Some have argued that the California real estate market is currently in a “bubble” — that is, the price of housing is higher than present levels of supply and demand would indicate. Consider two identical houses that sit side by side on a street in Palo Alto, California. One is offered for rent at $3,000 per month. The other is offered for sale at $1.2 million, which at an interest rate of 5% works out to cost $5,000 per month. Despite this discrepancy, which one of the following statements might be a valid argument AGAINST the proposition that the real estate market is in a bubble?
A. Earthquake damage is a perennial concern in California.
B. Termites are a major problem in Palo Alto, increasing the costs of home ownership.
C. Land in California is scarce, and future immigration into the state is expected.
D. Inflation is likely to remain low for the foreseeable future.
Posted in Land For Sale
Tagged Bubble, California, Estate, housing, market, Microeconomic, month, Palo Alto, price, question, side, supply