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

To: valueminded who wrote (51766)	5/26/2006 10:22:20 AM
From: Earlie	Read Replies (3) \| Respond to of 116555

Value: Good comments and appreciated. My concern with respect to the US real estate market is the level of "amateur" speculation that has taken place. Across the nation, that form of participation is at historic highs. A large percentage of this crowd has little or no staying power (interest-only mortgages, etc.) so I expect that this crowd will be forced to sell.... unfortunately more or less at the same time. Yes, there will be areas that won't be hit as hard as those where the speculation has been insane, but those areas will still experience price erosion just the same. I think the coming decimation of the amateur real estate speculation crowd creates two kinds of concerns..... those forced to sell will take serious losses hence their contribution to consumer buying will be reduced. Worse, their enforced selling will depress real estate values in general, which will reduce the "wealth effect" felt by consumers in general (not to mention their ability to borrow against their homes which has been the major source of dough for discretionary buying for the last few years), again a negative for consumer buying. In other words, my concern relates to the impact the real estate market will have on the stock markets. I do agree with your views about the regional nature of real estate, but when this very large amateur spec population starts to fall, "liquidity" will likely become a concern across the whole real estate market, which could be hard on even those geographic areas that have not participated in the insanity. Hope I am wrong on this but I will be betting that way. Best, Earlie