What you are suggesting is a cause and effect scenario, and you are taking the stance that ( becasue) people are not buying at the inflated prices, that (effect) home sales have become stagnant. That is not what has happened from waht I can see. First: Home prices started to appreciate much faster (in a shorter time frame) than what is normal appreciation. At the same time credit became very easy to obtain....almost a no questions asked type of loan. People who were( ALREADY) cash strapped were approved for loans that they either couldn't afford OR loans that they would not be able to pay in the future due to ARM; adjustable rate morgages set to reset on a specific date where the payment would be much higher than original payment. I am not soley blaming the lenders, some people were very greedy and couldn't resist taking a loan they otherwise would never have been approved for. Ok. This pattern of behavior continued for a few years and the real estate industry was booming as you probably know. I'm sure you were having some wonderful years during this time and making a killing. Not only was your commission higher becasue of rising home prices, but more people were buying too because of the easy credit. The lenders of these loans took those loans and sold those debts for a profit....and then maybe some of those buyers of the loan sold that debt to someone else for a profit....and who knows where those debts are now...whos holding the bag? Now comes the defaults by the people whp could never afford the loan they originally took out...maybe they squeezed by for awhile but things finally caught up with them and they are strapped, or the arm reset and their payments jumped by hundreds of dollars and they just can't do it. Default time. People are losing their homes AND who ever or whatever institutions are holding those debts that were packaged and sold ,and packaged and sold again are holding a peice of paper they thought was worth something...and its not. The game is over. You cannot possibley believe the banks did not know waht they were doing when they originally made these loans. It is their business to know their risks. They didn't care becasue it was very profitable for them in the beginning. Profit by volume of loans.
Isn't pent up demand caused by Builders of "Hotels" Multi family homes and developers walking away from ripe land deals? Isn't it caused by major track builders calling for a complete, cut and run and closing shop for a while? Housing markets are not like stock markets, but people still need houses to live in. And they don't want apartments. The interesting thing about the American consumer compared to the Japanese consumer is that American's strive to drive a Lexus and live in a big house to "show" that they are rich, whereas that is not the Japenese culture. Joe Blow might even lose his house, but he's still going to try to drive the newest, shiniest truck, have the biggest television, and if he has to...he will rent the nicest place he can find for his family. Put the money in the bank? pshaw! Oh, and punching the timeclock and investing in real estate is how most people become millionaires. And those that do it right pay little tax, BTW. SM
Heh. No. Carlton's advice is kind of vague, and you need to delve into the specifics of it to get anything out of it. The funny thing is he is often the first image of who a real estate investor is. But often, it is muligenerational corporations that buy shopping centers or subsidiaries of insurance companies looking for safe long-term investors. SM
"People need a place to live in". Fine and dandy, but they don't need 3, 4, 5 places to live in. The BIG problem that the R.E. bulls have and will continue to have is that the "supply" of properties continued to grow at historic rates. A constant build out of real estate in markets already flooded with unmarketable properties is not exactly a bull item. If you could have kept the supply constant and/or shrunk the supply (Maybe a few more hurricanes), then maybe this argument would have some weight. The other problem is that you guys cannot put your finger on how many of these properties are owned by the aspiring "Carlton Sheet's" of the world. If you have one guy with his own private holding company holding title to 27 properties, it doesn't exactly fit the bill of "everybody needs a place to live in". This whole mountain of fraud, deceit and credit expansion at all costs will kill the 25 year asset bubble.
Perhaps the American consumer has stopped spending because they are saving? Including our household we know of 8 out of about 10 friends/family that have stopped using credit cards/closed the accounts and payed them off in the last 2 years. The only debt really held in our circle is a mortage..and we are all "middle class"...no new cars..no latest and greatest TV`s. Just hunkering down for some hard times that may happen You will always have the big spenders that need the latest and greatest. But I beleive Americans are learning this time from mortgage and credit froth. The smarts ones at least. Time to let Chinese citizens start piling up the debt Just my observation
Only problem is your observations aren't supported by the recent data. Credit card debt is growing exponentially. Auto loans are also going delinquent at a rapid clip. The savers have become the minority since there exists only a small percentage of people who were alive and/or learned the lessons of The Great Depression.
Spot on! "25 year asset bubble"?... well, it was in 1982 when the Fed went on the money-pump rampage. Hence, 25 years of inflation (which is often referred to as "growth"). Thanks to this greed and foolishness, hyper-inflation, loss of buying power in Americans' money, and likely a SEVERE recession/deflation* are in our future. *probably the BIG inflation first, then deflation
with a negative savings rate its hard to agree with the consumer being a "scarity cat". The consumer is totally tapped out, once those big piggy banks stopped giving and credit started to tighten what is left for a consumer to do, use cash.....