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Strategies & Market Trends : Classic TA Workplace -- Ignore unavailable to you. Want to Upgrade?

To: martin001 who wrote (43961)	6/30/2002 9:36:47 PM
From: morokko65	Read Replies (4) \| Respond to of 209892

OT: Martin001, regarding Real Estate I am an asset manager for a bank in California and sell foreclosed properties. I tend to see the underbelly of the lending world, so my perspective is somewhat tainted in that regard. That being said, Prices in Northern California have basically doubled since 1996-1997. Some of the high end stuff $2MM+ went up 4X when all the funny internet money was still sloshing around. The market peaked in early 2001 and subsequently declined about 10% until 9/11 (the upper end was hit harder, the sub400-450K segment hardly felt it. For 2-3 months after 9/11, the market kind of froze. Few transactions took place and inventory dwindled as sellers were discouraged. Sales that did take place tended to be on the low side. After Jan 1, when buyers realized that the world did not end, mortgage rates were low and residential inventory was very, very low. This resulted in a buying panic. Prices in the $350K to $1MM range have been moving up approximately 2% per month. Anecdotally, this appears to be on a lower number of sales. If this were a stock, it is looking like a retest of the highs on lower volume... Where do we end up? I don't know. Many have been pointing to Real Estate as the mother of all Bubbles. The willingness of consumers and banks to have 100%+ loan to value mortgages is insatiable right now. Residential Real Estate looks as bulletproof as Telecom did in 1999-2000. If the Nasdaq finally bottoms at 500 or 900, etc in the next year, the money fleeing stocks could throw another log on the Real Estate fire short term and prices could keep shooting up. However, if such a decline results in another wave of layoffs and/or is symtomatic of a banking/dollar crisis, Real Estate will come down hard and fast. Even if mortgage rates decline to 3%, most people still require income to qualify. If Unemployment is 8-10% underwriting criteria may tighten up, which will reduce the pool of qualified buyers. Similar speculation is occuring in So Cal, NYC/NJ Metro, Denver, Chicago, Boston, Northern VA, etc... So, how to profit? If we get Tommy Bears mid year stock rally until autumn, I would incrementally build a position in FNM '04 puts. (please do your own research..) I see that as a hedge against the value of my house. Here is a good link for a current analysis of the crossroads we may be at: contraryinvestor.com