That was the year that was
An interview with an "investment banker" on the subject of how the world came crashing down and what should be done about it, performed by the British comedy due of John Bird and John Fortune. My apologies to those of you who may have seen it already. I had not.
It reminds me of Dave Barry's summary of the housing mess in his eulogy for 2007:
"There was a major collapse in the credit market, caused by the fact that for most of this decade, every other radio commercial has been some guy selling mortgages to people who clearly should not have mortgages. (''No credit? No job? On death row? No problem!'') It got so bad that you couldn't let your dog run loose, because it would come home with a mortgage. The subprime-mortgage fiasco resulted in huge stock-market losses, and the executives responsible, under the harsh rules of Wall Street justice, were forced to accept lucrative retirement packages.
"So they did OK. But for the rest of us, it was another bad year..."
Ah, 2007. Glad we put that behind us.
As the Brits would say, brilliant! I think we should add "dodgy" to our lexicon.
People who bought houses between 2001 and 2005 should have realized that they were buying into a rally. Very similar to the dot-com rally of the late 90’s. I advised people during that time to stay clear of real estate because of the irrational exuberance of real estate prices. The problem couldn’t have been clearer because there was nearly a three fold increase in house prices from 1992 to 2005. A house purchased in 2005 for 450k needs to seek its more realistic valuation of about 300k.
I’ve been buying and selling both real estate and stocks for over 25 years now. There’s little difference between the two nowadays.
You sell into a rally. Just as the many smart sellers did from 2001 to 2005. There should be a great buying opportunity coming in 2010 to 2012 when prices may over correct to the downside. It’s going to take a very long time to recover 2005 real estate prices. Probably 15 to 20 years. Sellers can cut their losses by selling now with their best offers.
Good luck
Phil,
I cannot think of any less similar assets - a fixed tangible non-liquid owner occupied asset that is not easily sold vs a liquid nontangible (though well defined) asset held at a distance that can be sold with the click of a mouse. The only similarity is the run up in price and the need for a dramatic shift toward regulation of the investment banking market. These assets are not the same and the future is also not the same as the dot com bubble.
The view you express is the type of opinion of those who are looking to flip houses from desparate sellers at the bottom of the market and capitalize on the misery of those who made poor decisions. These dramatic falls affect a well defined overbuilt sector; you can wait until the next millenium for a 1/3 rd price reduction in Bethesda or Chevy Chase, Maryland, Westchester, NY, or Brookline/Newton/Lincoln, MA.
Phil - um, what?
Those who bought 2001-2005 are sitting on a boatload of appreciation. It's the buyers in 2006-2007 who are below water. Which is why, when they face foreclosure due to job loss or other change in income, cannot sell for what they paid.
Where are you getting your data???
GB etc.
Have a look at what happened to prices in "Bethesda or Chevy Chase, Maryland, Westchester, NY, or Brookline/Newton/Lincoln, MA." in 1989-1996. I think you may be surprised by the price drops.
And by most metrics this go around looks like it will be worse.
This blogger might want to review your comment before posting it.
browse this blog
by categoryINside Boston.com