Dazed and Confused

So walk down most neighborhood streets these days. You see condos on previously undesireable streets, all over the place. You see condo conversions going on in former crack houses, former whore houses are now priced better than 1/2 mill, and 20% price appreciation happen in less than 3 months. Small working class frame houses on 25 ft. lots go for > 1 mill.

Can the yield curve maintain a "safe" shape for the economy (i.e., can it not invert?) given current trends?

Well, it must be remembered that a lot of the speculative stuff is happenening in "blue state" regional markets. While the east coast and west coast seem to be overheating, the Chicago market
is not accelerating too far beyond equality of ownership with rental income. That is, rental properties pay owners in yields enough in property appreciation, after expense. (BTW, Illinois was a Blue State) That is, rents are keeping pace for those who own leased property.

While we might well experience a real estate "crash" in localized markets, I don't believe this really threatens the general (albeit tepid) recovery. And the historical precedent for this was the California real estate crash of the 1980s. Most areas were not affected and certainly the yield curve was not. Lincoln Park might well sink, but not the "gentrifying fringes"...which are cheap and have poistive "gamma".