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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 249.75+2.2%9:57 AM EST
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To: fedhead who wrote (99938)4/11/2000 6:24:00 PM
From: Robert Rose  Read Replies (2) of 164684
 
<Do you think if NAZDAQ were to fall to 3000, the Bay Area
real estate prices would fall ? I have friends building
custom made houses in Saratoga based on their options in internet stocks. (Their ption prices are set at much lower levels) I wonder if these houses get sold now. >

I do believe Silicon Valley real estate prices are a prime example of the wealth effect, which is why I've been mentioning data points in that regard on this thread. I mean, good god, closing prices 30% above asking prices in P.A. in March?? That stat alone sets the stage for this current stock market pullback.

I don't know the Saratoga market as well as my own, so I'll speak about my own first.

During the bottom of the Bay Area real estate market in the mid 90's, prices in P.A. dropped just 10% from their high, versus up to 30% in many parts of CA. (I would guess that Saratoga being a little less frenzied of a market might have pulled back 15% then.

So let's assume that March does prove to be some sort of ST or IT peak for Silicon Valley real estate. Given the current craziness, a somewhat steeper price decline this time around might be possible - say, 15% in P.A. and 20% in Saratoga.

I don't think the problem will be unsold houses, as much as price declines. If your friends can still make money selling their houses for 20% less, they should be fine.

Note: Such declines can take 6 months to a few years to develop, which should give your friends enough time to adjust their building strategies to take account of new market realities.

Caveat: Just my conjectures here. Take them with a block of salt.

Rob
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