The stock market has been screaming “RENT” for at least 6 months!
Math always matters in the end and the math does not pencil out for owning over renting based on today’s pricing. PERIOD!
As I stare out at the San Diego skyline from Coronado I am amazed and concerned at the amount of troubled high rise deals that I see built and underway. How many $800,000 condos can the world digest. Graduating students and young families can’t afford nor want to live in them, and although the country is aging and the dollar is weak, the supply is just too great. I think we are long past the point of digestion.
My uber smart friend Blair and I are constantly discussing the end of this real estate boom. Although our business is lending, we are amazed at the length and strength of this cycle.
As the “nerds” speculate about the web 2.0 “bubble” (NOT), the true “bubble” that is real estate speculation, has begun the long unwinding phase.
If you take a look at the one-year stock charts of any homebuilder (I randomly chose Meritage Homes and Toll Brothers), you will see the unwinding of this boom in the “leading eyes” of the stock market.
PAY HEED!
A this cycle has lasted longer than most, the “newbie” factor is as high if not higher than the stock market boom of the late 1990’s.
The housing boom and unwinding offers MUCH more danger than the stock market boom as people’s net worths have never been more intertwined with their homes.
I do stand by my long standing opinion that the commercial boom will end with foreigners holding the bag. American bankers are still THE BEST at dishing the CRAP to the foreigners at the top. As the dollar is likely headed to much lower levels in the forseeable future, this boom could last a while longer,but I am focused on the apartment and commercial REITs as the boom unwinds.
As proof that the market occassionally makes sense, compare the charts of the homebuilders I linked to above to those of these commercial and apartment REITS – SLG and EQR .
As you can see, not all real estate stocks have cracked.
RENTING WINS FOR NOW!
The thing that freaks me out about the housing markets is the banks agressively encouraging people to borrow against the “value” of their homes. In Oz, they’re agressively advertising to retiring boomers that they should blow their equity on self indulgent holidays etc.
This is all going to end badly.
its an ugly shame if this goes the way I think.
More distribution to the edges of wealth
Mr. Angry: People want to spend (blow) their equity. No one is holding a gun to their heads…..
EVERYONE, WITH SOME USELESS FINANCIAL PRODUCT OR SERVICE, WANTS TO “SELL” TO BABY BOOMERS, because they have piles of money looking for a home….rather sad.
Howard: I’ve been screaming bubble for years now but ever since the general public caught on with it I began to wonder if it’s already over.
I’m sure that we’ll see houses flow from the weak hands to the strong ones and the FED has a lot of tweaking to do in order not let “burst/deflation” of the bubble into a full out panic.
But its not a RE bust until the bank gets the keys to the house and can’t get rid of it. That hasn’t happened because properties are getting snapped up. The BIG land grab continues under our noses by the strong hands.
That’s the true metric to measure, what are the REO’s by banks YOY.
stop screaming and make money – your site looks good