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

To: MulhollandDrive who wrote (48371)	10/24/2003 1:17:23 PM
From: X Y Zebra	Read Replies (1) \| Respond to of 57110

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. Yes, but if that demand continues, (as it seems to be), then the valuations will be relatively "safe". 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. The low rates facilitates the purchase, but what causes the higher prices is the demand for housing, not ONLY the low rates. What I mean is that there may continue to be low rates, but the demand for housing may abate, putting less pressure on prices. Now, if rates continue to e low and people begin to build and/or buy homes just because they assume they will go up, then we would be entering a speculative phase and yes, at such point when the last buyer entered the market, we could face a "crash". Up until now, I do not see that happening because it has been real demand for homes (i.e. people who need a place to live in) that have driven prices up. 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) yes, technology working its efficiency magic... in addition, remember in the savings & loan charade... builders would build shopping centers where there were no towns... hoping that homes would be built.. the game then was to buy the land surrounding one of these white elephants so it would appreciate and make a killing... problem was it was all speculative and the music ended at some point. there was no REAL demand. that leasing rates have been fairly stagnant, the property has always been fully occupied...but it happens to be in a prime location.... . Valuation in commercial real estate, (including industrial), is based on capitalization rates, which derive and are affected by market interest rates... therefore, if your property is fully leased, then the valuation is retained, not to mention that on triple net leases on a fully occupied industrial building is known as a "coupon clipper" and yes, there may be "leaner times" when leasing rates are stable and even soft at a given point, but better times will come and rates will start to creep up slowly... put that together with the underlying value of land and the safety that the location factor gives you and... what bubble say you ? but the potential problem i do see is what happens when the pool of first time buyers dries up sufficiently. well... the cycles will continue to exist, nothing can be done about that other than plan well one's investment/involvement in real estate. The question then becomes.... when will that pool of first time buyers dry up ? The answer will also depend on the what is happening to demographics of the particular area... once again I will bring up the immigration sector of population growth and what effects it has on the rest of the population... that will be a key element to decipher. Strictly from an economic perspective (not political), the moto.... "Put the "J" back in Texas" -lol all of a sudden has a different meaning... (and an important one at that) There is some serious potential demand looming if what I think is happening with birth rates in the latino segment of the population... -ggg <of which I have nothing to do, yet I know what they are capable of doing> -lol lol... planning? what planning? -g exactly !