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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: SouthFloridaGuy who wrote (6541)	11/3/2002 3:21:40 PM
From: GraceZ	Read Replies (2) \| Respond to of 306849

As measured by closing prices and inventory levels, the bubble is deflating out here - it started in August (8% price drop in last two months) - and I can't wait for the October figures. I get giddy watching the next house being added to the MLS listings while the others remain unsold for 3+ months. It's like a slow motion way of watching the market fall back in 2000. You'll know when house prices are reasonable when you no longer want to buy a house and no one else does either. I have to whole-heartedly disagree. Debt is an important part of the capital structure, particularly given its tax-free nature. It allows companies to take advantage of good times and I pesonally would question management that is not taking on at least some debt during good times. I should have said, with almost no debt. Perhaps I will be repeating what you just said, but in simple terms, credit crunches occur when you need the money but nobody will give it to you. This generally occurs when you have a cash flow problem. The banks themselves are still lending at fantastic rates to companies that have good balance sheets, the problem is that those companies are few and far between. If Cisco wanted to take a huge loan tomorrow, the banks would give it to them at a much better rate than AT&T because Cisco has tremendous free cash flow to support interest coverage. How could this possibly be viewed as a negative development? Good companies with good cash flow sufficient to pay debt can borrow funds and receive favorable rates while those companies who don't have good balance sheets are cut off from cheap credit. This is the way it is suppose to work.

To: SouthFloridaGuy who wrote (6541)	11/3/2002 4:19:37 PM
From: David Jones	Respond to of 306849

..... Levering the capital structure and taking advantage of good situations is a crucial part of the business cycle and capitalism. Like anything it can be absued, and it is the job of a good analyst/investor to run a Monte Carlo risk scenario for every company he/she covers and see if the debt issue is a problem.... That's exactly the the problem or risk with purchasing real estate that I find today. It's difficult at best to find that piece that warrants taking advantage of these attractive rates. imo Seems remodeling is the rage to my eye. In fact I'm in the process of doing just that with an existing holding of mine. Being unsure I have appointments with my accountant and an inspection scheduled with my broker to discuss just such a move. Always the risk of over building and the addition, what ever it may be, moves the unit into a higher priced market. Not something I relish. I just need to be doing something.