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

To: Tradelite who wrote (16082)	1/16/2004 8:41:17 AM
From: bozwood	Read Replies (2) \| Respond to of 306849

localmarketmonitor.com Here you go. It is dated Dec 2002, so assume it has become crazier since then.

To: Tradelite who wrote (16082)	1/16/2004 9:40:05 AM
From: Micawber	Respond to of 306849

It is rather futile for us to discuss this matter, as we come from opposite ends of the spectrum. I don't mean this disrespectfully. In your world, if one wants to purchase a single family home, one should buy one at any given time based solely upon the sales prices of surrounding homes. This is a broker's mindset, which one would expect in your business. You have a vested interest in making a sale, and that is your only goal. With this focus in mind, the economic cycle is irrelevant. More incredibly, the home's possible rental value is irrelevant. All of this is fine for your business, as it keeps things simple, and it has undoubtedly made you a good living. Unfortunately, you feel that anyone who doesn't subscribe to this mantra is an overcautious whiner, hell bent to regulate the real estate business. As an investor, I could not possibly disagree more with your approach. It amounts to pure speculation. Over the past few years especially, speculation has paid off handsomely. History has shown, however, that this can't continue forever.

To: Tradelite who wrote (16082)	1/16/2004 11:08:51 PM
From: Doughboy	Read Replies (2) \| Respond to of 306849

I'm amused, however, at the notions being expressed now that market values of residential properties should somehow be measured in terms of rental value or that the income approach to appraisal be applied to personal residences. . . . . In Northern Virginia, tenants are scarce for many large office buildings. On the other hand, affordable houses are in short supply. Why the value of the latter should be measured on the same terms as the former, is beyond me. First of all, I'm obviously not talking about "office" buildings when I say investment properties affect real estate prices. And I still think you miss the general point. I'm not saying that investment real estate determines residential home prices in a lockstep fashion, but that housing prices still follow the general laws of supply and demand. Housing supply, while relatively inelastic, still does have some movement, and as rental properties are converted to resale or developers build for buyers rather than renters, the gap between rental and buying is going to close. As I pointed out, developers are already making drastic decisions to sell whole buildings of former rental units. That surely is having an effect on prices; maybe today its simply keeping prices from appreciating at a faster pace, but tomorrow it may actually bring prices down. On the demand side, the story is much the same: Income properties and residential properties are relatively fungible to consumers, and as the economic proposition continues to be more favorable to renters, real estate prices are going to be suppressed as consumers go more toward renting vs. owning. This effect may be masked somewhat right now because interest rates are still low, but when rates increase, the cost benefit advantage of renting is going to be glaringly obvious. You are ignoring reality if you don't see that investment return on income producing properties affects the price of residential housing prices. By this measure, I believe that prices in DC are overvalued right now, and there will be a correction. Of course, a correction can come in several ways, prices can plummet or prices can stagnate for several years. Conversely, rents can catch up as the rental supply is squeezed. Or it can be a combination of any number of them. I'm not selling my properties, so I guess I'm not worried about 30-40% overvaluation. There are some fundamentals supporting prices in DC--scarcity of buildable land, net job, population and income growth in DC, and fairly low interest rates. But I do think that the risk-reward proposition from holding real estate in DC is the worst I've seen in a dozen years, so I would not be surprised to see prices fall 5-10% or stay the same for several years, especially if interest rates spike.