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Real Estate Bubble (RUBBLE)

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Last Post: 9/23/2016 9:22:48 AM - Followers: 65 - Board type: Free - Posts Today: 0
This board was created because I believe the Real Estate bubble is massive and growing more massive everyday - at least as of June 1, 2005.

Link: http://img.photobucket.com/albums/v239/bj2110/realestate30yrchart.jpg

This economy has grown and continues to grow despite the horrendous debt issues we face purely because of one reason - the astronomical wealth effect created by inflated home prices. The refinancing boom has given millions of people extra money - not only because they usually skip a payment, but also because they have lower monthly payments.

But, the biggest issue is that when people THINK they have more net worth than they had last year, they spend like it. The overall debt situation in the US is staggering beyond anything any of us has ever seen. That is never going away in our lifetimes.

Many negatives face the prospects for further home appreciation - not the least of which is rising rates. But, the appreciation level for several years now has been unprecedented. It is eerily similar to the tech bubble that blew out in March, 2000.

Here are two important truisms on real estate. Every realtor knows them and spouts them.

THEOREM 1) Land: "They are not making more of it." Sounds good, but incredibly misguided! The perfect example - and there could never be a better example of anything. Anyone who doesn't recognize this example is a fool! There is nowhere on earth where land is more important than Japan. You have half the population of the US squeezed into a country the size of one of our states! Even worse, a big percentage of the country is mountainous! Despite that (and listen up), Real Estate values in Japan have DECLINED for 13 consecutive years! This is not a 3rd world country. This is the 2nd largest economy in the world!

What happened in Japan is identical to what is happening here. Their stock market went wild for quite a while. When it popped and began a many year down cycle, all that money had to go somewhere. It went into real estate and Japan's real estate market went wild for several years afterwards. Finally, that popped and it has declined 13 consecutive years.

The US equity market peaked in 2000. People sold. People had to do something with their money. And, new investors weren't too keen on putting it in stocks. So, where did it go? Real Estate. And, the market has been rocketing up for 5 years. It is now at levels where only the bravest (and stupidest) people are buying. The bigger fool theory works only so long.

THEOREM 2) "Everyone has to live somewhere." True, but also incredibly misleading. Nobody has to live in MORE THAN one place! What has driven this market more than any other single issue is the construction of second and third homes. Approximately 26% of all homes built in the last year were second or third homes. What people fail to realize is that if things start to go downhill, people will try to unload these things. That will set the dominoes in motion - and forget about it! It takes very little oversupply to obliterate prices - especially when they have rocketed up so long so fast.

There has never been a time when so many people were speculating on land and property. If they don't have equity, they will bail when things start going down. If they HAVE equity, they will bail because they want out with their profits. Just wait until you see huge numbers of for sale signs on "extra" properties that people own. It will be bloody IMO.

I estimate that the market will average -25% over the next 3 years - specifically in those areas around the coasts. That is really bad, if true. If you take 25% off the value of the biggest asset most people have, that is a horrible drain on the economy. Nobody is going to be spending like a drunken sailor under those conditions.

No bubble in history looked like it when it was at the peak! Everything looked fantastic! Everyone figured they could sell before the crash. At least in stocks, you, theoretically, can. You can find a buyer in 2 minutes. In housing, good luck.

Len
PostSubject
#2635   Littlefish: instead of a PM which you cannot swampboots 09/23/16 09:22:48 AM
#2634   all happening north of you - prices have crazytrader 09/08/16 03:06:19 PM
#2633   Not where I am, working class buildings swampboots 09/06/16 05:36:05 PM
#2632   its happening all over again. Home prices crazytrader 08/30/16 03:23:10 PM
#2631   Shareholders r the eventual suckers unless U can littlefish 08/29/16 03:04:48 PM
#2630   To be clear the lease back originators are swampboots 08/22/16 09:08:38 AM
#2629   I don't think those guys r suckers. They littlefish 08/21/16 07:22:30 PM
#2628   Re: your reaction to lease back. I am swampboots 08/20/16 10:41:20 PM
#2627   Another Real Estate Crash Looms: Sam Zell Dumps dickmilde 05/29/16 05:47:03 PM
#2626   Looks like everyone is shy on CUO LOL. littlefish 04/05/16 08:11:11 PM
#2625   I just reread post and noticed it sounded littlefish 04/04/16 10:33:13 PM
#2624   Thanks for the clarified DD. swampboots 04/04/16 09:35:12 PM
#2623   Definitely keep an eye on CUO. They have littlefish 04/04/16 09:03:18 PM
#2622   My Condo group is very manageable, as can swampboots 04/04/16 08:19:53 PM
#2621   Ouch. That sounds as painful as being a littlefish 04/04/16 06:58:44 PM
#2620   Well now its the hardest thing I faced swampboots 04/04/16 11:40:20 AM
#2619   12 Ways to Generate Seller Leads Fast boldleads 03/02/16 02:54:10 PM
#2618   Its so weird they take down price of swampboots 03/02/16 10:38:51 AM
#2617   Ok here is run down on triple net swampboots 03/01/16 07:54:19 PM
#2616   Ok Ok I see I will have to swampboots 01/14/16 06:16:23 PM
#2615   OK trying some 2016 serendipity. swampboots 01/01/16 11:11:32 AM
#2614   $2 million mortgage: No down payment, no joke! dickmilde 12/12/15 08:25:27 AM
#2613   "The Fallout Ratio" Is Flashing Red - dickmilde 07/01/15 04:18:50 PM
#2612   I added to my load NYC junk ( swampboots 02/13/15 08:51:33 PM
#2611   Real estate is a very local market. I'm dickmilde 02/13/15 08:41:27 PM
#2610   Is this a bubble (?), cost 90 swampboots 02/13/15 03:38:27 PM
#2609   Bizarro Housing Bubble Spills Over Into "Overbid Madness", dickmilde 05/11/14 06:30:07 AM
#2608   A radio AD I could not swampboots 04/24/14 12:24:59 PM
#2607   I so agree with you its not funny! swampboots 01/26/14 06:54:54 PM
#2606   home-ATM machine man. crazy xero90 01/26/14 05:33:06 PM
#2605   It's amazing how gullible people are. dickmilde 01/26/14 05:30:30 PM
#2604   Thundering poster child for this site: swampboots 01/26/14 12:02:51 PM
#2603   What state are your properties? swampboots 01/18/14 08:42:34 PM
#2602   I grabbed some Condos in Marina Del REY, swampboots 12/20/13 03:00:01 PM
#2601   Well that remains to be seen. It's dickmilde 12/20/13 02:53:36 PM
#2600   You were right on the money, like SLP. swampboots 12/20/13 12:32:42 PM
#2599   Here there was the bottom call actually just sayin. swampboots 12/20/13 12:31:31 PM
#2598   Brother, can you spare a $50,000? :-) Donshub2 12/06/13 09:15:29 PM
#2597   Rubble turned into a bubble, I am un-godly swampboots 12/02/13 02:34:22 PM
#2596   This board has crawled to a stop which Donshub2 10/14/13 11:55:51 PM
#2595   YES this board rocks, only 18% yearly gains swampboots 10/07/13 10:14:28 AM
#2594   Heat alert sending messages to one billion people swampboots 07/19/13 01:28:01 PM
#2593   Bubble may now be artificially held up by swampboots 06/04/13 12:26:10 PM
#2592   Just got back from L.A. hanging with broker swampboots 06/03/13 07:57:35 AM
#2591   OK parts of LA CA experiencing a bubble, swampboots 05/19/13 08:02:14 PM
#2590   Hey Littlefish no more buying, heard through grapevine you swampboots 04/19/13 11:23:56 AM
#2589   Yea man, fiscal cliff is not deep enough swampboots 11/29/12 10:05:45 PM
#2588   Amen brother! littlefish 11/29/12 08:07:09 PM
#2587   I can't buy stuff in 500K range in swampboots 11/14/12 08:11:18 PM
#2586   Len is probably off on his Own swanlinbar 10/16/12 04:46:56 PM
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