America's Riskiest Real Estate - CNN article - Posted by SteveA (FL)

Posted by rusty on August 05, 2005 at 22:20:17:

right you are… ipo price was something like $28-30. somebody working for a for an investment bank is a millionaire today that wasn’t yesterday.

America’s Riskiest Real Estate - CNN article - Posted by SteveA (FL)

Posted by SteveA (FL) on August 04, 2005 at 13:12:54:

Re: America’s Riskiest Real Estate - CNN article - Posted by Jack

Posted by Jack on August 05, 2005 at 09:06:24:

Thanks for the link. That is the most objective, credible and sober study I have seen on regional bubble markets. I wonder how much this effects regional PMI rates.

Is it useful to the typical investor? Probably not, but possibly if you live in Boston or CA. But then if you live in Boston or CA and have not yet figured out that your market is overpriced, then this study is not going to influence you.

Re: America’s Riskiest Real Estate - CNN article - Posted by wes

Posted by wes on August 04, 2005 at 15:02:58:

A largely useless statistic.

I agree that there are areas of the country where prices are excessive. However, this article gives “percentages of probability” for a decline in value for real estate in certain areas.

I want to know how much of a decline is expected.
A 55% chance of decline in Boston also means a 45% chance there will be no decline.

I was a stockbroker for almost 10 years. I will “not predict” but “guarantee” that the stockmarket will decline sometime in the future.

But, when looking at an investment, the overall return one might expect over a given period of time is what is important. That is where the stockmarket has always been a leader.

However, those that have invested in the stockmarket thinking it only goes in one direction (up for example) have been disappointed.

Same thing should apply with real estate.

A few years ago during the go-go days of the stockmarket and internet bubble, some company business plans were being written on restuarant napkins and any new company with even a mention of “internet” in its profile could expect huge gains in their stock price on the very first day of trading to the public.

Back then I laughed at people I saw on TV that were saying they expected their investments to grow 40-50% per year until they decide to retire…

I am sure they were dissapointed!

Many Real Estate investors will be dissapointed also.

However, the big question will be whether we will see just a slow down in RE values, stagnation of values, a small drop in values or a RE crash???

While many would be effected, even a crash can be overcome if there is a reasonably quick recovery.
What would be a worst case scenario would be a RE crash such as what Japan has experienced with RE values declining for 14 years or so.

Anyway, regarding this article, just as when I saw it released a week or so ago, I still feel this is largely useless information from a practicle standpoint.

It will give some people a reason to not invest in Real Estate. It will be confirmation to others that have agreed with this point of view for some time.
But, when all is said and done and if Boston (1st on the list) does see a RE decline, I will guarantee that while that decline is happening, there will be some RE investors in Boston that will make good profits on their real estate projects/holdings.

Remember a few years back when stocks were only going up, there were people having monkeys throw darts at a list of stocks and they performed as well as many stock analysts .

A similar environment in Real Estate has existed for awhile now and sooner or later, it will end.

But, when that time comes, you will still have some people making their fortunes in real estate.

Re: America’s Riskiest Real Estate - CNN article - Posted by Chuck

Posted by Chuck on August 04, 2005 at 14:09:40:

Re: America’s Riskiest Real Estate - CNN article - Posted by Vic

Posted by Vic on August 05, 2005 at 13:02:34:

I happen to think it’s a pretty useful tool. You have to figure that PMI’s underwriters have taken most things into account about each market.

What I find surprising is that Vegas only has a 13% risk rating. Perhaps Vegas isn’t as bubbly as it first seems. Some other cities also surprise me.

All indications are that we should see continued growth in most markets for at least the next 2 yrs, even if the appreciation is already high.

Just my opinion.


Beta… in Broker language - Posted by JT-IN

Posted by JT-IN on August 04, 2005 at 21:31:44:


You could read the article that the author is calculating the “Beta” of each city based on the risk to the market… Not much different than calculations on stocks… and what is all that worth…? Sometimes it is right, and sometimes the author of the data tries to justify how close to being right they were, when the event occurs, and they missed the mark…

There are housing markets that are overbought, which has driven prices about where they should be, and consequently these same markets will experience a softening, or a drop in prices, depending upon how severe the liquidity and economic crisis evolves into. Again, Not much differnt than way too many folks buying Tech stocks because they heard of 10 others who made a killing on the same thing, when it is already overpriced… So they wade in without knowledge or experience, and drive the price even higher, to an usustainable high… This has undoubtedly happened in some RE markets… The thing that is different with RE than in the rest of the financial world, is that RE does not have daily pricing, so therefore, prices will NOT mirror that of stocks in a sell off, as many of these analysts are calling for… An unknowledgable property owner doesn’t have to look in tomorrow;s paper to see what his house is worth, he can just believe it to be worth whatever they wish, and as long as they don’t need to sell, then who is to say that the owner is wrong…? The owner is valueing what the property is worth to them… and that is the difference and why prices will NOT plummet, IMO.

The problem that I have with all the hurang about the “housing bubble” being touted today, is that it is largely being written about and folks are being warned about such risk, by the very people who are in direct competition to the housing market’s success. The brokerage houses have experienced a flight of capital with all these funds going into RE, and they are banging the darned drum loudly and often, in an attempt to bring on the rain… (ala the Rainmaker and Witch Dr doing a dance). Eventually they are going to be right, when housing does cool off, and it will, but that could still be in the offing a ways yet.

They are all praying for rain… in hopes that the sheep will bring their funds back to the fold… so they can churn the account once again… They long for those days… so much so that they will keep beating the “housing bubble drum” as long as it takes, or do whatever Rainmaker dance they must, to return those funds to their market, which they all know is best for all of us… especially them…

Just the way that I view things…


PS. I used to be a Broker too… I get it…

Re: Beta… in Broker language - Posted by rm

Posted by rm on August 05, 2005 at 16:32:54:

I was surprised that Detroit’s “risk” was so low.

More job losses on the horizon, and it looks like Delphi is not going to avoid bankruptcy.

Re: Beta… in Broker language - Posted by wes

Posted by wes on August 05, 2005 at 07:07:51:

Sounds about right!

However, while I am sure the big brokerages would love to see those go-go days return, I am not sure the “flight of capital” into RE was not more a result of a lackluster stockmarket (dead money) with more and more people chasing what they view as the fastest and highest return available to them.

Since this is a historical occurance, stocks, tulips, etc, it has been noted that once the “public” decides to flock to any investment arena, they usually end up getting in in the late stages.

That fact more than anything else worries me about current RE prices.

But with that said, I do agree that the “crash” that is being predicted will probably not happen the way some might think.

RE is not a “National” market so “Local” supply, demand and economic issues will play a big part of any future value of the area RE.



Re: Are we seeing the new craze? - Posted by wes

Posted by wes on August 05, 2005 at 13:23:32:

Regarding the subject of people “chasing” the latest, greatest investment, check the quote on this new issue stock that came public today at $27.


Said to be the Chinese “Google”

Up $ 107 now… Not bad… - Posted by JT-IN

Posted by JT-IN on August 05, 2005 at 13:50:47:

However, it looks like it started trading around Noon, at about 80 bucks per share… so the avg Joe may have made 50 bucks per share on it… still not bad.

Re: Up $ 107 now… Not bad… - Posted by Cletus

Posted by Cletus on August 05, 2005 at 19:38:35:

I bought all I could @ $157.00 a share…How’m I doin?


Re: Up $ 107 now… Not bad… - Posted by rm

Posted by rm on August 05, 2005 at 16:36:40:

Average Joe’s usually don’t get IPO’s prior to the opening.