That was scary! I scanned the post above, missed the 'l' and thought McCain was dabbling in economics too.

Yes, but...

Sales are down 25%, inventories are doubling.

Price reductions will follow.

JP

Inventories increase because at those prices you want to see what you'd get for yours. They aren't serious sellers.

"If only the value of dot.com stocks had kept increasing."

Domain names... they aren't making any more of them. Better buy yours now before it's too late...

(Real estate agents deserve, but don't yet have, the reputation used-car salesmen have earned.)

"Inventories increase because at those prices you want to see what you'd get for yours. They aren't serious sellers."

Well I'm no bear but I think you might be a tad too sanguine. We shall see.

JP

Where are the 100 million more immigrants going to live?

But I don't think that current immigration has been fueling the real estate boom. While increased future immigration will create demand I doubt it will happen in time to bail out the hyper-extended speculators that have been riding this wave. Short term versus long term.

JP

We added 100 million in twenty years and property values went up. we're going to add another two undred million over the next 50 years. Property values won't go down.

Where are the 100 million more immigrants going to live?

Same place they do now: multiple families stuffed into 2 bedroom apartments because zoning regulations and environmental protection laws won't allow the building of new or affordable housing.

How are immigrants going to afford to buy unless prices go down? More exotic financing? That's a recipe for disaster.

oj-Prices go up and down. They don't grow to the sky.Easy money been fueling this boom and those days are gone.Investing in the 'greater fool' theory is a great way to lose money when the music stops. More than a few condo flippers buying on spec in Vegas are in big trouble. Buyers, of course, will be back when prices come down.

So they don't.

Tom,

OJ's peculiar ideas about real estate values will be fleshed out in greater detail in his soon to be published book "Redefining Economics". In there you'll find, among other nuggets of wisdom, how a home's value is not calculated by what an existing purchaser is willing to pay but what a hypothetical purchaser will pay for the home after 100 million immigrants have moved to the USA.

Enlightening stuff.

JP

Prices of stuff there isn't enough of don't go down. There are fluctuations in how much they go up.

See my last comment.

oj- A simple, obvious concept that you may find helpful is the long-term, statistical fact of 'reversion to the mean'. Stock markets are a great example of historical returns tending to stay constant over time. Periods of speculative, frenzied advances are usually followed by sideways to down price movement that can take as long to play out as the previous advance. Secular or long-term bull markets usually end with a spectacular, blow-off top and can take years to clear out the excesses. The long-term average rate of real estate appreciation, relative to it's rise over the last few, easy money years, is what you should keep in mind. It will inevitably average out to the long-term rate of appreciation. It's not a question of 'if', only when.

Yes, there's never a shortage of stocks. There is a shortage of housing.

And the real estate busts that some of us lived through in the past? All in our imagination. Never happened.

Because of the immigrants.

JP

Yes, periods of tight restriction have had concurring underperformance by the economy. It's no coincidence that we've had twenty plus years of uninterrupted growth during this immigration tidal wave.

oj-The hottest markets of the last few years have no shortage of housing. Prices are coming down in those areas.

Sure--your results may vary--the housing market itself isn't going down anytime soon. There aren't enough houses for the population we're generating and the wealth that population has.

Good to know. In the meantime I look forward to acquiring some foreclosures in the near future -- some of those "varying results" you refer to.

JP

Exactyly! You know their price is going up, not down.

JP, Odd you speak of foreclosures, our paper this morning reports they're down by 50% in our area of Central Florida. Here's the whole article Business Week Online. As always with media reporting, it's so hard to know who and what to believe.

The building boom here for moderately priced new homes, i.e., those under one mil, has slowed down, however, the market for really upscale new homes (million dollar plus condos and multi-million dollar lots along the beach) is still booming. Real estate agents and builders continue to be astonished at how high buyers are willing to go.

erp: Yep, my friends in Florida tell me that certain sectors of the real estate market there is still quite frothy.

OJ: I never consider appreciation, just rents. It's all about cashflow.

JP

Ah, everyone's a sucker in the short term.