Real state.... ahh hasn't it been a wonderful decade? over the last
15 years or so homes have almost triple in value. Excellent investment
everybody is buying into the real state market and housing prices can
only go up up and away!!! It's lovely really even in New Orleans
homes are worth more after the disaster than before, people are buying
them because they expect others to come and grab them off of their
hands. Housing market is a Godsend so that we can all make an honest
buck...
screetch.... hold on... haven't I've heard this tune somewhere
before? yup, I'm pretty sure I have what did they called that last
one? Ohh yeah Stock Market buble, unrealistic prices being paid for
stocks. Palm's IPO at 160 a share with 800 million shares that gave it
a market capitalization of 130 billion yet it had losses of over 80
million per quarter.... and people wonder why it went straight to 17
cents and everybody and his brother lost everything they ever had. The
housing market is in an incredible bubble right now, while this may
not be the absolute top I think it is pretty close somewhere around
here. I just sold my home and half I owned in another, this time I
wont ride the bubble all the way down... HA!
Below I'll copy an article by Warren Buffet clearly we don't all deal
with the amounts he does but the principals apply just the same, I
think.
In my humble opinion the real state market is headed for a crash much
in many ways resembling what happened in Japan during the 90's. Our
stock market followed Japan's lead 10 years later our housing market
followed theirs 10 years later. If you put a chart of the Japanese
real state market from 1980 to 2000 it mirrors the real state market
in the US to a T from 1990 to 2005 and just around here is when theirs
went flat.
I'm renting and waiting to scoop up at half price, just like Buffet. :-)
-----------------------------
actually I don't know if I'm allowed to copy the article so I'll copy
just an excerpt of it and post a link to the site were I got it from.
=============================
http://money.cnn.com/2005/05/01/news/fortune500/buffett_talks/index.htm?cnn=yes
The oracle speaks
Warren Buffett and Charles Munger warn of real estate 'bubble,' the
risk of terrorist nukes.
May 2, 2005: 9:22 AM EDT
By Jason Zweig
Buffett and Munger on:
* Real estate
* The trade deficit and the value of the dollar
* The threat of terrorism
* The overall climate for investors
* The auto industry
* The NYSE's merger with Archipelago
* Whether pharma stocks have become bargains
On real estate
Buffett: "A lot of the psychological well being of the American public
comes from how well they've done with their house over the years. If
indeed there's been a bubble, and it's pricked at some point, the net
effect on Berkshire might well be positive [because the company's
financial strength would allow it to buy real-estate-related
businesses at bargain prices]....
"Certainly at the high end of the real estate market in some areas,
you've seen extraordinary movement.... People go crazy in economics
periodically, in all kinds of ways. Residential housing has different
behavioral characteristics, simply because people live there. But when
you get prices increasing faster than the underlying costs, sometimes
there can be pretty serious consequences."
Munger: "You have a real asset-price bubble in places like parts of
California and the suburbs of Washington, D.C."
Buffett: "I recently sold a house in Laguna for $3.5 million. It was
on about 2,000 square feet of land, maybe a twentieth of an acre, and
the house might cost about $500,000 if you wanted to replace it. So
the land sold for something like $60 million an acre."
Munger: "I know someone who lives next door to what you would actually
call a fairly modest house that just sold for $17 million. There are
some very extreme housing price bubbles going on."
The trade deficit and the value of the dollar
Buffett: "That really is the $64,000 question. It seems to me that a
$618 billion trade deficit, rich as we are, strong as this country is,
well, something will have to happen that will change that. Most
economists will still say some kind of soft landing is possible. I
don't know what a soft landing is exactly, in how the numbers come
down softly from levels like these....
"There are more people [like hedge-fund managers] that go to bed at
night with a hair trigger than ever before, it's an electronic herd,
they can give vent to decisions that move billions and billions of
dollars with the click of a key. We will have some exogenous event, we
will have that. There will be some kind of stampede by that herd.... |
