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

To: jrhana who wrote (34599)	6/1/2003 10:15:14 AM
From: BubbaFred	Read Replies (2) \| Respond to of 74559

Housing bubble burst in early 1990's California Sacramento and Los Angeles was about 20 - 25%. Overbuilt condos and townhouses bubble burst of the 1980's oil boomtowns Houston and Denver was much worse, from banks excess repos inventory that were sold by blocks at 25 cents to the dollar. No such scenario exists.

To: jrhana who wrote (34599)	6/1/2003 5:12:16 PM
From: TobagoJack	Read Replies (1) \| Respond to of 74559

Hi John, <<real estate price boom>> ... I value real estate by a combination of: (a) current net achievable rent yield (b) location, for purpose of rental/resale during bad market (c) financing rate relative to expected real estate inflation rate (d) current rental/capital value relative to expected income level of potential buyers (affordability) The US physical real estate market is big, diverse, and localized, but the refi market where people extract perceived value that has been standardized by the government-sponsored machines and the paper mortgage market. Generally, I believe the US rental yield is absolutely low, and OK only when compared to money market instruments. I believe the US cities have a lot of expansion room as well as redevelopment prospects. I believe the US real estate inflation rate is not sustainable, fueled by foreign credit, and ultimately is at the mercy of foreign creditors, even though I take Bernanke at his words, that he is willing to trash the currency of the realm, and take the officialdom at their words, that they are willing to completely mortgage the future, so as to avoid the pain at any given time. I believe afford-ability run in cycles, up and then down, and looking back in time, without thinking about the future, increases in US afford-ability has slowed. Real estate in HK is traded like stocks, as there is no capital gain tax, and the market is deep and liquid, most of the time. Many in Hong Kong are experiencing negative equity syndrome, and are still holding on by digging into savings, even as income in this absolutely free economy has dropped an aggregate of close to 30%. Before the burst, many folks were paying 40-50% of their then current income towards mortgage repayment due to the high price they paid for the property. In aggregate, folks may have saved 15-30% of their annual income, investing in real estate and stocks (not so much bonds). You can well imagine the pain now. In such an environment, much frivolous spending ceases, retirement nest egg gets emptied out, the future is held hostage to the present, and any little economic hiccup becomes a near-fatal wealth disease. We do not know the end of this chapter yet, because we do not even know how many pages are left in this chapter. My rented office is well-located and cost as much as HKD 9 mm (HKD 7.8 = USD 1) at the peak of 1997 frenzy, and now can be market-cleared at perhaps HKD 1.5-2 mm. There were no bidders at HKD 2.2 mm as of February 2003. The rent came down from HKD 26.5/sft-month to a current HKD 8/sft-month. Chugs, Jay