Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: AC Flyer who wrote (14131)	1/28/2002 6:20:14 PM
From: reaper	Read Replies (1) of 74559

<<The residential real estate slowdown continues - NOT! Part II>> Just change the words a little and you could have an article from March 2000 about the telecom buildout -- favorable demand, lean inventories (relative to THEN CURRENT demand), signed contracts from buyers, etc. etc. etc. The capital markets are NOT imposing discipline here -- they are throwing gobs of money at a non-productive asset. This works as long as there is more capital (in classic ponzi fashion) but IF capital availability ever levels off, the whole thing comes unwound. Demand falls (due to lack of credit), inventory skyrockets, and prices collapse. The median home price is up 10%-ish this year. My home in Boston bought for under $600k in summer of 1999 was just appraised for over $1mm. Balance sheets at Fannie & Freddie are growing at 25% annualized rates. Housing turnover is up roughly 50% in 5 years. Home equity at a generational low (in terms of %), putting housing leverage at a generational high. If it walks like a bubble, quacks like a bubble.... Cheers

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