[FoRK] Does this real estate boom remind you of the dot-com boom?

Cleopatra Von Ludwig rockfish at gmail.com
Tue May 17 13:47:45 PDT 2005


> 
> 
> > the US real estate market compared to the global situation among other
> > things, I'd say that the US real estate market is more likely to
> > stagnate for an extended period than go bust. While the scarcity is
> 
> How can U.S. economy itself not to go bust over the next 5-10 years?


Good point. Scary thought. I did not address this at all in my reply below.

> artificial in the sense that it is highly regulated, the supply of
> > economically compelling land is definitely finite.
> 
> It's a market, some sell, some buy. Right now, I would cash out, and 
> invest
> elsewhere.


Invest elsewhere, meaning...? So, say you sell your home and cash in on the 
boom. Then what do you do? Live in a cardboard box? Pay too much for a 
lesser home? Move to Kansas? Rent? And let's not forget that you pay taxes 
on the profits from selling a home (>$250K for an individual, >$500K for a 
married couple; you pay taxes on the profit *over* those amounts).

I'd have to agree with some others who noted that real estate is a limited 
commodity in certain areas -- metropolitan areas along the water, in 
particular (since about 90% of the population of the US lives along the 
coast, you see how it's a desirable market). That being said, there will 
have to be some kind of slowdown in the real estate market -- if for no 
other reason than because people have stretched themselves too far, with 
their variable-rate, interest-only mortgages, and with interest rates on the 
rise. There will be foreclosures or sales of desperation. There will be 
people who lose their jobs and can no longer afford the mortgage that they 
afforded with 2 incomes. This will have a greater effect on the non-coastal 
regional economies, in the sense that the market will return to a more 
reasonable, "buyer's market" mentality; but at the same time, it will have 
*less* effect on non-coastal regions, because a much smaller percentage of 
the population lives there.

I don't think it's totally unwise to buy right now (if we're talking about 
coastal metropolitan areas or a few other pockets in the country that are 
still strong), even though the prices are ridiculous, so long as you're not 
going in over your head. Real estate should always be viewed as a long-term 
investment anyway; a short-term decline in the prices, if any, will 
eventually be followed by an increase. That, plus if your income keeps 
rising (fingers crossed), the amount you're paying on a fixed-interest 
mortgage becomes proportionally less as the years pass by, unlike rent, 
where you keep getting screwed year after year.

That's my 2 cents.
-cleo

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