Comments on: Real Estate Bubble Economy?

By: LJD

LJD — Wed, 01 Dec 2004 12:34:13 +0000

You can always make more real estate. Subdivisions break up larger parcels for development, multi-family homes and condos replace single family homes. Even in the city, old industrial buildings are rehabilitated or demolished for housing projects.

One thing to remember about property values though, is that low interest rates have had people in the last two years buying well beyond what they can afford. When the cost of living rises, including energy prices, taxes, and upkeep of those expensive houses, something will have to break.

Another trend to consider is that some people flock from the cities once their nest egg is earned, to live a slower and more affordable life in the burbs or country. Crime and terrorism may yet have further impact on those metro property values.

By: Attila Girl

Attila Girl — Wed, 01 Dec 2004 04:57:36 +0000

I think there will be an adjustment here next year or two--a slight settling. But the long-term trend will always be up, so the biggest mistake one can make is not buying during a peak: rather, it's not buying at all.

I think cities will see renewed demand, as people start to value shorter commutes over homes in "fashionable" suburbs (the nature of fashion is that it waxes and wanes, no?). But if your home is in or near a city that continues to produce jobs, it isn't going to lose too much of its value.

By: McGehee

McGehee — Tue, 30 Nov 2004 22:32:10 +0000

I've been expecting real estate to "bubble out" in California for years. Demand has been increasing while the upper limits of supply (actual real estate, which is fixed, is not the same as marketable real estate, which can be increased or diminished, within limits -- and the latter is what matters) have been diminishing due to unreasonable environmental regulation.

No bust yet. [knocks on wood]

By: Jane Galt

Jane Galt — Tue, 30 Nov 2004 19:37:51 +0000

There's a more important constraining factor: incomes. The price of real estate cannot, over the long term, increase by much more than incomes do, no matter how much demand goes up.

By: Dave Schuler

Dave Schuler — Tue, 30 Nov 2004 17:41:29 +0000

The one difference is that although they're making more stock they're not making any more real estate. And a house in the fashionable suburbs will continue to have some value and be a status symbol even if Amazon stock doesn't and isn't.