bostonbubble.com

balor123 · Joined: 08 Mar 2008 Posts: 1204

Real estate and equities are only loosely correlated. As someone else already pointed out, during the tech bust everyone moved their money into real estate. Right now I see lose-lose propositions. You can stick your money in stocks but they are performing well and if you need to buy a house then you can't afford the risk anyway. You can put it in CDs or money market funds but then you lose to inflation. The only decent place to put your money now is in these rewards checking accounts but who knows how long that will last. Keeping your money in CDs is only a good strategy for buying a house because housing deflation is worse than inflation. The only potentially safe place is stocks over the long term. If you are planning on buying a house, then you should commit to buying it in the next few years because otherwise you're savings are simply losing value in the mean time.

john p · Joined: 10 Mar 2006 Posts: 1820

Oh, I know you're not treating me like a punching bad Admin, being accused of being a realtor is such a weird place for me to be in.

I remember your post on Cramer's meltdown, so that was a loaded reference on my part Smile

He's a bit of a nut, but immersing oneself in data is not a bad strategy. In the movie "Tommy Boy" with the late, great Chris Farley there was a quote "You can take a good look at a T-Bone by sticking your head up a bulls ass, but wouldn't you rather take the butcher's word for it?" I'm not saying Jim Cramer is the butcher, I'm saying it is better to stick your head up the bull's ass like Jim Cramer does.

I'm glad you responded to the M3 subject. What I'm wondering is how the value could evaporate and if it is possible to have the assets that are bouyed drop as they were lifted in the high tide. I am uncertain to the deformation. Is it possible that assets get pegged to a dollar amount, but the value of dollar gets the debasement? If you looked at the price of a house in Massachusetts over time based on the Euro, you'll see that the prices collapsed. What I'm wondering is if part of this correction is taking the form of devaluation of the US dollar. In which case, if the US dollar devalues, the amount of US dollars associated to a house value might go up with inflation. If people get cost of living adjustments based on inflation, people's pay will go up greater than 3%.

Everybody being irresponsible at the same time could deform the market. It is like an agressive herd. This kind of reminds me of a bunch of people staging a bar room brawl just before closing time so they can avoid paying their tabs. It also makes me think that with all the US debt our nation has, it is an interesting strategy to purposely devalue your currency so to be obligated to pay less value back to your debtors. Just like you don't tell the angry herd what to do, I'm wondering if the US in devaluing their money is acting like the big gorilla that dillutes the amount that they need to pay others back? I know this sounds a bit absurd, but look at who's in charge.

balor123 · Joined: 08 Mar 2008 Posts: 1204

You are entirely correct that devaluing the dollar effectively lowers the price of housing, which is part of the reason that Europeans are buying properties in downtown Boston. If wages were keeping up with inflation, then housing prices would not need to drop they could just stay where they are as they are. However, wages are likely to drop relative to inflation this year and have remained constant so far this decade. At the same time, housing cost rose at an amazing rate so one of two things must happen now: (1) income rises to make housing more affordable at current prices or (2) housing prices must fall. In the near term it appears that income isn't rising so (2) must be the case. The next few months will be very revealing.

john p · Joined: 10 Mar 2006 Posts: 1820

When Europeans are investing in our properties, it makes you wonder if they feel that their currency is OVERVALUED. If they thought that the US was going to collapse, why would buy our property even if it is cheaper in their currency, if it's going down, it's going down right?

Our Government's recent intervention in our currency has changed the "free market" definition and has increased the risk factor for US investments. It's kind of like breaking the rules with troop deployments today will hurt recruitment efforts tomorrow. I'm wondering if the FED realized that everybody got so upside down on their debts that the best way to soften the landing was to dillute the amount of value of the debt by flooding the economy with money.

In doing so, they have created a moral hazard: if you play by the rules you wait in line and if you act irresponsibly we will bail you out. The rich have figured out that they can make money betting on the bail out and the excess liquidity which has made people even more irresponsible, and make the most irresponsible, rich. So the question is, does everybody go to jail if everybody breaks the law? No, they will just change the law.

We need to change the value structure in people. We need to make people pay for hanging concrete tiles with glue above drivers in the tunnel. We need to hold politicians feet to the fire for showing up late or being on the wrong side of predatory lending and not making a person on the Board of a predatory lender our friggin Governor. I believe that changing the properties of our constitution to make us more load bearing, more responsible, more competitive is based on education and reconnection to a value structure that bears fruit.

admin · Posted: Wed Apr 30, 2008 9:53 pm GMT Post subject:

That "foreign buyers" meme smells like another urban legend to me. Here's the catch - the property may be cheap in their eyes because they're paying in euros, but that would equally cheapen the rent that they get from the property. If they are buying places to live in, OK I might believe that, but buying for investment purposes doesn't make any more sense in euros than it would in dollars.

- admin

Brian C · Guest

To continue the original discussion, this morning's (May 3rd) MLS update is probably the biggest ive seen in a long time.

Again these are towns im looking at:FRAMINGHAM, NATICK, NEEDHAM, WALTHAM, WATERTOWN, priced up to 475k

16 New Properties in Framingham
4 New Properties in Natick
8 New Properties in Waltham

Another record, 6 properties Back On Market in one day. Interesting enough, most of these Back on Market went inactive about 3-5 days ago. We know financing is the major reason why deals fall apart? What about inspectors actually doing their job and flagging potential problems to the home buyers?

Happy House Hunting this weekend!!