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

To: FrozenZ who wrote (33347)	6/13/2005 6:48:36 PM
From: SouthFloridaGuy	Read Replies (2) \| Respond to of 306849

The housing bubble in America cannot be compared to Japan, IMO, where the speculation was multiples greater in both residential and commercial real-estate. Furthermore, companies were leveraging inflated commercial real-estate values to do a lot of stupid things that we only came to find out about later. From 2000-2003 we had had a major adjustment in certain sectors of the US economy whereby similar shenanigans were occuring (albeit to a lesser extent). Another problem with Japan was/is the rigid structure of their economy versus ours. This is often the case with young countries that become rich relatively quick. They may have the manufacturing prowess, but a functional banking system that has experienced crisis is key to a functional economy. Here we have pockets of residential real-estate speculation, particularly acute in coastal regions, the whole State of California, Florida, Mass, etc. The speculation is like an airborne virus which ravages the citizens of one area and then moves onto the next. However, the speculation in areas like Vegas and Phoenix is for the most part new and catalyzed by equity withdrawl from those who have capitalized on the appreciation in their respective original bubble areas. I liken it to the dot.com stock that was flavor of the day back in the 1990's, shot up for a few weeks, and then went right back to Earth. Some made money, more lost, and life went on. If Greenspan is to be believed, the Fed will continue to raise rates and finally end this charade. Expect a consumer-recession coupled with continued restructuring by American companies. What housing does will be regional in nature and totally dependent on supply/demand, which is dependent on employment and wages. Housing will eventually return to some type of equilibrium but the Economic adjustments will be localized not national. San Francisco will always be more expensive than Phoenix. San Francisco will probably always be over-valued. There is a reason for this as it is the most beautiful city in this country, but magnitude is important. Expect some type of convergence back to normalcy to occur - 2x instead of 4x - or Rents equaling interest-only loan payments. We'll all live and there will be some good opportunities for those with cash on hand. But no, we are not entering the Great Depression 2.