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Millionaire Now! by Larry NusbaumThis blog is based on the organizational principles found in my new book, "Millionaire Now! - A Financial Toolbox with Seven Steps to Wealth". |
Is Housing in a Financial Bubble?
Posted on 10/14/2006 13:31 PM | Link | Post Comment
Housing is absolutely the weak sector of real estate at the moment and in real estate, cycles end and begin much slower than in the equity markets. As a result, I do not see housing bouncing back as a strong short-term investment for some time to come.
That being said, and showing weakness after 8 1/2 years of solid appreciation, housing is not in a "bubble".
What does a financial bubble look like?
At least not a bubble as in:
You mean the dirt can go from $400,000 to $4,000 almost overnight?
Or, that insiders can sell while pumping up the house's value on TV?
Or, they can issue more shares in my house?
Or, the analysts can keep a buy rating on my house, while confessing in private emails that my neighborhood sucks?
Or, we can be attacked again and they can close the housing market for a week?
Or, they can cook the books on my Schedule E?
Or, maybe they could issue title to my house to 7 people at a time?
How about moving my loan off-shore thus removing it from my personal balance sheet?
A stock is a click of a button or a call and you are out. There is no clicking in RE transactions. However, let's say the bubble pops next week......my property still exists, the land still has value, my rent still gets paid and my mortgage payment remains the same. Unlike stocks, whose leadership always changes with every new bull cycle, real estate (housing) can always be cured by time. Think about that.
And, right now, across America, commercial real estate is sizzling, especially apartments and offices.
Commercial Real Estate Outshines the Housing Market and will continue its strength as long as the economy holds up.
That being said, and showing weakness after 8 1/2 years of solid appreciation, housing is not in a "bubble".
What does a financial bubble look like?
At least not a bubble as in:
You mean the dirt can go from $400,000 to $4,000 almost overnight?
Or, that insiders can sell while pumping up the house's value on TV?
Or, they can issue more shares in my house?
Or, the analysts can keep a buy rating on my house, while confessing in private emails that my neighborhood sucks?
Or, we can be attacked again and they can close the housing market for a week?
Or, they can cook the books on my Schedule E?
Or, maybe they could issue title to my house to 7 people at a time?
How about moving my loan off-shore thus removing it from my personal balance sheet?
A stock is a click of a button or a call and you are out. There is no clicking in RE transactions. However, let's say the bubble pops next week......my property still exists, the land still has value, my rent still gets paid and my mortgage payment remains the same. Unlike stocks, whose leadership always changes with every new bull cycle, real estate (housing) can always be cured by time. Think about that.
And, right now, across America, commercial real estate is sizzling, especially apartments and offices.
Commercial Real Estate Outshines the Housing Market and will continue its strength as long as the economy holds up.
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