the smaller one while the housing bubble is not bursting yet. When the price is too high in a housing
bubble and the interest rate is too low, the bubble will ultimately burst, but nobody knows with certainty when will it occur, and that’s why I decided to refinance my house while the housing bubble is still ongoing. Bubbles and crashes will happen all the time and there will be always correction of the mispricing. The timing of the bubble depends on the assumption that serves both as a general metaphor for differences of information, opinions, and beliefs among traders. Market timing is very important according to some experts and the perfect example was when Hedge Fund Manager of George Soro’s $8.2 billion Quantum Fund, Stanley Druckenmiller, did not get out of internet stocks earlier even though he knew that technology stocks were overvalued. He thought during that time that technology bubble is still ongoing and will not end so quickly. Quantum Fund lost huge amount of money that resulted of Druckenmiller resignation as fund manager in April 2000 (2003, Abreu & Brunnermeier).
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