Posted on 07/03/2005 8:07:52 AM PDT by ex-Texan
When people start buying Florida real estate over the internet, site unseen and planning to flip it (as they're doing now,) that does scare me a little.
Nice find. Very interesting and informative.
I see you posting a lot on this topic so I'm interested in your personal view as to how best to prepare for the bubble bursting. Get out of the market? Pay off all debt? Pay off the mortgage? Buy gold?
Many have leveraged their real estate purchase and, if the rise continues, will be wealthy. If the bubble bursts, they will be broke, their loans will be in default and lenders will have big problems.
Today, in San Francisco, 70 year old houses, worth less than $100,000 in most of the rest of the country, are selling for a million two, more if there is a view. This is artificial and can't continue. A sharp increase in interst rates (for variable mortgages) will force many of these houses into default, the lenders will take over and try to resell them.
Wife's grandma bought a small lot in central Florida for $2200 years ago. We get post cards offering $30-$40,000.
This is the Collective Speculative Beanie Baby Syndrome. It's where take something and drive its price beyond its true worth thru collective hysteria. We do this with everything from Beanie Babies, to Dot Coms, to real estate.............
PS: there is no real estate market. Ther are real estate markets, even within the same geographic area.
The hell of it is, banks can get overnight money now at 3.25% and soon that will be 3.5% and higher. Why on earth should anyone buy 10 year treasuries at 4%?
San Francisco is a magnet for European and Asian money, which sees US real estate as cheap and will continue to do so for some time. When the bubble gets popped, don't be surprised if San Francisco and New York prices don't go down all that much. The areas that are going to get killed are remote suburbs where homes have been overbuilt and run up to three or four times what they should be selling for by speculators and desperate first time buyers. San Francisco prices may at worst drop 20-30% (bad enough to trigger a wave of foreclosures, certainly) but prices in new developments in the Central Valley - 100 miles or more from the nearest employment centers - could drop 70%.
The real estate bubble burst will be a suburban economic holocaust. Unfortunately, it's going to hit hardest among just the kind of new Republican voters the 2008 candidate will need to fend off Hillary. It's going to be a neat trick for the Administration to manage the real estate bubble deflation as well as Greenspan handled the NASDAQ bubble deflation - Greenspan's policies shifted the imbalances into real estate...but where is his successor going to move them this time? Chinese government bonds?
Interesting.
Don't you think that "employment centers" are moving out of big cities with traffic moving both directions? Why do companies need cities like San Francisco for their center? Why not the central valley?
In regards to S.F., sounds as though California is becoming much more antagonistic to businesses with every passing year. What do you think?
You would think so, with the rise of the Internet and the relative ease of setting up telecommuting arrangements. In my experience, though, most employers 1) Love big cities (maybe because senior management loves good restaurants) and 2) Remain hostile to the concept of telecommuting - they seem to think that if employees can't be watched, they aren't working. Interestingly, as many former dot com companies have grown larger and stabilized, they have started to take away a lot of the flexible work schedules and telecommuting policies that served them well when they were high-flying startups. Once a senior managmeent becomes accountable to Wall Street, they start getting paranoid about any area of the business that doesn't feel totally under their control.
California is antagonistic to small businesses, but large corporations can generally direct their campaign contributions in such a way that they get whatever favors they need from the Democratic Legislature. Democrats love Big Business (the fastest way for them to realize their socialist dreams is to adopt large corporations as parnters and administrators of their schemes) - it's the entrepreneur that frightens both Big Government and Big Business. In California, the two have made common cause against the entrepreneur. ;)
Not really when you consider that 30,000 people are moving to Florida ever month. Like Cal. there is a lot of demand. Demand is the main force behind the price surges. Are they to high in certain areas, could be. Who knows for sure until the demand side starts to slow down.
the problem is that US Government costs so much
Nobody cares when Greenspan or the government distorts the markets, nor does it make a sexy theory worthy of quoting.
great point; demand is everything. government and/or greenspan certainly cause demand imbalances, but 30K people per month to is going to drive prices. hedge funders just work that demand and make it excessive.
its all part of work and retirement cycles. warm, coastal and mild areas are the preferred destinations. cities have had the work and denmand before.
as mr jeeves says companies can't quite decide if telecommuting works. small(private) business needs to take that money right out of their pockets.
If you are only getting 10 offers for 230.000 condos I would say your bank has a problem.
Not to worry - they will lend you some more!
I hate fear-mongers....
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