October 22, 2006

Real Estate Market Falls and Goes…


October 21, 2006 - Adam Called
He’s so excited because he and Stephen have found several houses they like. And, in two cases, the price dropped since they began looking.

“Did the bubble burst, Grandpa?”

“Looks that way, doesn’t it.”

“Yeah, Stephen’s sister and her husband have had their house up for sale for over a year with few bites. They’ve changed realtors twice, but nothing happens.”

“What will they do?”

“They’re talking about adding onto the house instead of selling it.”

“That makes sense.”

“I don’t understand why builders keep putting up new houses and condos. They're going in everywhere around here. And, you saw Rehoboth Beach - thousands of new units are going up down there.”

“Same here in South Florida. I don’t know if resorts are feeling the pinch yet. Also, many condominiums and other projects here in Palm Beach County, and I guess everywhere, have been in the pipeline for years. The buildings going up now were actually in the planning stages 3 to 4 years ago. And once one of these big projects is started it can't be stopped without everyone and his brother losing his shirt, his tie, and his hat.”

“But, what happens if most of us guys in the middle class can’t afford the high prices of houses and condos that are on the market?”

“Is it going to stop you from buying?”

“Stephen’s talking about waiting until spring because he says prices are bound to come down further.”

“You might adopt a wait and see posture. I think a lot of people are doing that right now.”

“Do you think prices will come down?”

“Who knows. I think housing is over-priced. I guess I’m more afraid the bottom will fall out completely because the market is so full of new housing, and prices are so high that the people who need it can’t afford it, and those who already own one house, have speculated and bought a 2nd, and even 3rd with interest only loans.”

“If the bottom falls out, prices would really come down.”

“Yes, lower than low.”

"Like the 29 crash."

"Actually, the stock market crashed in 29, but price inflation had been rampant during the 1920's, property included. Frightening thought isn't it."

"Yes.

"Well, I'm an old man, and I've been told recently that we old folks tend to dwell on the negative too much. Besides, other areas of our economy haven't been terribly inflationary - just oil and real estate. I'm probably wrong."


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