This one number suggests that the real estate bubble may be fizzling out

Every time I write a piece on real estate I am asked: “when will the real estate bubble burst?” This proverbial question remains very difficult to answer because of several reasons.

First and foremost we have almost no data on real estate. For something as simple as what is the going price in an area, one has to trust the brokers operating in that area. One may make that leap of faith and trust the broker, but how does one figure whether there are any transactions happening at that price? The broker has no incentive to be honest.

Further, there is no clear way of figuring out whether prices are rising or falling even at the aggregate city level. The National Housing Bank(NHB) through the Residex index tracks prices in 26 Indian cities. But the index works quarterly. Further, the NHB takes way too much time to put out the data. Currently, the data is available up to the period between July and September 2014. We are in May 2015. Basically whenever the next data set of October and December 2014 will come out, it will be many months late, making even his broad indicator practically useless.

Also, the index possibly doesn't take the black money component into account. Black money forms a substantial part of the real estate transactions in India. Further, any evidence of prices falling that come in is at best anecdotal. Typically, the way this works is that the journalist covering real estate calls up a few brokers he is close to, and they tell him that prices in such and such area are falling.

Read full story: This one number suggests that the real estate bubble may be fizzling out