Best Example of the Real Estate Bubble
Posted by Frugal on September 7th, 2006
Check out this article from Marketwatch.com on the real estate in Bakersfield, California. As I have discussed previously in my post of comparing bubble between real estate and stocks, near the end of a bubble, “small cap” or the less favorable real estate will have the fastest ramping up, and then down. This is so indicative of a real estate bubble that is finally over. Do NOT buy into the real estate market, unless you have to. The “big cap” real estate will be the last one to fall, but fall it will for sure (my estimate is another 2 years). That is just the nature of a financial bubble.
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September 7th, 2006 at 10:47 pm
By the time everyone waits for everyone else to cut prices, pricing will be at a whole NEW LOWER level. The smarter ones are trying to cut now, so they will not incur a bigger loss.
September 7th, 2006 at 10:52 pm
JC,
I totally agreed.
But I can’t believe that there are people who talk about a short correction in real estate. Real estate markets are very different from stock markets. Usually there is no short correction period (besides seasonality). It’s either all the way up or all the way down, a much slower and smoother function than the fast changes in the stock markets.
January 30th, 2007 at 10:44 pm
After reading these two articles, I don’t think the correction is short.
It’s now Jan. 2007, and the number of vacant homes for sale has surged 34%.
http://www.marketwatch.com/news/story/number-vacant-homes-sale-surges/story.aspx?guid=%7BA09A933D-57BA-4583-BDF7-6E000DF9E74D%7D
Kerkorian even slashed his home for sale by $7 million or 28%.
http://www.post-gazette.com/pg/07026/757089-28.stm
January 31st, 2007 at 1:04 am
I believe the correction will last until mid to late 2009. Even if it stops going down, it will not go up at all. I believe the total return for buying a home now in the bubble zones will be 0% from now to 4 or 5 years later. Putting your money in any other place should give you better return.
April 17th, 2007 at 6:15 pm
I’d love to see a followup to this post now that we have the subprime lending implosion well under way. I’ve been very focused on staying away from real estate and building up positions in stocks directly or via mutual funds, the last couple of years, and it hasn’t been all heaven but it’s been pretty good to me…
I also wonder about “permanently hot” areas like New York City, the SF Bay Area, etc.. Some of us can’t really move (my family’s in New York, my job’s in SF). Any comments?
April 17th, 2007 at 6:15 pm
I’d love to see a followup to this post now that we have the subprime lending implosion well under way. I’ve been very focused on staying away from real estate and building up positions in stocks directly or via mutual funds, the last couple of years, and it hasn’t been all heaven but it’s been pretty good to me…
I also wonder about “permanently hot” areas like New York City, the SF Bay Area, etc.. Some of us can’t really move (my family’s in New York, my job’s in SF). Any comments?