I love this quote ... Trading Places: Real Estate Instead of Dot-Coms in todays NYTIMES Jane Buchan of Pacific Alternative Asset Mgmt dismissed the idea of a bubble in hedge funds. "It's not like real estate," she said.
I don't think you can talk about a bubble in hedge funds in the same way you can talk about bubbles in tech stocks or real estate because there are so many strategies in the hedge fund space. That being said, you can probably say that hedge funds may have become too popular and that the performance of hedge funds on average may suffer because quality didn't increase with quantity.
Yes, a very good article. I read it in The International Herald Tribune. The bubble is almost the same here in most parts of Europe.
Rents and occupancy may stay low for YEARS!!! There may be no "bounce back" or the "bottom" is near. The rental market is overall a small per cent of the housing stock. Most people want to live in a place they own if they can afford it. Homebuilders may develop at the current pace (1.8-2.2M) new homes per year for another decade. This is about the level needed to replace older homes and meet the needs of new family formations. The media hypes the anecdotal information of someone flipping homes in San Diego, Las Vegas etc. That is merely a small % of home sales. Will there be a pullback or slow down in price increases?? Of course. Real estate, as in owner occupied homes, is unlike any other investment. No two homes are alike or valued as the same. Think of YHOO as having a different price for each and every individual share!!! Some shares only a penny apart and some thousands of dollars apart. What is the value of a share of YHOO? By the postings I can tell who lives outside the US and who lives on one of the Coast of the US, LOL. SteveD
I have been watching this market and have come to the same conclusion as I did during the dot-com run-up. Right idea, wrong timing. There are significant structural reasons for the real estate market boom. 1) Low long-term real interest rates (and getting lower, if inflation rises); 2) More people able to afford real estate (viz a viz easier credit, ARMS); 3) increased demand caused by people buying second homes and buying homes for 'investment' purposes (flipping, rent for the misguided); & 4) fairly flat real estate prices throughout the country prior to this run-up for years. BUT, do you really think that it is 100% up room to go after the last 3 years, when interest rates are rising, and when great corporate earnings can't even raise the stock market? Those last two factors indicate to me that some tougher times are just around the corner. Once that happens, credit will dry up, so will consumer interest in real estate, and a lot of people will be sitting with some very illiquid property in their hands. They will be able to hold on to it, for a while, but as the law of averages picks off a few of these folks who are overleveraged and undercapitalized, prices will stop rising, and shudder the thought, might actually fall! How far, how much, how long is anyone's guess, depending on conditions that start the drop. My best guess is that it takes 18 months at least for the 'real estate boom' to end. 27 months for there to start to be some pain in the market.
The way the economy and the interest rates are for the moment, the real estate market will do OK until the end of summer as people will rush to get mortgages at a cheaper rate before mortgage rates start climbing. The analogy of internet bubble in the 2000 is correct, we knew it would happen, but we did not know exactly when, but now I can say that you may start seeing signs of the major RE downturn by mid Sep-Oct2005 this year.
It may be a bubble now but in my opinion no one has any idea when it will end. Do you realize that a home bought in 1976 for 150,000 in Greenwich Ct. sold for $700,000 after the market crash in 1987. It probably was worth about 900 at the top right before the crash. Now that homes is worth over 2 million. Bubble now? 150 to 700 in 11 years. This market is just getting started by comparison. What about the 40 million Northeasterners wanting to be warm and play golf and boat. Look what they did the stock market. they are just getting started.
So when you sell your home just where do you move to at that point? You do understand that when you sell the buyer is going to require you to vacate the house unlike selling in the "dot-com bubble". So you and the family pack up and move exactly where?? Are there going to be thousands of people living in their cars??? You move out of a nice 4 BR home and move into an apartment??? Or move in with family?? I do hope some of you understand the very basic fundamental difference between owner occupied HOMES and trading stocks made of electronic paper. SteveD
I believe I read somewhere that 30% of home sales last year were not primary residences so the implication is that there is a decent level of speculation going on in the housing market. I'm not trying to be a bear --- just pointing this out in response to the prior post.