December 30, 2005

Don't get caught in the housing bubble crash


Well, the nice thing after the wipe-out is that people will buy homes again for one reason and one reason only - to live in them.

Ah, the old days...

It's funny to me too that the biggest bubble markets are the cities with the cheesiest, flashiest, live beyond your means, get-rich-quick, uneducated lazy losers - Miami, Las Vegas, Phoenix and Los Angeles. Couldn't be more different than quality, hard working folks in Kansas, if you know what I mean.

Good commentary on the crash. Here's some out-takes...

In 1998, I began loudly warning people about the approaching dot-com bust. I had analyzed the situation and knew the bubble was going to burst. There was no doubt in my mind, because I looked at the fundamentals of these internet companies' finances... the internet startups that had stock prices in the billions of dollars but had sold no products, had no revenues and had no customers. You don't have to be a genius to figure out that bubble was going to burst, and something very similar is happening today in the housing market

First, let's get back to the dot-com market, because, in hindsight, it was easy to see that it was a bubble about to burst. Think about what you were doing in 1998, 1999 or 2000. You were probably invested in the stock market. You thought you were doing pretty well. You thought you were building up a huge retirement. Everybody was getting rich, at least on paper.

In a sane, normal housing economy, that's the thinking that's going on. But today in the United States, especially in key cities, there's something amiss. Increasingly, people are not buying houses to live in them, nor to rent them out. They are buying them for speculation. They're buying them because they are anticipating a price increase. They're buying houses for the same reason they bought stocks during the internet boom. They don't even care what it's for. They don't care if the house is a place to live in. It's just a way to double their money.

8 comments:

DrChaos said...

Actually, I think there's another phenomenon: testosterone.

Young guys are going into RE flipping because so they can try to get laid: it's cool (now) to say, "I'm a real estate developer and investor". Sort of like how pre-IPO nerds were getting attention from the women who never paid attention to them before: for exactly two years, 1998 and 1999.

In the process they may have big credit limits or temporary cash on hand for the bling.

keith said...

Very good point

I remember hearing in Scottsdale bars unemployed losers saying to girls "I'm a day-trader" in 1999

I'd ask them what stocks they liked, and they couldn't name any

Guarantee they're flippers now. With the leased Hummer in the driveway. Credit cards maxed out.

mtnrunner2 said...

I did not buy any of the tech stocks, but instead bought UPS (more deliveries due to internet purchasing), Berkshire Hathaway, and hard-hit Dow companies (unfortunately Delphi was one I forgot to dump). I bought Lucent when it had come off its high of $70 or $90, when it was around $5, but then it lost half its value after that. I foresaw that bubble, but my intelligent friends did not. My lawyer friend said she didn't want to miss the party. I see this bubble too. I'm still flabbergasted that intelligent people can't see this bubble, after experiencing a bubble just a few years ago!

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Anonymous said...

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