A commentary on the bubble

[Kurt]

Mack,

And, at Alys Beach, the agents are actually calling prospects to try to "drum up business".

In a recent post you said you had heard this and wanted someone to confirm. Did you get confirmation?

Though I wouldn't be surprised to hear about salespeople attempting to achieve sales.

 

[OnMackBayou]

Mack,

Not sure what deals you are talking about, because the only stuff I see selling along on the eastern end of 30A are at prices that are below the prices paid for very similar properties last year. In fact, several lots in watersound sold recently at prices 20% less that lots next door sold for in 2004. There are also numerous properties on the market in Seaside, Watercolor, Watersound and Rosemary that are for sale at prices close to or lower than last summer that are not moving. The inventory on the market is overwhelming and folks continue to drop prices with no takers. In Watersound, Watercolor, Seaside and Rosemary, the inventory continues to increase each week (ie:new houses appearing on the market exceed the sales each week). And, at Alys Beach, the agents are actually calling prospects to try to "drum up business". When was the last time any of the big developments had to contact people to drum up business. Not sure how long the slow down and trend of decreasing prices will last, but in the short term, you are dead wrong. The FACTS speak for themselves.

Skier, was going to write a long reply, but have to cut it short. Large pieces of the sky have fallen in the yard. The missus says I have to clean it up. Now!

Let's talk in say.........5-10 years. Good luck til then.

 

[patticakes]

I agree with Smiling Joe - the media machine is out of control. If investors pull out of the real estate market, where are they supposed to put their money? Gee, I wonder... back in the stock market? Who really stands to gain from a major reallocation of investor's dollars? Where was the money before investors jumped into real estate? I would guess mostly in the stock market or on hold in cash funds or low-risk investments waiting for the market to recover. Remember WHY we pulled out of the stock market? Is the market honestly looking THAT much better now?

The media is doing everything they can (quite successfully) to get the word out to all (not just investors) to stir up panic. Example: local media (in KS) is now talking about the bubble effecting our area - pleeease! Property values here have steadily appreciated 4-7% a year for the last 20 years... now it's a bubble? Come on! By the time you factor in cost of living & increases in cost of building materials, labor, etc it sounds pretty sane to me. But now people everywhere, including the midwest, are afraid of buying in a bubble and losing the money they have invested in their homes.

If you've pulled out of real estate, where do you put your money now? I don't know about the rest of you, but I am not dumping my money back into the market - give me a reason to feel confident that it makes sense to do so and I might get back in, but at present, it doesn't look so rosey. Those 14 month cds at 4.25% are looking pretty good these days. Or if I bury it in my back yard, at least I won't LOSE anything.

Do you think any of this is going to change lending practices - 40 year mortgages, interest only loans, high debt to loan ratios? It's all part of a larger problem - overconsumption, overspending, overextending, overeating... The media (ie: advertisers/lobbyists/sponsors) has programed us to overdo everything without any concern for what's good for us, good for the environment or good for the long-term economy. It's all about somebody making big bucks. I'm sick of the ongoing daily onslaught of sales pitches, misinformation and outright lies. We are little puppets and the saddest part is that the majority of people out there don't even realize they're being manipulated. What to do? I'm awake - what now?

 

[Kurt]

Why not diversify and think long term, in an attempt to achieve a 10% return on your investments?

 

[patticakes]

Yes, that's the model and I agree that in the long-term it generally works out. Haven't personally seen a 10% gain since the tech crash. But I could always count on my home appreciating because historically it has always done so. If I believe what the media says about the bubble and it effecting me even in Kansas, then that investment is now a risk as well. I'm all for diversification and do have money in the market, but right now putting even more than my standard allocation in every quarter doesn't make sense to me when I see my diversified portfolio of funds sitting there making next to nothing or even dropping a bit. There are lower risk options that at least have a guaranteed return.

 

[Smiling JOe]

... Those 14 month cds at 4.25% are looking pretty good these days. Or if I bury it in my back yard, at least I won't LOSE anything.
...

I know you say this in jest, and while you may not lose anything physically if you bury your money, but your buying power will definitely decrease at least 3% per year due to inflation.

 

[patticakes]

I know you say this in jest, and while you may not lose anything physically if you bury your money, but your buying power will definitely decrease at least 3% per year due to inflation.

Only half in jest - If my gains in the market for the year are 2%, I'm still down 1% when you factor in inflation. If I'm making 4%, then I'm gaining 1% factoring in inflation. I'm lucky I have a ways to go before retirement, but at the age where I would like to start seeing some gains before I have to shift to a more conservative investing model.

 

[Smiling JOe]

Only half in jest - If my gains in the market for the year are 2%, I'm still down 1% when you factor in inflation. If I'm making 4%, then I'm gaining 1% factoring in inflation. I'm lucky I have a ways to go before retirement, but at the age where I would like to start seeing some gains before I have to shift to a more conservative investing model.

...and on top of those low gains, you have to pay the Man.

 

[Kurt]

Yes, that's the model and I agree that in the long-term it generally works out. Haven't personally seen a 10% gain since the tech crash. But I could always count on my home appreciating because historically it has always done so. If I believe what the media says about the bubble and it effecting me even in Kansas, then that investment is now a risk as well. I'm all for diversification and do have money in the market, but right now putting even more than my standard allocation in every quarter doesn't make sense to me when I see my diversified portfolio of funds sitting there making next to nothing or even dropping a bit. There are lower risk options that at least have a guaranteed return.

The interval you mention since the tech crash is short term.

Dollar cost averaging - sounds like you are on top of it.

 

[patticakes]

...and on top of those low gains, you have to pay the Man.

Good point. There's always that...