My brother -- who is a real estate agent and was a high school buddy and
water polo team mate of N.J. Republican senate candidate Doug Forrester --
says the most bubblicious part of the market is duplex to fourplex, which in
Sacto are selling for as much as 300 times monthly net income. The benchmark
is 100 times income. Jim says buying a fourplex would be like buying Enron
at $90 a share. The below piece of bumf would, in my view, tend to confirm
what he says. Any time Greenspan testimony refutes, once and for all the
existence of anything, you have to be concerned.
As if refuting the bubble once and for all was not enough, the bumf goes on
to put this issue to rest, declare no such thing as a house price bubble
and note that a pop of the bubble simply isn't in the cards. If the mixed
metaphors don't get you, the repetition repetition repetition will. In other
words, as my bro says DO NOT BUY an existing duplex, triplex or fourplex if
they are selling at more than 100 times the monthly rent... Your entire
investment could be wiped out.
Rumor of Housing Bubble Pops
WASHINGTON (July 19, 2002) Federal Reserve Board Chairman Alan Greenspan's
testimony before Congress last week refutes, once and for all, the existence
of an alleged housing market bubble, said chief economists of the National
Association of Realtors® and the National Association of Home Builders, two
trade groups that collectively represent more than 1 million professionals
from all walks of the housing industry.
The time has come to put this issue to rest, said NAHB Chief Economist
David Seiders. The nation's home builders have said it, the Realtors have
said it, and now Alan Greenspan has said it once again, in no uncertain
terms: there is no such thing as a current or impending house price bubble.
Asked about the issue during his testimony, Greenspan said, We've looked at
the bubble question and we've concluded that it is most unlikely. He
attributed recent sizeable gains in home prices to the effects on demand
of low mortgage rates, immigration and shortages of buildable land.
Given the local nature of real estate, NAR Chief Economist David Lereah
said, it's possible for prices to deflate on a local basis, but a pop
simply isn't in the cards. He noted that, even during recessions and periods
of declining home sales, the national home price has risen every year. Over
time, the typical home value appreciates at the general rate of inflation,
plus one- to two-percentage points, he said.
Acknowledging the stabilizing force for the overall economy that
residential construction and related consumer outlays provided during last
year's downturn, Greenspan noted in his testimony that the U.S. housing
market continues to perform admirably in the evolving recovery period.
Echoing the Greenspan's apparent confidence in the industry when he
predicted reasonably strong housing demand, Seiders and Lereah affirmed,
The housing market is fundamentally sound: we have a lean inventory of
homes, historically low interest rates, good consumer confidence and strong
demand from a growing population. The supply/demand situation means we can
expect healthy price appreciation to continue.
The housing groups applauded Greenspan's leadership of national monetary
policy and his wisdom in lowering interest rates, which has unquestionably
helped housing support the economy during the recession and the early stages
of recovery.
EDITOR'S NOTE: Housing is vital to local and state economies, creating jobs
and generating taxes and wages that positively influence the quality of
life. Find out more about this crucial component of the economy at
http://www.nahb.com/news/housingjobs.htm . Also, NAHB's publication,
Housing: The Key to Economic Recovery, explains just how housing has led the
economy to recovery. This publication is available free of charge on NAHB's
website, at http://www.NAHB.com/housing issues.
The National Association of Home Builders is a Washington-based trade
association representing more than 205,000 members involved in home
building, remodeling, multifamily construction, property management,
subcontracting, design, housing finance, building product manufacturing and
other aspects of residential and light commercial construction. Known as
the voice of the housing industry, NAHB is affiliated with more than 800
state and local home builders associations around the country. NAHB's
builder members will construct about 80 percent of the almost 1.6 million
new housing units projected for 2002, making housing one of the largest and
most powerful engines of economic growth in the country.
The National Association of Realtors, The Voice for Real Estate, is
America's largest trade association, representing more than 800,000 members
involved in all aspects of the residential and commercial real estate
industries.
Posted July 26, 2002
Tom Walker
604 255 4812
