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

To: Graham Osborn who wrote (57819)	8/18/2016 11:56:59 AM
From: Micah Lance	Respond to of 78750

Agreed on all accounts. I don't think this is some sort of actionable investment advice, more just musings on where the DFW economy is and how it is getting to the point of being unsustainable. I think in the long term that the DFW will be a great place to find investment opportunities as it's projected to grow to the third largest metropolitan area in the US. Something that might best be discussed elsewhere is the issue that housing has in some ways become another asset class to invest in short term as opposed to being a shelter/long term family investment.

To: Graham Osborn who wrote (57819)	8/18/2016 6:04:02 PM
From: Spekulatius	Read Replies (1) \| Respond to of 78750

Real estate is one of those goods where demand increases, as it get's more expensive. At least that is what I saw in CA, when prices started to rise, more and more buyers were showing up. In the earlier stages, those are natural buyers that wanted to live in the house, in later stages they are buyers that speculate on rising prices (buyers of second homes, flippers, etc). Once prices stop rising, these buyers disappear and often out the excess homes they own on the market, which at that point is dried out, as there are little natural buyers left. Then the downturn begins. Funny enough, where in Long Island, where I live now, the housing market is still subdued. Prices have recovered some from the lows in 2011, but are still 20% and more below the peak values in 2005/2006. after a recovery in 2013, prices have stalled since then and are stable. I think this is because stable prices don't really entice the buyers. So the whole housing boom that others are seeing, is not yet nationwide. I do know that the whole West coast and Colorado are hot markets, but the East coast apparently less so. Housing wealth has a huge multiplier for local economies, so the Fed and politicians don't really want to mess with it, even when prices become unsustainable. I think it is a mistake to ignore asset bubble, Because when they blow, they will hurt many people, including those, that never really played in that game. In Hong Kong for example, the central bank looks closely at the real estate markets and tend to tighten liquidity when things seem to get out of control, which I think is a wise move. The other bubble I see is with commercial RE. While I don't think there is a huge amount of excess construction going on (except in some pockets), the Cap rates are at historical field by cheap mortgages. other than the residential mortgage, which tend to get sold of, these commercial loans tend to stay in the book of the banks originating them and are probably the most important business line for most regional banks. If the commercial Re market goes to hell via rising cap rates, the regional banks and probably the major banks will go to hell with it.