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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: LauA who wrote (20974)	3/27/2005 5:15:47 PM
From: Carl Worth	Read Replies (1) \| Respond to of 78954

There are always going to be people who try to take shortcuts, whether it's in the market, or real estate, or business, whatever. Anyone who would buy a piece of property, especially a piece of property on (or basically consisting of) a hill without seeing it in person deserves what they get. These types of stories have been around forever, just check Ebay to see the kind of property that has been and continues to be available based on pictures if you will just bring the property taxes up to date. It's actually quite entertaining viewing to read the listings. <g> There's no doubt that the kind of appreciation that has been taking place in these "hot" markets cannot continue. However, the fact that the appreciation slows or stalls doesn't mean that values plummet, nor does it mean doom for the housing market as a whole. I see these articles and message board posts talking about investing in real estate as if it's suddenly a ponzi scheme in its entirety, but the reality is that real estate done right is a tremendous investment. The article cites one person who bought a home that ended up selling for over 300K, yet she could only rent it for $1250 a month. Homes that sell for much less than that near our area rent for significantly more than $1250 a month, so it is likely that she could have gotten more if she tried or had a management company working for her. Obviously she had no idea what she was doing, and again, falls into the category of someone trying to do things the "easy" way. Any piece of real estate bought with less than 20% down is subject to PMI, so the pieces mentioned in that article would all have that coverage. In addition, PMI has tightened its terms of late, to reduce the ability of "investors" to speculate on multiple properties, which should help to mitigate the effect of that speculation on pricing and leverage. You can see what happens in a place like Vegas, where things get too hot, and the market self-corrects. It didn't ruin the market, just took the wind out of it for a short time, and gave people a much needed reality check. The house mentioned is in foreclosure, but the mortgage holder probably won't lose a penny, and the house will be sold to someone who can afford it and the payments. There is no doubt that there will be excesses and unsavory deals capitalizing on people's desire to jump on the bandwagon, but this is likely to lead to individual misfortune, rather than widespread trouble. IMHO of course.