Ohhhhhhh, I like bubbles.
Posted on 06/24/2005 10:55:45 AM PDT by Tumbleweed_Connection
I think the bubble just exploded yesterday.
That's all you needed to know. These people are going to lose their shirts.
Ohhhhhhh, I like bubbles.
What I don't understand about all this is that if housing is such a great investment it should attract more developers which should eventually result in making it a buyers market. How come this is not happening?
my thoughts exactly.
Time to refresh the tree of liberty with the blood of tyrants (and Patriots, unfortunately...)" - T. Jefferson... if he were alive today
Zoning laws retard construction and supply growth.
I remember saying in the early 80's farmland may stop inflating but will never go down in value. BOOM, it retraced to 1/3 of the high very quickly when it happened and within a few years was up to 2/3rds of the high. Now it is at or above the high again.
Housing, who knows? Most soothsayers should be shot on sight.
One clear indication that residential real estate is overvalued is the relationship between home prices and rents.
CAn't remember the talk show guy from florida but his rule of thumb was that the monthly rent should be 1% of the value of the property.
So is it bad when rent is higher or lower than that 1% figure?
No, Zoning laws make sure that growth is orderly so that residents have a good quality of life.
Zoning is what keeps that industrial concern from building a plant next door to your $600,000 home.
And that is based on a mortgage at what interest rate for the landlord?
interest rates are low.
Florida real estate will also be held in check with retirement savings and investments made over a lifetime. In other parts of the country, where the median age is in the 30s, the local real estate is supported via income and investments. Once investments dry up, wages will be all they have to handle the monthly. The problem is, as outsourcing continues and more and more people are forced into other fields to compensate, wages in those fields drop. This will promote more bankruptcies and foreclosures as the people are unable to find work sufficient to cover their expenses, which were geared to the previous higher wages. This has already been seen in Colorado, parts of California, and No. VA.
First zoning laws were instituted in NYC after Equitable Life built a hideous headquarters in downtown Manhattan. The building, still standing today, is probably the second ugliest in the city.
It is a quick rule of thumb, after that, get you calculators out. If rental income is $1,000 a month, you would pay $100,000 for the property. Has worked well for me for quick analysis.
Million dollar condos in my area are renting as low as $2,700 a month.
So either massive increases in rent are due (which won't happen, because owners can hardly find tenants even at $2,700) or the value of the property needs a radical adjustment downward. Which it will get as soon as all of these 105% mortgages, interest-only mortgages, and other risky schemes get torpedoed by rising interest rates, and no one can afford to fake their way into a million-dollar home they can't objectively afford.
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