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

To: John Vosilla who wrote (33209)	6/12/2005 11:35:13 AM
From: Elroy Jetson	Read Replies (2) \| Respond to of 306849

Let's see. If everyone in Los Angeles sold their home and moved to the Midwest . . . Sell their homes to who? People in Los Angeles could not afford to buy their own homes at current prices. Which 20 million wealthier people will replace the 20 million currently owning Los Angeles real estate? This is the fatal flaw in a bubble. In the long run real estate prices can only increase as fast as incomes. While incomes have remained static in Los Angeles over the past few years, home prices have doubled and tripled. My gardener is able to own eight "rental" homes by using loans which grow in size each year, as he pays less than the actual interest on the loan. Even at that, the rent he is able to collect is far less than the mortgage and property tax. Although he loses money each year and he and his wife live like peasants (no actually more like slaves), he assumes the wealthy buyers from outer space will provide him with a profit. My housekeeper now owns two homes. I pay her $50 for a day's work, say $13k per year. Her husband is an unskilled construction laborer. I guess that sounds like enough income to support the mortgages on two homes. Plus they have the rent on the second house which doesn't cover their mortgage payment. Those rich people from outer space had better get here in a hurry -- or a lot of people are in trouble. I'm skeptical. .