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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (34592)	6/1/2003 6:31:30 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

The house bubble is the result of many people using brick and mortar to hedge their savings. House going kaboom are they going to move to gold?

To: TobagoJack who wrote (34592)	6/1/2003 9:14:12 AM
From: jrhana	Read Replies (2) \| Respond to of 74559

The Economist gives a rather balanced view on the real estate price boom: "House of Cards" economist.co.uk It is interesting that they emphasize that supply is key to real estate. Both the areas I own real estate are of limited supply; Georgetown (strick zoning) and South Florida (Soon there will be nothing but swamp land left). So far I have been the beneficiary of this. How long it lasts is anyone's guess. I am taking steps to be able to ride out the inevitable downturn. Prices in real estate can sometimes be somewhat sticky on the downside because many people will be loathe to sell at a loss as long as they can pay the mortgage. Real Estate is not really as bad as the internet bubble. IMHO Buying a house for $350,000 when it really should be worth $200,000 is not quite as bad as buying an internet stock at $180 when it should really be worth about $.30. The problem occurs when people cannot meet their debt payments. If things get really bad and people start to hand in their keys, they will discover one downside of letting the bank foreclose. Any unrecaptured loss suffered by the bank will be treated as taxable income to the borrower. The IRS will go after those unfortunates with ferocity. I am constantly urging people not to put their life savings into making leveraged buys into an overheated real estate market. Ironically however if we were to have a mini hyperinflation (not impossible IMHO), real estate could prove to be the salvation of many. As long as I can work I have no intention of selling my real estate for $.30 on the dollar. We will see how low it goes. And of course there will be wide disparities among localities.