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From my neck of the woods this correction started about 8 months ago. I
see lots of for-sale signs in front of luxury houses owned by bag holders,
and people who would otherwise not sell at a reasonable price. There's a
huge spread between the bid and ask in the high-end market. The mid-level
houses are being sold at reduced prices or being taken off the market. I
always joked about "selling my house short" a year ago. Even today my
house would be appraised at an unreasonable price, but that's more due to
what the mortgage industry wants people to believe than actual realtime demand.
I'm less concerned about the 6 million dollar house crashing down to
reality, than I am for the American people's enormous appetite for
debt. By 1999 people got wealthy but didn't spend. In 2000 they spent
like wildfire. In 2001, as their wealth diminished, they couldn't shake
their habit of spending, so they borrowed money against their houses instead.
Credit card companies are allowed to set up tables at college campuses to
nurture the young materialistic college Freshman into $20K debt early. And
lots of people are refinancing not for constructive pursuits like starting
a business, but to pay off some of their credit card debt they incurred
early on. Some only pay off some of their debt and buy more things with
the rest of the borrowed mortgage money. Others remodel their houses on
the mistaken believe that their houses are worth more than they are. In
the end, we'll have a class of people that will spend the rest of their
lives with perpetual debt.
I don't hear much about the stock market or the Internet in my neighborhood
any more, but there still remains a quiet optimistic belief that "the
bottom" is near. Of course, that's what the ignorant Media Mob propaganda
has perpetuated the past year. Now I'm seeing signs of Media paranoia, and
paranoia is contagious. Paranoia in debt is worse.
At 05:19 PM 9/5/2001, Bilo Selhi wrote:
>this time the rumor is that US house market
>is nearing a shakeout.
>one shake out down, another one to go.
>my RE sources are telling me that the luxury housing
>market is grossly overheated all around the country
>and is about to correct, especially higher prices
>( expensive ) housing. the rational is that the
>expensive homes are speculative investment
>and as the owners
>will try to take profits towards the end of the trend
>the crash is imminent.
>
>i kinda feel it myself and you might start hearing
>it on CNBC more often.
>could anyone with RE connections please confirm
>that you there is talk going on around...
>
>if that's the case then selling the overprice house now
>and buying back similar house later might be
>the best buy of the decade???
>
>certainly sounds and feels like that buying a house now
>is tempting with low interest rates but what if it
>collapses and rate goes even lower???
>bilo.
>ps. luxury housing ( whateverfront ) went up to 100-150 %
>in the past 2-3 years... houses that were worth
>1-2 mil 2-3 years ago are now up to 5-6 mil.
>waterfront luxury condos that were worth 1/4 mil
>then are now more than 1/2 to a mil...
>although those are price setters but feels like
>reversion to the mean is a must here as those
>investment have to be turned into hard cash.
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