Posts filed under “Real Estate”

The Global Real Estate Obsession

Interesting Real Estate/Housing discussion in, of all places, the NYT Week in Review. It turns out that "cheap credit worldwide fueled the housing market, making mortgage payments less costly." (You don’t say?) "Homeowners refinanced their mortgages at lower rates, and the savings went into consumer spending. They took out home-equity loans on houses of rising value, and spent that borrowed money on cars, clothes, furniture, restaurant meals and vacations. The higher consumer spending and the soaring value of the home nest-egg have kept the global economy chugging along."

Juts as Greenie planned it. But you knew that already; what you may not have realized is how globally widespread the housing boom has become:

The housing market in California may look like a textbook case of superheated "irrational exuberance," but then how does one explain Spain? Home prices there have risen 130 percent since 1997, twice the run-up in the United States.

These days, house price vertigo is more than a local or national condition. It’s a worldwide phenomenon. The American housing boom in recent years is nothing compared with the price run-up in countries like France, Spain, Britain, Ireland, Sweden and Australia, even though markets in Australia and Britain have cooled in the last year.

Quite fascinating; I knew that the UK had a big run up, and that Australia’s Real Estate market had appeared to top and start reversing already, but I was unaware the phenomena was so robust globally. 

Rising Prices Abroad:

click for larger graphic


Graphic courtesy of NYT

How Global?
Consider this:

"Million-dollar two-bedroom apartments are not only a fixture of New
York, but of London, Paris and Hong Kong. In New Zealand, housing
prices rose by more than 16 percent from 2003 to 2004. In Ireland, they
rose more than 10 percent in that period.

The rise in prices is worrisome, because the international housing boom
is a byproduct of globalization. A house on a plot of ground is the
most local of assets. But the financial markets that make it possible
for people to borrow money to buy a house, or speculate, are
increasingly open, international and linked.

Interest rate policies in the industrialized world tend to move in
lockstep, usually led by the United States. A growing community of
affluent professionals around the world now buy second homes and invest
in housing abroad.

The economic links act as a self-reinforcing network that has fueled
the global surge in house prices but would also likely magnify the pain
on the way down. The ripples would extend well beyond the housing
markets. A fall in American house prices, for example, would crimp
consumer spending – and free-spending Americans have supported growth
in many export-minded nations, notably China."

What does $1M buy around the world:

click for larger graphic


Graphic courtesy of NYT


BTW, a friend has a nice 3 bedroom, 1,500 sq ft doorman building in Brooklyn you can pick up at the bargain price of $850k. (email for more info)


Real Estate, the Global Obsession
Steve Lohr
NYT, June 12, 2005

Category: Real Estate

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uh-oh: Time Magazine on Housing

Is this the Magazine Indicator at work? First Fortune, now Time Magazine: We’ve seen some terrific Contrary market calls from magazine covers:  Time magazine naming Jeff Bezos man of the year in December 1999 marked the top of the internet bubble; The March 21st  2005 Newsweek cover story, “The Incredible  Shrinking Dollar,” marked a key…Read More

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Don’t Buy Housing Bubble Propaganda

UPDATE: The original version of this is still available on Real Money (subscription only). The 2005 article details was a pushback against the gloomers predicting a Nasdaq like collapse in RE prices. Instead, we detailed why this was a CREDIT (not a HOUSING) Bubble, and that while we should expect a 25-35% peak to trough drop in prices, it would not be a Nasdaq like 80% debacle. (35% was bad enough). We also noted that an extended period of high unemployment might make those numbers even worse.


The latest subscription only Real Money column, Don’t Buy Housing Bubble Propaganda, is now available on Yahoo (no subscription required).

In writing it, I decided to forget everything I thought I knew, and look at housing from scratch.  Consider the factors that make Real Estate very different than stocks. Lose the assumptions, check out the numbers driving Real Estate, and see if Housing is truly the bubble everyone claims it to be.

Turns out there’s much less of a bubble than commonly believed by many people believe. While anecdotal evidence of regional excesses are interesting,
they doesn’t mean we are about to see home prices get cut in half (or worse) over the next few years.

There are three key drivers hardly discussed by pundits opining on the U.S. housing market “bubble”:

1)  Purchase prices don’t matter to buyers — monthly payments do;
2)  US has the fastest growing population of industrialized nations;
3)  “Only 3% of all buyers sell their home in a year or less,” a survey found.

These issues, taken together, suggest that while Real Estate may be an extended asset class (i.e., two  standard price deviations above historical trend) that doesn’t maeke it a bubble.

Of course, its interesting to note that a Playboy bunny gave up her modeling career to go into real estate speculation (mentioned previously here), it doesn’t mean the end is nigh.

Now if I can only figure out how these columns end up at Yahoo . . .


Don’t Buy Housing Bubble Propaganda
Barry Ritholtz
RealMoney by, Thursday May 26, 2:04 pm ET


UPDATE June 12, 2006 9:39am

I just noticed that the Yahoo page expired; The full RM article is after the jump . . .


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As Prices Rise, Homeowners Go Deep in Debt to Buy Real Estate

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