It is heartening to see more listmembers paying attention to economic conditions:
[Mork] Then the article in the Homes section said low interest rates were reducing the potential market of renters at the same time as 1,600 new apartments were coming on line (no building?) [Heller] Remember that the City of Minneapolis is financing those new apartments. Where else could a developer borrow $32 million for a $24 million project? Referring here to Steve Minn's Stone Arch. Privately financed investors would never take such a risk. Who cares though when spending public money and paying yourself big fees in the process. [Mork] So there's an ever-expanding supply in a shrinking market. And what does Econ 101 tell us will happen when you have that combination? I guess not too many visionaries imagined this scenario in 1999 or 2000, did they. In some business dealings, people hedge against this sort of thing. I wonder how one would hedge in the rental business. [Heller] Those of us who pay attention to the economy could see what was coming. In real estate, you don't hedge, you sell. Or in the case of publicly financed properties, you slap as much debt as you can against the property, then you default, then you walk away and wait for prices to fall. At the right moment, you re-invest for 50 cents on the dollar. When deflation strikes, cash is king and debt is the kiss of death. [Mork] But if a person owns a house and can hold ONTO it, suddenly it appreciates like nobody's business. [Heller] Not really. Adjusted for inflation, house prices are the same as they were seventeen years ago. A book was just published, "The Coming Crash in the Housing Market" by John Talbot - check it out at Amazon.com. The scary part is that homeowners have been using their homes like VISA cards. Mortgage debt is at an all time high, and home equity is at an all time low. (More proof that tax policy influences behavior.) IMPORTANT TO UNDERSTAND: When the costs of owning real estate go up, the prices of real estate come down. Virtually ALL costs of owning real estate are going up: PROPERTY TAXES, insurance, utilities. To that list, add vacancies and bad debts for investment property. Interest rates will eventually go up too. As commercial and apartment properties drop in value, Minneapolis homeowners will have a mighty bitter property tax pill to swallow. Vicky Heller, North Oaks TEMPORARY REMINDER: 1. Don't feed the troll! Ignore obvious flame-bait. 2. If you don't like what's being discussed here, don't complain - change the subject (Mpls-specific, of course.) ________________________________ Minneapolis Issues Forum - A City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:[EMAIL PROTECTED] Subscribe, Unsubscribe, Digest, and more: http://e-democracy.org/mpls
