Saturday, April 30, 2005

Springtime In Profligate America

The Yahoo Finance page had these headlines Saturday morning. "The Most Expensive ZIP Codes 2005, Travel Like a Billionaire, The World's Most Expensive Yachts, Should Ex-Smokers Worry?"

The CBOE Volatility Index is a measure of investors' risk perceptions, and as the chart shows, that has been headed steadily down for years. This in spite of the many warning signs, chief among them the degrading credit quality of home buyers.

The Toledo Blade reports on speculative building. "A growing number of smaller developers are building 'spec' houses, some with price tags as high as $34 million, without any specific buyers in mind."

"Some economists caution that it could lead to price declines if there is even a slight economic blip. 'These guys typically can't carry these houses for very long, especially these small builders, and then you can get into a fire-sale type situation,' said Thomas Lys."

In the S&L debacle, it was the spec developers who were really wiped out, taking many institutions with them. But on this bright spring day, the public can see no clouds on the horizon. "That's one of the wealthiest generations ever to come into their own in the history of this country,' said Steven Crandall." And in a country that counts it's obligations in the trillions, the most indebted in the history of man.

15 Comments:

At 9:17 AM, Anonymous Pamela said...

Unfortunately I came in on the last of a discussion on the Neil Cavuto show on Fox this morning--it was a discussion on housing taxes. All I caught was the four or five guests' predictions on the housing market. It looked to me like Ben Stein was the only one who was predicting a downturn, and maybe up to a 30% correction. After he said that, it was like all the townspeople grabbed their torches and headed for the monster on the hill. I tried to find info on the discussion on the Fox page, or maybe a poll, but nothing.....

 
At 9:31 AM, Anonymous Rob said...

I saw the show. Ben first said that he thought real estate was not too much of a worry, explaining that in long term, it never declines for more than a couple of years. You caught him later in the show where he admitted that in some markets it may decline as much as 30% like in the early 90s'.

Jim Rogers was much much more bearish.



The show was mainly about the question abuot how rapidly rising could pop the real estate bubble.

 
At 9:33 AM, Anonymous Rob said...

Pamela, I also notices a note on the screen that the show was replayed on Monday, I think at 1:00 ET. Not sure about the time, but I bet their web site would have it.

 
At 9:57 AM, Blogger Ben Jones said...

Jim Rogers was on the show?

 
At 9:59 AM, Anonymous rob said...

I may be mistaken. The guy with the bow tie. He is a regular.

 
At 9:59 AM, Anonymous rob said...

I may be mistaken. The guy with the bow tie. He is a regular.

 
At 10:12 AM, Anonymous Rob said...

Yep, Jim Rogers, I checked the Cavuto site.

(Sorry about the double click, and misspellings, too much coffee.) Sheeeesh

 
At 11:27 AM, Anonymous Anonymous said...

Yes, Jim Rogers is on every Saturday. My Tivo records it automatically. :-)

What was hilarious was that Ben Stein said that the housing bubble couldn't continue indefinitely because in 30 years, every American home owner would have the wealth equivalent to the total wealth in the world. HA!

 
At 11:41 AM, Anonymous Anonymous said...

Speaking of profligate, just saw the 'Enron: The Smartest Guys in the Room' documentary -- scary that the market mindset that ballooned Enron is alive and well and blowing us a house bubble. Would recommend the film to all on this blog (especially to bubble doubters -- good reminder of how quickly 'reputable' banks, analysts, journalists etc., dropped the ball in order to glory in Enron's easy money --hmm --sound familiar?)

 
At 1:05 PM, Anonymous Anonymous said...

i would say building spec homes in Ok might not be that dumb, alot of oil $ there

 
At 3:35 PM, Blogger John Law said...

rogers likes RE in places that would benefit from a commodities boom.

 
At 5:22 PM, Anonymous Anonymous said...

President of Nehemiah Corp. says it's not a good time to buy. This guy is in the real estate biz and is one of the biggest RE bulls out there.

http://www.sacbee.com/content/home/real_estate/story/12761886p-13613161c.html

 
At 5:43 PM, Anonymous Anonymous said...

Great article. Pretty much what we all have been saying all along.

 
At 7:01 PM, Anonymous Melissa said...

11:27 Anon,

That is so funny and so typically Ben Stein! He is such a fun writer, too.

We sold our house for 30% more than we bought it for 2 years ago, when it was 500K new. (way too much house, lesson learned, got out and are thankful).

I did a calculation and if our house appreciated 15% every year for 30 more years, it'll be worth 58 Million!

Man, we shouldn't have sold that house. :-)

 
At 7:13 PM, Blogger Ben Jones said...

Thanks 5:22 anon,
I'm going to post that one!

 

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