The LAW has not been repealed


Was talking to someone yesterday regarding the frothy pricing in the LA market.

She made the reasonable observation that pricing in big city markets seems to be on a long, one way rise.

This is a version of an argument I hear a lot:

  • Millennials don’t want to move to the suburbs, because they prefer city amenities (bars, etc.), so demand is stacking up
  • Big cities don’t allow enough construction of for-sale and for-rent dwellings to absorb this demand
  • So, pricing in big cities will continue to rise forever

There’s a lot to be said for this argument… it’s been borne out over the past 7-8 years.

That said, I get suspicious when I hear arguments that posit a change in the fundamental law that the pendulum ALWAYS swings back.

I have no way of knowing when the steam will come out of LA asset prices. But I know, in my bones, that it will.

And, when that happens, and its raining money, we’ll follow Buffett’s famous dictum and be ready with our buckets.