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To: Tradelite who wrote (145202)	1/22/2002 3:15:49 PM
From: reaper	Read Replies (3) \| Respond to of 436258

<<The real estate is a valuable underlying asset and will only become more so in many cases. >> There are two things that make an asset valuable. One is the cash flow that it generates. The other is what people will pay for that cash flow. Last time I looked my house generates no economic value. It produces no cash. It produces no productivity improvements. It produces no increases to the workforce (though my wife and I are working on that <g>). Therefore the ONLY thing that I have to rely on in selling my house for a higher price than I paid is that somebody will want to pay more for it. Greater fool theory. This is PRECISELY what people who bought internet stocks were doing; the asset generated no cash flow but it did generate higher prices (until it didn't). Don't confuse "price" with "worth". The bank may have put a "price" on my house of $1mm; there is no way in heck it is "worth" that. <<there are more people alive today of home-buying age, and this figure is going to grow>> if you define "home buying age" as +/- 25-54, then yes you are right there are 13% more people of that age in the US than there were in 1990 (see Census.gov). that's about 14mm more people. generating a 53% increase in the average # of new home sales in the same period (from 3.9mm a year to 6.0mm a year). so increased population explains a very small part of the increase in new home sales. the rest is churn, which is brought about by unconscionably lax lending practices and Fannie & Freddie propagating the dangerous myth that you "own" your house when you have a loan outstanding for 95% of its value. IMHO of course. Cheers

To: Tradelite who wrote (145202)	1/22/2002 3:33:34 PM
From: reaper	Respond to of 436258

as a follow-up to the message i just sent, in the 10-year period 1976-1985, existing home sales averaged 3.1mm a year, and if you take out the two years of DEEP recession (1982 & 1983, when sales were only 2.4mm and 2.0mm) they averaged 3.3mm. so basically you have a LONG period of time (1976-1995) when existing home sales tracked very consistently between 3.0 and 3.9mm. in 1996 the number just TOOK OFF, and now we're running 5-6mm a year. since the take off in existing home sales (and recent acceleration) tracks very nicely with the booming credit expansion in the last 5 years, i'm going to lay the cause at the feet of increased credit and not at the feet of increased population (as population surely increased between 1975 and 1994 and there was no appreciable change in the existing home sales #). Again, IMHO only, of course. Cheers