The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Lizzie Tudor who wrote (57840)	7/17/2006 1:51:02 AM
From: Elroy Jetson	Read Replies (2) of 306849

Just because home builders are folding their tents at record speed, when compared with the last cycle, doesn't necessarily mean home owners will. Obviously there will be a direct impact in those areas where home owners are competing with new developments where homes are suddenly priced 30% lower to continue selling product at a reduced level. But most existing homes are not located close to new developments. Historically, going back to the real estate boom of the 1880s in Southern California, it has always fascinated me that these busts seem to always take the same amount of time to collapse, regardless of the amount of over-valuation. I believe this is based on human psychology. I think it probably takes humans the same amount of time to face up to reality today as it did in 1890. This is what makes the current actions of publicly held home builders so interesting to me. I think this is largely driven by the increasingly short-term focus of Wall Street. I have not heard about the same panic going on at privately held home builders. Most private builders see this as a temporary problem and believe the "demographic forecasts" which I believe are based on every American needing three homes and waves of immigrants sneaking across the border with heavy sacks of gold bars and willing to pay almost any price for a home. A friend of mine spent time this weekend in San Diego with real estate development friends. They believe it will take 10 years for the market to absorb the existing condos built in the former skid-row of San Diego - and that doesn't include the visibly large number of additional buildings currently under construction. The younger brother of another friend of mine, bought one of these condos before he was married last year. For the past year he has been unsuccessfully trying to sell his condo for the amount of his mortgage - and that was when the market was "hot". There's a lot of people locked into debt slavery and I expect the time duration will be similar to past down-turns. .

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