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To: HairBall who wrote (70334)	2/24/2001 8:58:26 AM
From: William B. Kohn	Respond to of 99985

Interesting comment, my son, has refrained from buying a house here in the Chicago area, primarily because he is sure that there is a 'real estate bubble' and he expects it to burst. I, on the other hand, purchased a home, this year, for what I felt was alot of money. I really look at real estate prices and wonder how considering what I normally see as wage distribution curves of the US population, can so many people afford housing that costs as much as it appears. I remember than last June, a townhouse complex we were looking at called and told me a unit we liked came back on the market because they person who was originally going to buy had lost alot of money in the market. This correction, so far, must have put many others in that category. If as many here and elsewhere subscribe we are only in Phase 2 of a bear market, then I believe we will see the real estate pain grow much more acute in the coming months.

To: HairBall who wrote (70334)	2/24/2001 9:14:11 AM
From: John Rowton	Respond to of 99985

There is not much of a slow down in the Chicago area. I am not a real estate "person" but have recently bought and am in the process of remodeling a house in a gentrified area. The contractor is 75% finished and we are getting offers already. I personally think that there is a bit of a bubble but there are many factors that may offset some areas 1. diversified economy of an area 2. gas prices ( if you live in a far suburb and have 3 suv's , you are hurting 3. schools ( city schools suck) 4. etc. etc.

To: HairBall who wrote (70334)	2/24/2001 10:17:44 AM
From: Square_Dealings	Respond to of 99985

LG Its hard to imagine that real estate prices won't be affected. Here in Phoenix there are a lot of homes, especially the high end $800k+ on the market now with few buyers. Prices have come down but not significantly. I would think that if things don't turn pretty soon though that the price would be next to go. On the other hand basic material costs and rising inflation would make the replacement cost go up so there is some counter force there for a while to support the prices. Not clear which way this will go. askresearch.com M.

To: HairBall who wrote (70334)	2/24/2001 11:12:29 AM
From: A.L. Reagan	Read Replies (2) \| Respond to of 99985

LG, I'm a commercial real estate developer and operator here in the Austin, Texas area, and although recently absorption has significantly slowed, I do not see any signs of there being a "real estate" bubble. To get a bubble typically requires a lot of high leverage debt going into real estate projects (a la Japan and the U.S. in the late 80's) and this simply has not happened, at least around here in commercial. We have not had an environment where existing product sells substantially in excess of full-boat replacement cost. This is usually a harbinger of a bubble, and it ain't there. Lenders for at least the past 12 months have significantly tightened underwriting standards for new projects. Spec stuff (not pre-leased/sold) typically requires a minimum of 40% equity. Having said that, there certainly is a prospect for a leveling out of development activity, and I exclude from these comments anecdotes about laid-off high-tech execs in option-fueled $1MM+ mini-mansions -- which make for good news copy but is hardly representative of the bulk of real estate assets in this country. Short answer - no overall significant real estate bubble, and no overall crash. Expect a measureable slowdown in new construction of apartments, offices, retail and bulk distribution, however. This is one of the important differentiators between the USA now and Japan of the early 1990's. Keep in mind that Japan also exported a huge amount of its capital to other countries to buy commercial properties at ridiculous prices. We have not done that in the USA to any significant extent. (The biggest dumb mini-bubble in the USA I am aware of was AMZN's multi-million square foot warehouse building program in 1999-2000, which can be fairly attributed to company-specific brain death. And there may be some overcapacity in So. Cal. manufacturing facilities - No. Cal. looks OK.)

To: HairBall who wrote (70334)	2/24/2001 11:12:40 AM
From: Casaubon	Read Replies (1) \| Respond to of 99985

LG, Thanks for raising this issue, as it hits close to home. <ggg> I have been shopping for a a house in the vicinity of Cambridge MA, and prices are quite disheartening. It looks like 600-800K is average, for anything within 40 minute commute time. It is almost impossible to touch anything in the $400K range, unless it needs a minimum of 100K work, not to mention most of these homes are 80 years old. I have taken the tact of low balling the seller, which has been met with much resistance from the realtors. They employ the hard sell tactics like, "there's another offer, or the market is as hot as I've ever seen". I have some time, so will continue stalling and low balling until "the right deal comes along". In the mean time, I'll continue to try and make a winning bet in the market occasionally. Also, I have put a modicum of effort into finding houses for sale by owner, in an attempt to cut out the middleman. Those 6% commissions turn my stomach, and I've already had some rather annoying conversations with the brokers who actually had the gall to try and convince me the commission comes out of the sellers pocket. The FSBO market looks too thin to be a viable method of home purchasing. Maybe it just has not caught on yet. Or, maybe many people have a lot more money than me, and don't care what they pay for a house <ggg>. The bottom line is prices have not let up at all yet. Lower interest rates just creates more demand, and may actually cause prices to continue higher. The only hope for lower prices is higher unemployment, for which there is some evidence. A recent example would be the Polaroid lay offs (one thousand people, I believe).

To: HairBall who wrote (70334)	2/24/2001 12:27:54 PM
From: JRI	Read Replies (1) \| Respond to of 99985

LG, Doug- If I'm not mistaken, supposedly the "wealth effect" from rising real estate prices is as powerful, or more powerful than "wealth effect" from stock price appreciation in upturns (although, given the magnitude of the recent bubble in stocks, perhaps this time equities could play a bigger role).. However, when housing prices start to slow their gains, or even reverse in some/many areas, isn't that going to have a decent-sized impact on consumer confidence/spending? I think of all those who took out home equity loans, and who are now sitting on a lot less equity...and/or negative equity.....with the double whammy of lower stock portfolios, I could see some people pulling back the spending reigns for some time to come... If someone's net worth goes down 20/30/40% or more, I'd think they'd make different choices! (than before) BTW- It is absolute obnoxious how much mail, phone calls, etc I am getting from the home loan guys right now...they sound almost desperate...