Real Estate. Some interesting anecdotes in this article.
In Naples, Florida, some houses have been bought twice in a single day.
“It just seems like everyone is doing it,” Laurie Romano, a 26-year-old self-described real-estate investor, said with a giggle as she explained why she was attending an open house this month for the Nexus, a 56-unit building going up in Brooklyn’s chic Dumbo neighborhood. She and her fiance, a dentist, had already put down a deposit on a Manhattan condo earlier in the week and had come to look at another at the Nexus.
But Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors, is not worried: “South Florida,” he said, “is working off of a totally new economic model than any of us have ever experienced in the past.”
Any time you hear something like the term “new economic model”, watch out. As Sir John Templeton said: The four most expensive words in the English language are “this time it’s different”.
The night before the Nexus party, Patrick Cullert, 31, and Jennifer Mathews, 29, who are engaged, camped out to ensure that they would be near the head of the line for one of 16 condos to be sold at the party.
Such anecdotes are classic signs of a credit-fueled speculative bubble. People with no knowledge of a particular market, buying because “everyone is doing it”.
“I look at this as a short-term investment,” said Farquharson, 36, who works for a venture capital firm, “and plan to unload it as soon as things look dangerous.”
The article also notes: The average house in San Jose, Calif., costs 35 times what it would cost to rent for a year, according to Economy.com, a research company. In New York and West Palm Beach, this ratio--a rough equivalent of the price-earnings ratio for stocks--is almost 25.
But economist assure us that there will be no collapse. Land and housing are real assets, they reason, are not like stocks, which are “only paper”. What’s that they say about those who don’t know history being doomed to repeat it? In 1992, as the Japanese property bubble burst, prices in Tokyo were down 60% from their peak. Real estate can and does go down in value.
