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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Rational who wrote (19569)	12/27/2004 11:54:20 AM
From: John Vosilla	Respond to of 116555

<To be sure, my "theory" admits downward adjustment of prices depending on local economic condition. This "theory" merely contests wild assertions that there is some secular real estate price bubble waiting to burst to cause wide spread gloom and doom. A big force acting in my theory's favor is that large money lords cannot short-sell real estate (except builders' stocks) while spreading gloom and doom to profit from manipulation as they do in stocks.> I think too many are looking at the temporary boost in earnings of the builders (mostly through skyrocketing land values) and related sectors and not the truly astounding valuations of homes in coastal bubble markets relative to either the comparable rent or cash flow the asset would generate. The fact that the declining dollar has apparently helped boost property values in certain markets even in the face of declining rents and flat wages tells me the fall could be even greater than the doom and gloomers predict when the cleansing process unwinds. When I see median home values at $350-500k that rent for only $1200-1800/month with average household incomes at $40-60k the homes are way overvalued. Hey maybe I'm old school now and just don't get this new age world we live or maybe the Greenspan/Bush team inadvertently created this monster to save us from a depression and will ultimately make fools of themselves as well as the masses. Can the strong balance sheet of corporate America growth in capital spending, new innovations and modest valuations in home values in middle America offset a highly leveraged US consumer and overinflated coastal housing markets in a rising rate environment as we attempt to grow our way out of this?