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To: Jim McMannis who wrote (171183)	9/24/2002 5:47:27 AM
From: John F. Dowd	Respond to of 186894

Jim: I don't know where you live. It must be second home hell where people bought a second home just because interest rates were cheap thus the carrying costs of the asset was low no matter what they paid for it. I fear these are the people who impatient with their equity investments, sold near the bottom (causing me great angst), and invested in the exploding real estate market. Basically they bought a home on spec figuring that real estate was better than the equity downturn. And if the homes have for rent signs indicating they are not the primary home, they have indeed bought homes at the wrong price on spec. Where it makes sense for the renter to convert to ownership in this case it makes less sense for someone to build and/or buy a second home (with the hope of renting it full or part time)under the conditions that you describe where ever you are. Up here you can get a 2 BR place for about 1100-2500 per month rent depending on location and season. So for mortgage of 300 K plus taxes and insurance the renter can buy a 325,000 home for about 2100 per month carrying costs assuming a modest tax rate. Depending on the location that can be a pretty nice small home or a 3 BR home in a less grand life style. Now I don't know how this works out for the second home but that is not what I would have done with what was left of my portfolio but given what you have described that is what a lot of digruntled "boomers" did in your area. It is only the non primary home owners that are going to get hit by an RE bubble. Also up here in Maine after a summer lull big ticket homes are getting sold again. This means that Boston must be recovering as we are becoming a bedroom community for same. In sum I think you live where a lot of people bought second homes as investments and they all rushed into the concept at the same time. That can result in a localized bubble but I can't see how the primary home buyer has been hurt even if he payed a little too much when he arbitraged out of rent into ownership. If he is prepared to stay put then in a few yrs things will work out for him but not necessarily so for the spec buyer. JFD