Globalization and housing price trends.

[NotCranky]

This question occurs from time to time:

How can we have globalization without a nomalization of the economies of the more affluent countries to a broader standard around the globe? Either globalization is mostly talk or assets like housing are going to adjust down completely independent of previous regional cycles. I bring this idea up because many “Bears” are seemingly convinced that once things playout according to plan,25%,35% 40% declines, they will time the market right and thus make a good investment.
Maybe houses, especially large,luxurious,expensive ones that by far exceed necessity, will never be a great investment?Perhaps we have way too many of them as compared to our declining access to wealth due to globalization and this fact has been masked by funny money? Maybe we are going to wake up and find out over and over again that these houses and our life styles are too rich for us?Maybe this is an example of the kind of “Doom and Gloom” talk that will be pervasive at the bottom, right before real estate takes off again?

[Bugs]

I made the mistake last time in thinking that people would learn their lesson after suffering those losses during the 1990s. Not only did real estate speculation come back, it came back 3 times stronger than it had before. Now I know. This will happen over and over again and it is only limited by the availability of investment capital, whether its source is here or abroad. So far, I think we’ve been a good choice for foreign investors because our economy has been perceived as being more stable (as opposed to more profitable) than these emerging economies elsewhere.

For every American who wants to build a solid and sustainable future there are at least 2 dozen who aspire to the Mercedes + McMansion combo with a Hummer on the side. And they want to do it with no visible means of support. Everyone wants to be a rock star.

[Bugs]

I made the mistake last time in thinking that people would learn their lesson after suffering those losses during the 1990s. Not only did real estate speculation come back, it came back 3 times stronger than it had before. Now I know. This will happen over and over again and it is only limited by the availability of investment capital, whether its source is here or abroad. So far, I think we’ve been a good choice for foreign investors because our economy has been perceived as being more stable (as opposed to more profitable) than these emerging economies elsewhere.

For every American who wants to build a solid and sustainable future there are at least 2 dozen who aspire to the Mercedes + McMansion combo with a Hummer on the side. And they want to do it with no visible means of support. Everyone wants to be a rock star.

[PerryChase]

As far as globalization is concerned, I believe that 2000-2005 was the euphoria stage. There are now plenty of desirable place being developed around the world so our cities will eventually no longer be as attractive to foreigners.

Think of the 2nd and 3rd tier cities of Europe. They are lovely but are you going to buy a house there? Only 100 years ago, American cities were nothing compared to the cities of Europe. We’ll see that same shift to Asia in the 21st Century.

Population growth will stagnate in 50 more years (even in China) and we’ll have to come up with a new business model.

I just read that miles of beaches are being developed in Montenegro which is experiencing a property boom of its own.

The property boom is world-wide and if this continues we’ll end up with a glut of housing/resorts/hotels/offices.

[PerryChase]

As far as globalization is concerned, I believe that 2000-2005 was the euphoria stage. There are now plenty of desirable place being developed around the world so our cities will eventually no longer be as attractive to foreigners.

Think of the 2nd and 3rd tier cities of Europe. They are lovely but are you going to buy a house there? Only 100 years ago, American cities were nothing compared to the cities of Europe. We’ll see that same shift to Asia in the 21st Century.

Population growth will stagnate in 50 more years (even in China) and we’ll have to come up with a new business model.

I just read that miles of beaches are being developed in Montenegro which is experiencing a property boom of its own.

The property boom is world-wide and if this continues we’ll end up with a glut of housing/resorts/hotels/offices.

[Allan from Fallbrook]

Spring article from The Economist on housing. Main focus is America, but it addresses housing markets internationally, including those most likely to experience some pain.

Perry, somewhat off topic: There are trade reps from Macedonia making the rounds right now touting the benefits of moving one’s business there. Benefits/perks include low personal and corporate tax rate, upgraded infrastructure and access to Central Europe and the Balkans. Concurrent with this, they are also discussing improvements being made in the residential and commercial property sectors. I wonder if they would throw in one of those beach houses in Montenegro.

Link to article:

http://www.economist.com/opinion/displaystory.cfm?story_id=8888776

[Allan from Fallbrook]

Spring article from The Economist on housing. Main focus is America, but it addresses housing markets internationally, including those most likely to experience some pain.

Perry, somewhat off topic: There are trade reps from Macedonia making the rounds right now touting the benefits of moving one’s business there. Benefits/perks include low personal and corporate tax rate, upgraded infrastructure and access to Central Europe and the Balkans. Concurrent with this, they are also discussing improvements being made in the residential and commercial property sectors. I wonder if they would throw in one of those beach houses in Montenegro.

Link to article:

http://www.economist.com/opinion/displaystory.cfm?story_id=8888776

[Author]

Posts