[lbo-talk] Re: The Housing Bubble

[Marvin Gandall]

My sense is the current housing bubble seems to have been pumped up by the
widespread growth of condominium ownership. I don't know to what extent, but
I expect it is significant. Many have been purchased as rental properties
("buy to let") by small investors (not all of them affluent) looking for a
hot alternative to a sluggish and uncertain stock market. It used to be that
developers administered and rented their apartment units directly. Now they
turn them into condos and sell the units to individuals who assume the
administrative overhead and risk along with the income stream. This form of
real estate securitization, along with REITs, parallels the evolution of
banking, with banks offloading risk onto investors by bundling mortgages and
other loans for purchase and sale in the market. As interest rates rise, in
addition to the customary pressures (reduced demand, foreclosures), you
have to assume the drying up of this speculative activity will accelerate
any decline in residential real estate values, but others on the list would
know more about this than I.

Marv Gandall

----- Original Message -----
From: "Jim Westrich" <westrich at nodimension.com>
To: <lbo-talk at lbo-talk.org>
Sent: Thursday, July 08, 2004 5:10 PM
Subject: Re: [lbo-talk] Re: The Housing Bubble


> I have no great insight into the general bubble phenomenon but based on my
own
> experience living in and trying to buy a place in the Boston area I have
two
> smaller observations.  Clearly, the amount of square footage per person is
> growing (both social and demographic factors confound the impact of
> income--longer hours at work has meant a somewhat paradoxical substitution
> effect of more home demanded to make up for less time).  Also, housing is
> bought by people outside of the area (i.e., second homes).  In the Boston
area,
> lots of out of state and international wealthy drive up prices at the high
end
> (multiple homes appear to be socially chic and justifiable as investment
in the
> bubble).   They would not show up in any income ranking of the area unless
they
> were full-time residents. See Cape Cod below as well.

(snip)