[quote=kev374]You should realize that there have been interesting articles in the press lately about investor enthusiasm dying down slowly. Do you know that rents are actually deflating now because there are simply too many rentals and it’s expected to get worse. Think about it logically, when rental supply increases rents WILL go down, this in turn causes investments to generate lower returns.
When investments generate lower returns the urge to cash out accumulated equity increases and people start dumping their properties. This dumping starts a deflationary cycle leading to even more dumping and even lower prices.
A mania cannot be sustained forever, this is common sense…eventually things cool off, some investors will get out in time and make a killing at the expense other POOR SOULS who thought paying half a million dollars for a dump in a blue collar neighborhood was a good idea!!!
The only shame is that these POOR SOULS will go crying to the government about how they are suffering because they are now losing their homes. They did not bother to use a thing called “Reason” that would’ve told them that an entry level house in a middle class neighborhood with teachers and accountants living in it should not cost half a million dollars![/quote]
Stay strong, Kev. As you probably already know, these “all cash” buyers are often leveraged. Just because they aren’t using purchase mortgages, don’t be fooled into thinking they are actually using 100% unleveraged funds. Not only that, but they will have redemption requests at some point. If they are leveraged on top of that, look out.
IMHO, we are definitely in bubble territory because people are buying because they think prices will be higher in the future. Whether they are funds or individual investors or owner-occupants, the frenzy seen today is because people believe there will be a large pool of greater fools who will be willing to pay more for these houses down the road. I’m very skeptical about this.
We received a post card today about a house that was on the market around the corner from us. It backs up to a VERY busy 50+MPH road (~6+ lanes) and has fewer bedrooms/baths than our house. It sold for ~$100K more than we bought our house for 18 months ago (our house has a larger lot, much better location, and more beds/baths), and they received MULTIPLE offers in one week! This is NOT a normal market!
