Economist On "Nationwide Tour"
The GrantsPass News couldn't wait till Sunday to run this cartoon. "I believe that in years to come, historians will see the beginning of the 21st century as the 'golden age' of real estate."
With the plaster falling down around his head, and all those copies printed, these are busy times "promoting his new book on a recent nationwide tour." You can almost hear the rustle of pom-poms. "His infectious enthusiasm is as strong as his theory."
You simply must view things his way. "Like other experts, Lereah wants to start any discussion of real estate booms and busts by redefining what a boom is."
Isn't it possible that "when interest rates hit a 40-year low", that we may not see rates that low for another 40 years? Is it really a positive that "relaxed credit terms allowed more people to buy."
"You can have a downturn and still be in a boom period. A home is no longer a place to live.."
7 Comments:
I have reserved some space on my shelf for this book right next to "DOW 36,000 : The New Strategy for Profiting from the Coming Rise in the Stock Market."
I am waiting to buy mine at a foreclosure auction.
john,
(how embarassing must it be to have your professional career as a milestone marker of a bubble?)
He probably figures he may as well make a buck. He is the least objective "economist" I have ever heard.
I agree with you guys, except that I'e heard more than one analyst lately state that they expect US interest rates to stay low and the US dollar to stay strong.
It doesn't make sense given the US's deficits and lack of economic growth, yet as long as the US is doing better than europe and Asia has huge surpluses, where are people to put their money ? If they keep pumping it into the US, the RE boom will continue.
Somthing has to break this cycle. I don't know what it will be other than lack of ever more buyers, but I think it might take even more than that.
I smell a stock market crash coming this week. That might do it.
(US interest rates to stay low)
Personally, I think the bubble has been bursting for months and will continue regardless of rates.
Thanks for commenting.
I agree with you, Ben. I believe the market has peaked, too.In the Vancouver area, history will shoe that it peaked last May.
---(Robert A. Knakal, chairman of Massey Knakal Realty Services, said that in the mid-1980's and early 1990's, investors could expect an 8 to 10 percent annual return on rental properties. Today, he said, investors are buying properties with yields ranging from 3 to 6 percent. ---
I'd give my left (insert favorite body part) to find an "income" property in the Bay Area that throws off 3-6%.
Everything around here is pure negative cash flow as far as the eye can see. Everyone ASSUMES asset inflation so they don't care that they will be losing money every month. And yes, that includes apt buildings.
In fact, we just sold two very long-held buildings in SF last fall. They were throwing off good income (fully paid for...no mortgage). But at some point, ya gotta sell if someone makes you an offer you can't refuse. The new buyer will be losing money every month. We loaned him half the money to buy them at 5.5%---pretty much what we were earning by owning them. But now he's the guy who's gonna have to put in the new elevator, new windows, and deal with rent control and the People's Republic of San Francisco.
Of course, we won't benefit from future appreciation. But since these buildings have doubled in the past five years (in a rent-controlled market where vacancies are now 12% vs. 1% five years ago), we'll take that chance.
Folks may be right in thinking we are in for a long period of very low returns on investments (if any). But that's no excuse for overpaying for property. Hell, if they want a 3% return, just buy a freaking T-bill. No headaches about tenants or property problems and no worries over a fall in property values.
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