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  • From: Gene GeRue <genegerue AT ruralize.com>
  • To: homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] Real estate market in balance
  • Date: Mon, 10 Apr 2006 21:38:31 -0500


If indeed there were the bursting of a bubble under way, would not the real estate market be at a state of equalibrium at some point on its way to crash. . . . I didn't see anything in the article that addressed that or gave any evidence that the "balance" was anything but a passing phase.

Good point. Had you gone to the url posted you would have found in another article that in fact the majority of real estate lenders feel that prices will soon face ten to twenty percent lowering adjustments. This was offered as proof of the so-called bubble bursting. By my standards, that decrease is not a crash but a common adjustment. But I understand that my standards are not common with the hysterical media or with those who strive to justify contrarian decisions.

James, it occurs to me that my view of real estate cycles is similar to your view of what others call global warming. The climate may in fact be simply doing what it has always done, cycle. So, too, real estate prices surge and wane cyclically. I don't see bubbles, I see normal business cycles.

Not only that, many analysts have said that the 'borrow on the
equity/speculate in real estate' phenomenon can only continue as long as prices and demand *continue* to rise. "Balance" means the rise is over.

Borrowing too much against one's home is an additional issue. There are many among us who commonly make foolish financial decisions. In the case of cashing in on high home equity, lenders are happy to oblige. As they sell the loans, the risk is transferred to investors who accept the return versus the potential for foreclosure. Real estate securities are generally pretty good investments. I haven't seen recent foreclosure percentages but my sense of it is that they are currently low.





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