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

To: Tom M who wrote (8885)	2/14/2003 1:09:08 PM
From: Mr. Sunshine	Read Replies (1) \| Respond to of 306849

Tom, <<don't you think they're going to try to keep things inflated like our lives depend on it?>> Who is "they"? The fed? Artificial inflation of assets, whether it is the stock market, real estate, bonds, or tulips, just does not work. History has shown this over and over again. I believe the fed knows this. Interest rates are low to spur a poor economy; high real estate prices due to low interest rates are an unintended consequence. <<When RE crashes with the current personal, corporate & gov't debt loads, who'll have cash to pick up the pieces?>> I will, and I imagine lots of people around the US and world, who are mostly in cash because they believe that assets are currently inflated and prices will drop. <<Isn't this how Japan was buying up US properties the last go round?>> NO!!! The Japanese bought US properties in the late eighties during the last huge real estate run up. The Japanese were largely responsible for that run up, IMO. They bought at the height of the market, not at the bottom. After the bottom fell out of the real estate market in the early 90's, the Japanese sold much of their US real estate, at huge losses, often back to the US citizens they had bought them from. One great example is the Rockerfeller center. These basic details are from memory. The Rockerfeller's sold it to a Japanese business for an amount way above what the income from the building would support. The Rockerfeller's bought the building back several years later for 25-50% of what they had sold it for. Japanese lost billions, Rockerfeller's made billions. This process was repeated many, many times, and IMHO was one of the single greatest one way transfers of wealth in history. And it went from the Japanese to the US. <<Most will be caught with negative equity, and Japan has been a nation of savers for some time. Deja vu all over again?>> Actually, unless you bought in the last year or two, people should have a lot of equity in real estate. I know I have tons of equity in mine. It is only those who bought in the past year or two, at the height of the market, who will be caught. Most will continue to pay the mortgage even if they are underwater because they need a place to live if the property is a home. There will be an increase in foreclosures, but that is normal during market declines. <<We're NOT in a good situation>> At the micro (personal) level, in any economic situtation, there are winners and there are losers. At the personal level, I try to do what it takes to be one of the former. Even in the great depression, there were many who made money. That is how capitalism works. At the macro level, the economy, especially the stock market, has been hurting for years. Real estate has not followed, but I suspect that it will. If you feel the same, put some cash aside now so you can buy stuff after the crash.