Hard asset prices (realestate, oil, metals, gold) have been in a bull market for the last 5years give or take. Question is, when do they peak? Well, I remember travelling to HongKong on my honeymoon in 1988, took a taxi and this taxi driver was reading the business section, stocks. I asked him what was he doin, and his answer was looking at his investments. Markets peaked in 1988-1990 and have never recovered to the same levels (atleast in Japan). There is a thing called Deja-vu (Matrix fans wud remember). Move fast forward, this is the year 2000. Iam on a business trip in New York, take a taxi from Manhatten to go downtown to the World Financial Centre building. As my luck had it, I hated the tech bubble and really didnt like the valuations and market psychology, here I was sitting with a American-Italian cab driver whose sole purpose in life was to teach me the basics of stock market investing. Market peaked, has yet to recover.
Came across an interesting news clip, its not the same but a lot more sexier…
"article in this weekends Washington Post which pretty much
**summed up the situation within which it was revealed that Playboy’s Miss May, Fort Lauderdale native Jamie Westenhiser (23), apparently told Playboy recently that she is “ditching her modeling career” in order to take up "real estate investing". Apparently, investing in real estate is considered to be even easier than standing in front of a camera with your birthday suit on."
When Playboy cover girls are ditching their million dollar careers in modelling and moving to real estate investing, Guys this is a Red alert Red alert…
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when will the real estate peek end? or will it not? ;)
markets are on the peak everywhere in the world....from east to west..its all about real estate! I dont think it will crash at all :)
Basic premise of the first post is plausible that when a significant percentage of investors in a particular market are un-sophisticated (i.e. do not have enough knowledge), that may cause the prices to go to unsustainable level. And a correction (optimist) or a crash (pessimist) is almost inevitable.
This is pretty much what Greenspan said last week, where he alluded that real estate markets in some (not all) parts of US are in a state of "froth" (and we all know that froth is composed of bubbles). This is especially true about both coasts. Though its a matter of debate whether the prices will crash, or just flat out at a high level. There are many factors involved, including primary owners vs investors, salary levels compared to cost of living, availability of jobs, influx of people in that area and climate. Usually its the high-end housing market (luxury mansions etc) that collapses more significantly compared to median single family homes/townhouses/condos.
^ another point to ponder is whether other forces artificially inflate the prices. Monies moving from equity markets to real estate in a short downturn, monetary policy looking to curb inflation leading to Fed funds rate drop...New Yorkers in a buying frenzy. Oh yeah...we is crazy motherfkers!!!
I thought that the real estate prices in east rose after the dot com bust & 9/11 because people were scared to invest in stocks, while the prices in the west coast increased all through out the 90s. Is it a true observation?
and yahoos now think that they are real estate experts just because they can flip a property. Recall how people ebcame day traders and starting thinking of themselves as some financial geniuses in the pre dot com bust era. The same is set to repeat in real estate. You dont need a crash to mess people up, all you need is a slow down, when heavily leveraged investors would not be able to flip properties as quickly, and afford mortgage payments on properties they have.
Toronto real estate market is full of such stories if you look back in the late 80's early 90's period.
ITA - and the real problem today, which will have much more serious implications than previous slow-downs and crashes, is that people are able to finance a much larger percentage of the property. Whereas we once had 20% down payments, now in some cases you can buy for less than 10% down, and even finance for more than the value of the property. In short, when banks foreclose, everyone loses.
amana, I don't think getting loan for your first mortgage with less than 20% down is a bad thing. But when you get your investment property(s) on a zero down hoping to earn a quick buck by selling it within the year, then it is a problem.
