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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: bentway who wrote (19725)4/23/2004 9:47:14 PM
From: Elroy JetsonRead Replies (1) of 306849
 
Tract-home builders raise the selling price of their new homes on a regular basis because it provides home buyers with the impression that these homes are a sound, stable, and profitable investment. These price increases are in no way related to rising costs.

This can provide a predictable and profitable re-sale market for buyers of new homes - until the cycle ends.

I knew some friends who bought into new developments in Laguna Niguel and Mission Viejo California in the 1980's. After buying a new home they would sell it a year later and buy a more expensive new home. After six years and six homes they had built up $800k in equity after starting with $30k. Then 1991 happened and their last home went back to the bank after their equity vanished in price declines. They sent me a Christmas card a year later from Ohio.

It was like buying shares of America Online in the 1990's. It was very profitable - until it wasn't.
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