Point Taken

From the Businessinsider.com:

“In a few locations, the bottom [for real estate] may be close at hand but certainly not everywhere. More importantly, think of tech stocks and remember the creed ‘the last bubble is not reblown’. Ten years after the tech bust, the Nasdaq is still down over 50%. The recovery in housing will be even slower. There is no need to rush into housing at this point even if the bottom was at hand.”

I still have casual conversations with family, friends and business associates about real estate. Everyone seems to be banking on ‘it’ shooting right back to the moon. That logic makes no sense. And even if real estate did turn upward, and even if you had a trend trading philosophy for buying and selling, by now everyone should be grasping that real estate has no liquidity when times go sour. At least if you had an exit strategy with tech stocks you could actually exit.

7 thoughts on “Point Taken

  1. Didn’t the previous U.S. real estate bubble/crash (following the 1986 tax “reform” act)take ~13 years to regain price parity, in nominal terms only? i.e. 1987-2000 up/down ~30%?
    Where political market interventions, at several points along the way, “stimulated” the recent bubble/crash, one would have to assume another round of political mandates (bank “lending” rules? official prices, as in China?), to bet on price recovery.
    Unless, of course, debt-based currency dilution drives up the prices of anything resembling a hard asset, liquid or not – real estate, presumably, is as hard as it gets for most folks.
    So, perhaps a U.S. house will again be worth a lot of increasingly worthless U.S. dollars?
    And, a homeowner would again be able to borrow against the “equity” in the house, for a new car, etc.?
    And, park it, where gasoline will run ~$8./gal.?
    Oh, well…

  2. I meet with people all the time who still believes in this fallacy. I tell them if they want to bet on housing, don’t go tying up hundreds of thousands of dollars into something you can’t easily exit. The Case/Shiller Home Price Index futures at least will allow one to exit with the push of a button (even though the liquidity isn’t the best right now). Or IYR etf.

  3. I do not know of hardly any real estate moving especially if they haven’t faced the music and done a serious price drop.

  4. Mr. Covel: In terms of commercial real estate, here in Oregon the vacancy rate is atrocious; in one segment of the Portland market, the rate is over 25%. Commercial, as well as office, is terrifically overbuilt. Banks simple are not loosening their purse strings. And the small and mid size tenant are scared to be agressive in terms of expansion because of lack of funding. For what it’s worth, Portland’s unemployment rate is about 10% and there are counties in Eastern Oregon with upwards of 18-20%. Housing is also abysmal.

    John Hudson.

  5. Real estate in vegas has bottomed in some cases to 80% below peak, and in some cases you can’t build it for that… We also have more foreclosures coming downstream as a study by an investment bank showed, that they bottom about end of 2012..

    however, there are so many markets to trade, why not forget about real estate for a while? Trade soyabeans or wheat, or corn, or whatever… We have a choice..

    The property market has an 18 year cycle which goes back to 1800, and some people knew where we were in that cycle.. of course some patterns or cycles can break down and no longer work.. Japan had a deflationary cycle and in property it has not recovered yet.. The amount of debt that’s been in the the property market is at all time highs, and the global, bubble in my humble opinion has not yet burst… 50% of the people in germany rent…

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