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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Tradelite who wrote (4713)8/27/2002 2:12:42 PM
From: fattyRead Replies (2) of 306849
 
>Do you ever think you will look at a piece of real estate and think it's cheap, or even reasonable? If prices go down, will you think you're getting real estate "on sale" at a bargain price?

Sure, when I first brought my 3-family house in 1984, it was cheap because my monthly mortgage was $900 or roughly 50% of the household income. When I brought my 2-family house in 1992 in a better neighborhood, it was cheap because the mortage was $1200 or roughly 40% of the household income.

Now, my 2-family house won't fetch a cheap price because if I were to buy it again, I'd have to use 80% of my household income for the mortgage, not to mention 3 years of after-tax income for down payment.

People need to realize when they buy a piece of real estate, the real variable is in the land, not the house. We know exactly how much it cost to build a house. It is the land that takes up much of the cost. We also know that cities and towns around the country also making more buildable lands available. There isn't shortage problem here. What has been driving up the real estate prices is simply the domino-effect of a minority number of people's fancy for a tiny selection of desirable locations. But this is irrational because location A being desirable shouldn't make location B just as desirable. It is as laughable as a man thinking that since foxy cleopetra is such a hot babe, then the girl next door should be 80% as foxy since she also has legs and bottoms.
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