Bubble About To Burst??? - Posted by Alan(IL)

Real Estate Investing Industrial
1

Posted by waynepdx on July 10, 2002 at 01:09:31:

I agree, I believe the bubble is about to burst.

I was listening to Bush today talking about corporate reform. Now with 9-11 and all of the Corporate accounting scams, the American economy has taken quite a hit.

We are just now seeing the tail end of the Tech bubble burst.

I remember having debates in ecomonics class about how strong the American economy is and how much damage it can take.

Well this is the most damage I have ever heard of it taking.

Even with the War on Terror, which helps the available spending money in the Economy is only postponing the inevitable.

Now Bush is proposing massive corporate reform and from what I heard, it is going to effect allot of what we do.

So in the meantime, I have switched my business plan to wholesaling and sandwich l/o’s. More towards wholesaling than l/o’s. I was spinning my wheels proposing 3 or 4 lease options a week with no sucess, but now that I have switched to wholesaling, well there are plenty of deals to be had around here.

I am just looking to get in and get out, give me my check for whatever amount and I’m gone.

Also, I have a great house I am about to wrap up in a p/s agreement. A nice little rehab project.

It is in Portland.

I will give more info if your interested after I get it wrapped up in a p/s agreement.

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Bubble About To Burst??? - Posted by Alan(IL)

Posted by Alan(IL) on July 09, 2002 at 19:04:27:

I would like your opinions on this article. Personally I don’t have an opinion one way or the other. I believe in letting the chips fall where they may. I just wanted to know what you all think. Here’s the link:

http://www.larouchepub.com/other/2002/2924fannie_mae.html

Alan(IL)

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More Bubble Links - Posted by J. Clifton

Posted by J. Clifton on July 10, 2002 at 21:54:16:

http://www.philly.com/mld/inquirer/3574550.htm

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Re: Bubble About To Burst??? - Posted by Mark (SDCA)

Posted by Mark (SDCA) on July 10, 2002 at 11:31:31:

I would LOVE to see where they get their facts and figures from. They state that 1 out of every 10 homes for sale is 1M+.
I find that VERY hard to believe. I would be willing to bet in a lot of STATES there are essentially NO houses for sale at 1M+.

Mark

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RE is a bubble that bursts in slow motion. - Posted by Aaron-TX

Posted by Aaron-TX on July 10, 2002 at 11:08:06:

We’re not talking stocks and bonds that are priced via emotion.

When the RE burst comes (though I believe it’ll really only be localized to certain areas, not the whole country), it’ll bust slowly. It’s already started bursting here in Austin.

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Re: Bubble About To Burst??? - Posted by Frank Chin

Posted by Frank Chin on July 10, 2002 at 09:48:16:

Hi Alan:

The article talks about HOME RE prices. I lived through one such bubble in NYC in the late eighties, and watched prices doubled in a five year period (1981 to 1986), then drop about 30% (1987-1992).

BUT, you’re still ahead if you owned the property before it doubled in price.

I still have properties I owned since the early eighties, which more than tripled, nearly quadrupling, in price. If the bubble bursts, all I’ll say is “Great, I can go out and do some buying for a change.”

I’ve been reading the RE pages of the local paper here, Newsday, and it mentioned that commercial RE prices, rents etc. had stabilized after falling for the last year or two. Vacancies are up.

Right now, I’m refi-ing out some cash from overinflated residentail real estate and looking into commercial real estate opportunities.

Then are bubbles in every industry, sector, and its up to the entrepreneurial mind to take the chips off the table in one place, and put it somewhere else, where the opportunities are better.

Frank Chin

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Re: Bubble About To Burst??? - Posted by JohnP S.FL

Posted by JohnP S.FL on July 10, 2002 at 03:15:11:

Alan,
I don’t knbow about a real estate bubble bursting. I do agree the housing market can’t keep going the way it has been. I beleive you will see some hard hit areas. The areas will probably be where real estate has really gone through the roof like NY, FL, DC area and of course LA. I think you also have Wall Street being very nervous. I was talking with my cousin who is a stockbroker and you have to see him jump up and down when you mention that people are investing in Re instead of stocks. Remember Wall Street is in the business of getting people to invest. They don’t want to hear about RE being a better investment vehicle. I agree with Tim Jensens post about being carefull. I wouldn’t overextend myself right now.But I also wouldn’t stop investing.

JohnP S.FL

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Re: Bubble About To Burst??? - Posted by Gerald-DC

Posted by Gerald-DC on July 10, 2002 at 02:18:41:

I don’t think the real estate bubble is going to burst. I do think prices will stablize between now and next summer and we will see no to modest appreciation in most areas.

Historically, real estate values tend to decline gradually unlike the stock market which nosedives live a crashing plane.

However, I see three things that could cause an immediate negative impact on property valuations.

  1. Another terriost attack of the scale and magnitude of Sept 11;

  2. A significant rise in interest rates;

  3. If Bush proceeds with his plan to attack Iraq and send hundred of thousands of troops to the Middle East to oust Sadam Insane.

All of the shanagans of Enron, Auther Andersen, WorldCOM, Merck etc… are not helping the economy overall but I don’t think they are having a major effect on real estate markets for the most part. But if things continue at the rate they been going for the past couple of years (a steady decrease in stock values coupled with massive layoffs) then eventually, absence any of the above scenarios, the real estate market will take a hit and cool.

I just don’t see a BUBBLE BURST of the scale and scope that we saw happen to the tech stocks assuming things stay more or less the same as they are now, just a gradual decline in the rate of appreciation and an eventual flat line of prices.

But hey, I am not an economist, I don’t even play one on T.V.

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Popular delusions & the madness of crowds - Posted by Michael

Posted by Michael on July 10, 2002 at 01:45:35:

There is no bubble. To ease your fears read “Extraordinary popular delusions and the madness of crowds” to understand what a real bubble is. It’s one of the handfull of necessary texts for investors of all types.

Just because real estate has risen at elevated levels for a few years does not constitute a bubble. However, that doesn’t mean prices can’t fall either.

Lastly please do some research on where you get your info from on the web. Lyndon Larouche, Jesus, what a crook and flake.

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My take on the bubble - Posted by Tim Jensen

Posted by Tim Jensen on July 09, 2002 at 23:05:13:

Alan,

I read most of the article and happen to think that the real estate bubble will burst. I just can’t see how prices can keep going up, the economy is just sputtering along yet prices are going through the roof. Here is what I think will happen.

The areas where homes are just crazy, will be hit hard. Lower to middle income housing will not be that hit that hard. They may lose value, but no where near the upper dollar stuff. Look for rents to possibly go down. Foreclosures to go up. Then bargains galore.

The investors who I think will get hit the worst are ones that have bought subject-to and have no “real” equity and investors that finance things to the max and have marginal cashflow. Generally, low equity and marginal cashflow go hand in hand. Its going to be hard to make it if you don’t have a good cushion.

I will also add into the mix, the investor who holds a second mortgage. They will probably stop recieving payments on their second. What are they going to do foreclosure on a property that has gone down in value or has no equity? They will not get hit that bad because chances are that second mortgage was just icing on the cake.

Bottom line. The storm is coming, you can close your eyes and say “the bubble won’t burst” three times and it won’t matter. If you are not prepared for the storm you be wiped out. I have seen it and lived it a few times. What is a good way to prepare, my opinion. Simple, lower your debts and increase your reserve. I have never heard of an investor going broke when they didn’t owe anyone money. I am sure that it might have happened a time or two but thats not the norm. The low debt and strong reserves will allow you to weather the storm.

Once the bubble does burst, look out. It will be party time for the investor who has cash and great credit. I believe that there will be lots of bargains and if you are in the right situation, you will become a millionaire.

One interesting thing, when the bubble burts, is to see who can survive it. I have seen investors who I thought had it all, go down. They talked a good game (using OPM), but when the storm came, they got knocked down.

Just my take,
Tim

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Re: Bubble About To Burst??? - Posted by michael

Posted by michael on July 11, 2002 at 10:27:36:

“I lived through one such bubble in NYC in the late eighties, and watched prices doubled in a five year period (1981 to 1986), then drop about 30% (1987-1992).”

That is not a bubble.

“Then are bubbles in every industry, sector”

Just not true, true bubbles are extremely rare. With all this chicken little mania over the tech stocks, people seem to think anything that goes down in value is victim of a bubble.

A bubble’s hallmark is irrationality. The classic case is the tulip mania of several hundred years ago, and the recent tech stock fall. Extremely fast rising prices that have no basis in fact, such as tech stocks with no earnings worth hundreds of millions of dollars, are what a bubble is built on. Prices will fall to pre-bubble levels. I believe the Nasdaq is now at levels before the big runup. Probably means it’s near a bottom.

What you describe in NY is just a typical free market price action. Goes up and down.

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Larouche - Posted by Bart (FL)

Posted by Bart (FL) on July 10, 2002 at 14:15:03:

I agree with you. I would not even bother reading it after I saw it came from a Larouche source.

Bart (FL)