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

To: bentway who wrote (14965)	11/10/2003 4:04:25 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 306849

Cal. market is reprising the Japanese market of the 80's i think it's a bit different. the situation in Japan was much more business-oriented. banks were forced by the Ministry of Finance through "window guidance" to make lots of loans, so they forced cash down the throats of their customers. in Japan, land, not cash flow, was used as the basis for making huge loans. this way of thinking was incomprehensible to Western bankers. so you could have a lemonade stand that breaks even on $100 of sales a year, but if it was located in the right part of Tokyo, the banks might have lent you the equivalent of hundreds of millions of dollars. one lady in Osaka, who was a fortune teller, was able to borrow more than a billion dollars. if you are a lemonade stand which just received $100 million, what do you do with all this money? the loans were plowed into the stock market and real estate, which raised the collateral value and more loans were taken out, in an upwardly spiraling Ponzi Scheme. so, as ridiculous as things are in California today, in a way the Japan situation was much more over the top, more akin to the Nasdaq bubble than the current real estate bubble. but our RE bubble is real nonetheless, even if houses are only going to fall 50% or 70% as opposed to 90% in parts of Japan. it will be worse for us because of the profligate ways of the American Consumer, who greatly outshines his Japanese counterpart in utter lack of prudence.