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

To: ild who wrote (6584)	11/5/2002 1:42:50 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 306849

In Southern California, homes are roughly 2/3 land value while condos are 1/3 land value. When the square foot building price of condos and homes are the same, the extra real estate included in the price of a home is valued at zero. If we believe most people now prefer condominiums to single-family homes, and find real estate to have a zero value; Then the elimination of the price difference between these product types could be due to a shortage of condominiums and a surplus of now out of favor single-family homes. But real estate values rise and fall with income, while building values rise and fall with inflation - and depreciates as well. So this explanation requires significant irrational behavior from an investment perspective. The more likely explanation, of the sudden elimination of a price difference between homes and condos, is the result of buyers being priced out of the single-family home market and focusing their deamnd on condos - as seen in every previous market top.

To: ild who wrote (6584)	11/5/2002 2:05:37 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 306849

Some home buyers may indeed find a yard and other uses for extra real estate to have a zero or negative value. But I don't believe this is reflective of most home buyers. Advertising for real estate sales provides the largest source of revenue and profits for the Los Angeles Times. I think this fact explains the peculiar spin and perspective the Los Angeles Times and other newspapers place on real estate stories. Of course a quaint lack of grounding in real estate economics may also contribute to breathless accounts which upon reflection don't make a great deal of sense. But I think the essense of the actual situation is found in the following quote. "We're seeing a lot of 'now-or-never' condo buying right now," said Chris Cagan, director of research and analytics at First American Real Estate Solutions. "Interest rates are down, and renters want to become homeowners. Condos are the way to get in."