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            What is it that made so many people hold the almost same opinion to the prospection of house price? Why did people have such extravagant expectations about a vague future? And how can house market recovered so quickly from the shadow of the stock bubble? The boom and bust in the housing market was a social epidemic. Something hard to recognize, but do drive things. First, there was an epidemic of positive thinking that led to high expectations for long-term home price appreciation — and for the economy, too. Then, after 2005, an epidemic of negative thinking discouraged many people from buying a house or from spending in general, and kept many employers from hiring. Recognizing when you are being caught up in a social epidemic is often difficult. People’s thinking is often seriously influenced by others around them. If only a handful of people had an optimistic predict about long-term housing price, others may follow their steps even though they do not get it. Notably, when the housing boom was on the peak, even though the 30-year mortgage rate was above 6 percent, people expected long-term house price growth of over 12 percent a year. The result showed their mistake, as mortgage rate has fallen to well under 4 percent, but long-term expectations have fallen faster, which almost leaded to the latest financial crisis directly. Thereafter, having the drawback of short-sighted, most of Americans was attracted by the rapid increase of house price in 2005. What they did not pay attention to is the uncertainty and risks of the future. Sometimes they balm Chinese of their conservation, as many Chinese prefer to have some deposit in bank than invest them in financial operations. But I think it is time Americans built a prudent thinking for a safety financial situation. As an old saying of China goes that do not gather your eggs in one basket, Americans should be aware of the avoidance of risks, as well as individual thinking.

            October 8th From New York Time