The NYT weighed in today on the real estate condition (?bubble?): nytimes.com
Salient quote: <<"South Florida," he said, "is working off of a totally new economic model than any of us have ever experienced in the past.">>
Yeah, right! It's not like there've been Florida land bubbles before. If you watch local TV, you see the city and county elected officials trying to figure out how to cover local governmental services when the Federal subsidies are being cut. Real estate taxes are soaring, and there's a whisper of a Prop 13 Movement in Fla. Palm Beach County is pinning its hopes on a $300 million biotech proposal from the Scripps Foundation. (Is it curious that Phoenix, Boston, Cincinnati, and practically all other cities in the US are planning/investing/hoping for a biotech center of economic growth? Can they all be right? Is biotech investing easier for them than it's been for me? Will all the free cash flow come from Medicare? The same Medicare that will be bankrupt in 10 years?
NYT pontificates on: <<There are certainly serious reasons to believe that house prices will not suffer the fate of technology stocks. Not only are houses more tangible, but people do not sell their homes as quickly as stocks, making a panic much less likely. Because of tax advantages, few owners are likely to sell and rent something else simply because local house prices start to decline.>>
They ignored the fact that real estate is more leveraged than stocks. Current buyers are doing squirrely transactions like interest only loans and neg-am stuff and home equity transactions that give them an effective margin rate over 100%.. {For a national median household, earning just over $50,000 per year, the tax benefit is vanishingly small. The new house is 25% larger which requires that much more heating and cooling. And maintenance. }
But so far, facts fly in the face of reason. Life is good. |
