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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: X Y Zebra who wrote (48355)	10/24/2003 6:54:11 AM
From: zonder	Read Replies (1) \| Respond to of 57110

What do you think will happen when interest rates start moving up? I am not well-versed in the US real-estate market, but wouldn't think most mortgages are fixed-rate. John Tempelton considers that the US Dollar will lose 40 % of its value... where should money be placed in financial assets or in hard assets...? Ideally, into commodities with intrinsic value - like gold. Or other currencies that the USD is expected to depreciate 40% against. I do see what you are saying re this being the line of thought of the layman, and hence the real estate boom. But for how long? And will it crash once anyone who has ever dreamed of having a home has signed a mortgage (we are pretty much there now) and interest rates start rising (next year)? By the way, re Templeton - They (as a house) are horrible at market timing. They were a client of ours when I first started working in financial markets, and I would get frustrated when they just wouldn't sell anything, even when we foretold doom (which subsequently took place). I realized later on that they collected funds faster than they could place them, so they saw little point in ever liquidating an investment :-)

To: X Y Zebra who wrote (48355)	10/24/2003 9:27:04 AM
From: HoodBuilder	Read Replies (2) \| Respond to of 57110

XYZ, I can't tell from your profile as it's blank, but if I didn't know better I would guess you're either a real estate broker or developer. As they use to say when I was 10..."it takes one to know one." If I'm wrong so be it, but you seem to have an insider's perspective on the real estate market, one that I share...Cheers, you're dead on. BTW, you can't short houses but you sure can short Homebuilders and REITS.

To: X Y Zebra who wrote (48355)	10/24/2003 11:26:11 AM
From: MulhollandDrive	Read Replies (1) \| Respond to of 57110

there is real estate and then there is real estate... I personally do not think we are in a bubble exactly. always location, location....yada yada i think "bubble" would be an inappropriate term, however, there does seem to be a question as to valuations being driven artificially up higher than sustainable levels by the historically low rates which created demand for people to live in, as you say....people who would have ordinarily been renters. it seems to me as though the unprecedented rate cuts served to compress or perhaps accelerate is a better word, the normative appreciation of housing stock. in some areas where we were seeing 20% or better levels of appreciation yoy for the past several years, pushing prices to the limit of affordability (even with low rates) for first time buyers...while it may be questionable to label this kind of housing appreciation a bubble, it certainly is unprecedented....and would seem unsustainable. but as to a bubble type crash, no i don't see that either. but do you think we could simply see a reversion to the mean? and what effect would that have on an economy that seems to have an unquenchable demand for the mortgage refi as a source of liquidity to drive spending? I do not believe that builders are building to see if there are greater fools that would buy the homes in question, they are merely satisfying a demand based on need rather than speculative buying absolutely....one of the primary differences (apart from demand being driven by fear of inflation in the 80's) is that builders learned the lesson of overbuilding spec houses....almost the DELL model has been employed)....much of the housing built today is prefabricated, requiring much less stick building on site, that wasn't the case in the 80's so they were in the position of "building inventory" something unheard of today) Industrial real estate i.e. office/warehouse (for example in Seattle), has been cool since Boeing leaving for greener pastures left a healthy supply of available warehouse space that would make a developer of spec. space seriously think it twice before building. --not to mention the morons at city hall that their sole purpose in their existence is to make the developer's life impossible ... ah and let's not forget wet-lands .... Therefore, any new warehouse has to be thoroughly researched and must have a purpose... or the investor must be well heeled to put up with 18 months of bullshit. Latest report is.... leasing market is beginning to inmprove... but only a little. again JIT manufacturing has had its deflationary effect, manufacturers (dwindling breed that they are) do not have nearly the need for inventory , same is true of retailers. i happen to own some industrial RE which i purchased right before the 86 tax reform bill passed, and i can tell you that leasing rates have been fairly stagnant, the property has always been fully occupied...but it happens to be in a prime location.... for example, UPS hub is right down the street, and every bit of available industrial space industrial space is being developed. the key being it is a prime distribution location. Markets like Las Vegas have enjoyed a tremendous run but in this instance there has been a lot of jobs created there, or at least so it seems. The government of Nevada is without question the friendliest to business and so, many businesses are moving there and with them the jobs that have helped fuel the boom in the Las Vegas market. also parts of AZ...currently in the process of researching residential properties in Sedona (and surrounding communities)...already quite expensive, but i believe will only get more so for reasons i won't go into here. i think you're right about the japan/us real estate comparison...but the potential problem i do see is what happens when the pool of first time buyers dries up sufficiently. i think all the people with low iq reside at the planning commissions of every city lol....planning? what planning? <g>