I used to see a lot of java training classes in the newspaper in 2000, now there are lots of training classes for realtor's program...
From cycles I've seen, real estate agent jobs are pushed as people lose jobs in other fields. It is usually real bad timing. Too many agents cuts the pie too thin. But it is a great job if you are good with people and details.
Quote from Bloomberg Online 9-14-04, frontpage: "While predicting home-price movements is as dicey as long- term weather forecasting, there's reason to believe that home prices may be easing. If you are bullish on the $15 trillion U.S. residential market, it may be time to curb your enthusiasm." When the doubts about RE values hit the frontpage of mainstream news, then that is really the start of the end. Price apreciation is basically job driven, but it is also a matter of public perception. If the public thinks home prices will come down they will wait for lower prices. That starts a downward move that only stops at the bottom. If you want to sell now good luck. Your price needs to get in front of the move down. No kidding! And your property needs to be pristine and probably staged. 80% of all home sales are "lost", not gained, as the buyer walks to the front door. You can't change first impressions no matter how good the inside is or low the price. That is because women control home purchases, even for bachelors. Very general trade knowledge, but should be followed to succeed. Too bad you can't short home value.
http://www.economist.com/displaystory.cfm?story_id=3176456 "...Since the mid-1990s prices have increased more than twice as much in real terms (ie, after adjusting for inflation) as in the 1970s or the 1980s." "Calculations by The Economist show that home prices are now at record levels in relation to average incomes in America, Australia, Britain, France, Ireland, the Netherlands, New Zealand and Spain; on current trends, Italy will join this group by the end of the year. In other words, houses are more overvalued today than at previous peaks, from which prices typically fell sharply in real terms. Add in China and South Africa, and two-thirds (by economic weight) of the world that we track now has a potential housing bubble." "A year ago, most economic commentators in Britain and Australia denied that homes were seriously overvalued; today many more admit that markets do look frothy. America, though, is still in denial about house prices, judging by our favourite measure of whether homes are fairly valued, the ratio of house prices to rents. This is a sort of price-earnings ratio for housing. Just as the value of a company's shares should equal the discounted present value of its future profits, so the price of a house should reflect the future benefits of ownership, either as rental income or in the rent saved by an owner-occupier. America's ratio of house prices to rents is at a record high, 26% above its average over the 25 years to 2000 (see chart). To bring the market back to fair value, prices need to fall; alternatively, if rents continue to rise at their recent pace, prices will have to stagnate for as long as eight years." "Most American commentators, however, insist that their housing market is different and does not suffer from British or Australian irrational exuberance. Alan Greenspan, chairman of the Federal Reserve, has argued that while America has regional housing hotspots, such as in California and New York, a national bubble is highly unlikely because prices are determined largely by local factors. However, a recent study of America's housing market by Ian Morris, an economist at HSBC, concludes that home prices look overvalued in 20 states that account for over half of America's population. A second myth is that rising house prices reflect America's strong immigration and population growth. However, the supply of housing has also been rising fast. Vacancy rates are at their highest since at least 1965. If house prices were being driven up mainly by population growth, then rents should also be rising rapidly. In fact, they have lagged far behind. A third argument is that, unlike in Britain and Australia, most American mortgages are at fixed interest rates, so the housing market is immune to a tightening of monetary policy. But the British and Australian markets have stalled not because homeowners cannot afford to pay their mortgages, but mainly because first-time buyers have been priced out of the market. The same may happen in America. It is true that house prices in America are less overvalued than in Britain or Australia, so that any fall is likely to be more modest. Still, it could harm the economy. A recent study by Goldman Sachs finds that swings in house prices lead to much bigger changes in consumer spending in America than in Britain. Furthermore, America already has much lower short-term interest rates and a bigger budget deficit than Australia or Britain, so if the housing market did take a tumble, policymakers would be less capable of fending off an economic downturn. Even a mere levelling-off of house prices could trigger a sharp slowdown in consumer spending, as the recent experience of the Netherlands shows. The rate of Dutch house-price inflation slowed from 20% in 2000 to virtually zero by 2003. This appeared to be the perfect soft landing; prices did not fall. Yet consumer spending dropped by 1.2% last year, the biggest fall in any developed country in the past decade, pushing the economy into recession. Although house prices did not fall, borrowing against the capital gains on homes to finance other spending, which had surged in step with rising prices, declined after 2001. This removed a powerful stimulus to spending. Since such borrowing has provided similar support to consumer spending in America, as well as in Britain and Australia, economistsâand policymakersâwould be wise to take heed."
You would sure think so...but everywhere I read people of very modest means are spending 800k or more for homes they can barely afford using interest only variable loans with low teasers. They think further appreciation is a slam dunk. A major setup for disaster, coming soon.
Back to the original question, what asset classes are you guys put your money in? I am about 60% cash, 30% stock and 10% bond. I'll probably buy a second home within next five years.
Oneway, That is a real good post. I hadn't thought of the ripple to consumer spending in depth. I knew there would be fallout, but of course it is consumer spending. That will impact things worldwide to some extent. I've got my eye on a junior coal miner ready to open in 2005. Will ship coke to China. I am buying Uranium stocks at this time. And real things that hold value while the $ falls. GL
I bought shares of FDG (coal) six month ago, the price is up 30% so far, on top of 6.5% dividend yield.