Saturday, August 20, 2005

Friday's stream of consciousness

What do I know and when did I know it? There is definitely increasing chatter about rising inventory and perhaps some moderation in prices in certain regions of the country. Certainly, I don't see anything breaking in NJ. However, it seems to me that the condo market is getting itself into a little bit of trouble. That is the first place where we will see an oversupply, and thus a changing of the supply-demand dynamics. My best guess is that this is where we will see the first hit. I believe it will become apparent in the late Fall/early Winter. If the problems in condoland spill over into the credit markets, that is when we may start seeing problems on a larger scale. Real estate is illiquid, that is it's strength, but it is also it's weakness. Speculators owning multiple units will not be able to all run for the door, hoping for a greater sucker to bail them out. It just cannot happen. This kind of supply side shock would really knock the door down on this debacle. On the deman side, AG has to contininue to increase rates to squeeze the life out of the marginal creditors/debtors. I think a soft landing is only possible on a national scale. The hot market are going to get killed. It is unavoidable. A great wealth vortex will be created as speculators start rushing for exits en masse. Pride cometh before the fall.


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