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

To: LaFayette555 who wrote (49847)	1/6/2004 1:00:59 PM
From: mph	Respond to of 57110

I think you're right about the effect on rental units. I was also thinking that the lower mortgage rates for existing homeowners actually has a salutary tax effect in terms of revenue for the government. The lower the interest rate the lower the mortgage interest deduction. I'd be curious as to whether there was any appreciable increase in tax revenues that could be attributed to refinancing. In my own case, there was a difference.

To: LaFayette555 who wrote (49847)	1/6/2004 2:27:58 PM
From: X Y Zebra	Respond to of 57110

it is starting to impact rents negatively - it is now making renting a far better economic choice over buying at inflated prices - all this is making the purchase of rental units a dubious investment where renters are hard to find - it will eventually lead to an over supply of newly built units for sale and this is what burst our local bubble last time around. Careful there... "Over-supply" arises not only from lack of demand but more importantly from "over-building" of speculative units. There will always be an underlying supply of new renters, provided population continues to expand (via birth-rates OR immigration) These new renters are either too poor, or have limited credit history to make it as buyers --regardless of interest rates levels. More than probable, the over-building, driven by unchecked speculative greed leads to over-supply. In my opinion, builders, (at large), have learned their lesson and are now more careful. They monitor demand more closely and are more careful as to their debt commitments, in general they are better businessmen than what their past history indicates. However, let me give you another scenario... Lower rates, no doubt motivates investment and the public is constantly seeking the better venue. At this point, they are very careful with the equities market, however, real estate has continued to be a "safe heaven" (relatively speaking, and by no means I imply "risk-less"). In my eyes, the Fed is in no position to increase rates any time soon, considering the global perspectives that seem to be the consensus, (i.e. China becoming the manufacturing plant of the world, the third world becoming the labor supplier to the world and indeed, the third world --in selected but important areas-- becoming consumers in their own right)... This leads to certain US businesses, who have found their respective "niches" to have also become "survivors"; their employment policies are stringent, but sound and the way they run their businesses are efficient. (That's why they have survived --so far). A tough environment, but nevertheless one that pays a living. Or at least it seems that it is doing so. These businesses NEED low interest rates, because it is an important component of their capability to survive. For the most part, they are taking care of local needs, but some, will also have to learn how to export and become competitive --via technology, at which the US is still very good at-- Now they have to find a way to compete with price as well. Somehow, they seem to be succeeding --or maybe I am all wet and misreading the aparent strength of the US economy, that although not yet apparent in the employment field, it seems to chug along... I am not smart enough to figure out the exact reason... but it has been going on for long enough that it may become meaningful. So.... enter the NEW "American Dream" Real Estate push. Own the Real Estate of YOUR BUSINESS. i.e. condominium warehouses (or office buildings, etc). A theory... ? yes, but one that so long the two following components continue to be with us, it may not only be feasible but it may "lengthen" the real estate boom. These components are: 1. Low interest rates 2. Growing population (by birth rate or immigration) On the other hand... I could be very wrong.