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

To: GraceZ who wrote (26986)	2/8/2005 3:26:19 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 306849

Housing cost can't help but move with the inflation in incomes on a macro scale. But housing prices are another story. no, they are not another story, because there is a long-term relationship between costs and prices. if prices were not higher than costs, nobody would build new homes. if the bubble is punctured and prices crash, to the point where they are temporarily below replacement cost, then builders will stop building. supply will drain from the market until the long-term relationship is reestablished. What everyone forgets is that houses are a store of accumulated savings as well as a current cost, savings that is frequently passed down through generations...a large part of what is used to buy houses is savings, either the buyer's savings or their family fortune. perhaps you have been asleep this past decade. right now it is very common for people with ZERO savings and ZERO family fortune to buy a house with a 100% LTV mortgage, or even 125% in bubble hotspots like california. the idea of using savings to buy a house is now quaint, on its way to becoming archaic. There can only be so much beach front, so much Manhattan, so much buildable land squeezed in on the California coas i guess this is a new development in financial science. it must have happened since the last time the market crashed for properties on the beach, in Manhattan, or in California. was it an Act of Congress, perhaps? just like there is only so much land in Japan. a country with a land area similar to California, but with 3.6 times as many people in it. where they happened to have 13 down years in a row in the real estate market. we should tell their Diet to pass a law so that real estate can only go up like in California.