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To: chic_hearne who wrote (52124)	12/29/2000 4:48:58 AM
From: Oblomov	Read Replies (1) \| Respond to of 436258

Chic, I agree that the real estate market could be in for some tough love. Some of my friends won't even discuss real estate with me any more, simply because I tried to make the case that real estate prices can fall as well as rise over time. They seem to believe that the Midwest does not participate in the boom-and-bust cycle of the coasts. This is true to some degree, but it neglects the fact that the past 5 years have been unusual. The growth in demand for housing can be attributed mainly to a loosening of credit standards. And this is a national problem, not a regional one. The equity market is highly efficient, but the real estate market is greatly inefficient. Some types of real estate would probably not decline at all during a severe recession, such as buildings with interesting architectural features or history. More mature neighborhoods in which the owners are financially secure may not need to sell simply because they are moving - they can wait for their price. On the other hand, the spec house market started cooling off last year; instead of explicitly cutting prices, the developers now provide extra features (such as a basement or a deck) that was an additional cost to earlier buyers. Lower real estate prices are an admission of failure. An army of appraisers, real estate agents, and bankers toil to prevent list prices from dropping. But, at some point, they may not have a choice.