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Letter to the Editor: Housing Bubble Conclusions
I am fascinated by the varying perspectives on the perceived housing bubble. It seems incredible that so many enlightened and educated individuals can observe the same set of circumstances and arrive at polar-opposite conclusions.
While I try not to subscribe to an extremist view on any matter that is open to interpretation, I base a lot of business decisions on common sense and a gut feeling after consuming as much information about the matter as I can.
In that light, I do agree with some of Neil Barsky’s points in his Aug. 1 article (“What Housing Bubble?”) However, I believe that there are several important points that should not be ignored or discounted:
- There are regional housing markets that have experienced significant changes far beyond the national averages, and with a change in the local economy, this would not be the first time in history that Florida, for example, could experience a real estate bust.
- It is naive to dismiss the investor presence in the condo market or the impact a bust in that segment would have on the rest of residential real estate. I have yet to see well-founded numbers on the percentage of investors in condos. The few projects that have offered new product with a limitation on resale or recapture on profit from resale have seen a huge slump in sales.
- Just as in the cowboy days preceding the S&L crisis, it is unwise to discount the negative effect that interest-only and 125% mortgages and come-on entry rates will have on the market. One of the saving graces of real estate is that it is not an immediately liquid asset and, unlike stocks, is less likely to be purchased or sold on impulse. That being said, what happened on the West Coast some short 12 years ago is a reminder that real estate is not immune to significant swings driven by fear.
Do we as a country have so short a memory that we’ve forgotten the true cost of the S&L crisis and what it did to both the commercial and residential markets?
Common sense tells me that auto leasing and gimmicks to lower upfront mortgage payments only serve to entice the average consumer to spend more than he or she probably should, and will eventually come back to haunt the consumer.
Victor Lohmann
Innovative Designs of Dania Inc.
Dania Beach, Fla.
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