World housing bubble burst

[karde]

I am curious as to what plans people are making to protect themselves from a potential bubble burst in world housing prices. Here are two articles from 'The Economist' talking about this issue, I would have posted the entire articles here, but they contain some graphs and statistics that are very important to the read:

"In come the waves
The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops

NEVER before have real house prices risen so fast, for so long, in so many countries. Property markets have been frothing from America, Britain and Australia to France, Spain and China. Rising property prices helped to prop up the world economy after the stockmarket bubble burst in 2000. What if the housing boom now turns to bust?

http://www.economist.com/displayStory.cfm?story_ID=4079027 "


"Going through the roof
The Economist's new global house-price index confirms that spring is in the air. But will the housing booms in America, Britain and elsewhere end in bust?

IF THERE is one single factor that has saved the world economy from a deep recession it is the housing market.

http://www.economist.com/displayStory.cfm?story_ID=1057057 "

 

[ZKaudio]

mortgage liquidation service ;D

 

[flex229]

what am i going to do? i plan on shorting REITS and homebuilders...or perhaps i'll short a REIT-based ETF, if i can find one..

 

[perp69]

My plans are to go the foreclosure sales and buy, buy, buy, buy and buy some more. Right now just sell, sell, sell.

 

[bran987]

what am i going to do? i plan on shorting REITS and homebuilders...or perhaps i'll short a REIT-based ETF, if i can find one..

be careful there, you could be destroyed with that narrow of a strategy.

just because a speculative housing bubble bursts in certain regions of the country, does not mean commercial real estate REIT's will crash, does not mean that Industrial REIT's will crash, does not mean that Storage REIT's will crash, and does not even mean homebuilding stocks will crash. In Dallas the homebuilders are cranking out thousands and thousands of homes and appreciation is nil, there is no bubble here, just an increasing population every year and homebuilders building cheap houses to fill the need.

it was take a SHARP increase in mortgage rates to harm a lot of regions, and that just doesn't seem to be happening despite the Federal Funds rate increases over the past few years.

some homebuilders and REITs could continue to prosper for decades, you don't want to be short those stocks. sometimes the real estate boom and bust cycle hits all sectors and sometimes it is staggered. don't short it until you see a decline begin because both booms and busts can last longer that you'd ever expect them to (people have been saying bubble for 3 years).

if I would short anything it would be resort style developers who build in markets that have doubled and tripled in the past few years without accompanying rental rate increases to offset the mortgage payments, and thus have an abundance of:

1) Investor property
2) Negatively geared mortgages (Negative Cash Flows each month rents don't even come close to covering mortgage payment)
3) Financed by ARMs, Interest Only mortgages, and even now Negatively Amortizing mortgages.

short those markets. that being said, a big enough crash in one area can have ripple effects, just don't throw the baby out with the bathwater.

 

[flex229]

good advice, bran...

 

[bran987]

good advice, bran...

thanks just some things to think about

oh and I read the 1st article that was posted in this thread, it's very informative. I'm going to read the 2nd one after my workout, good post karde

 

[Creepusmaximus]

Bubble will take a while to burst. What's going to screw people are the interest only loans. If they end up upside down on their mortage and interest rates go up, big trouble but it will take a long time for that to play out. Now is not the time to start building million dollar spec homes. To earily to short sell builder stocks.

 

[MattTheSkywalker]

I know this guy that developed a financial product to provide a cushion to people with negatively geared mortgages as the bubble starts to burst.

He's going to make a lot of money doing that.

He also likes tacos.

 

[bran987]

I know this guy that developed a financial product to provide a cushion to people with negatively geared mortgages as the bubble starts to burst.

He's going to make a lot of money doing that.

He also likes tacos.

info. on how to purchase?

 

[MattTheSkywalker]

info. on how to purchase?

Not yet sur how to offer it, ultimately will probably come through insurance brokers or institutions that help us create the product.

 

[gotmilk]

I am curious as to what plans people are making to protect themselves from a potential bubble burst in world housing prices.

I'm going to build another 14 homes in Aspen on Smugglers. 165 acres already zoned. I'm going to sell the homes to rich Hollywood Aspen wannabe's and rake in some serious profit.

Then the housing bubble will mean even less to me than it does now.

 

[Creepusmaximus]

Aspen may work. That's a different market from what most people are dealing with.
Aspen is so last year. LOL BTW. Utah is hot.

 

[gotmilk]

He also likes tacos.

Are you going to contract this out to banks?

 

[MattTheSkywalker]

Are you going to contract this out to banks?

The tacos? Nah, probably Mexican restaurants.

the financial stuff will be sold through insurance brokers.

 

[MattTheSkywalker]

I'm going to build another 14 homes in Aspen on Smugglers. 165 acres already zoned. I'm going to sell the homes to rich Hollywood Aspen wannabe's and rake in some serious profit.

Then the housing bubble will mean even less to me than it does now.

Interesting idea, but construction out there must cost a ton Do you own a construction company?

The building codes out there must be pretty strict. How far down do you have to go to get below the frost line? Are people using trusses out there?

Just wondering. I do a lot of construction and am always curious to see how different parts of the country build.

 

[gotmilk]

Construction costs are not too bad because you have skilled labor that works quickly and efficiently. Homes in Aspen are pretty much the same, use the same materials, and have the same basic layout.

The problem with Aspen is that the Town has major influence over all construction aspects including approval of the design and eventual construction. That's how Aspen controls the "style" within Aspen County.

Building codes are strict including basement depth, type of roofing, right down to the spacing of joists on certain designs. We build homes with finished basements so we do not have to worry about flirting with frost lines because we go well below in order to ensure high basement ceilings.

On the otherhand, 165 acres on Smugglers is a slam dunk gainer. These homes sell for $10 to $20 Million each and go quickly.

You can bypass local zoning applcations by using firms that have pre-approval from the Aspen Planning Board.

A company like this:
www.galambosarchitects.net

I made a mistake last time of cutting a deal with a construction company to help fund the development. This time, I'll find a private investor to split the costs and double my return easily.

 

[MattTheSkywalker]

Construction costs are not too bad because you have skilled labor that works quickly and efficiently.

Aren't you worried you'll have to spend even more to get construction done while weather permits?

Homes in Aspen are pretty much the same, use the same materials, and have the same basic layout.

I don't want to be disagreeable here, but I must. Aspen homes are highly customized; it is not as if you will be building track houses. The custom work is the most expensive, anyone who has tried to DIY their bathroom will tell you that.

Same basic layout? LOL! There are houses in Aspen that have streams flowing through their living room. It is one of the most customized communities I have ever seen. Forget Aspen - how can you tell me with a straight face that homes selling for $10M to $20M have the same basic layout? Any part of the US where housing prices are that high (take for example Carmel, CA....Palm Beach FL and the Hamptons)...the houses near each other have virtually nothing in common, by design.

One of the members on here is a designer in the Hamptons....same crowd as Aspen. if you think the "same basic layout" will apply, you better get used to trophy wives complaining that they don't like the color of the grout in the sixth bathroom.

On the otherhand, 165 acres on Smugglers is a slam dunk gainer. These homes sell for $10 to $20 Million each and go quickly.

You can bypass local zoning applcations by using firms that have pre-approval from the Aspen Planning Board.

I made a mistake last time of cutting a deal with a construction company to help fund the development. This time, I'll find a private investor to split the costs and double my return easily.

based on what you just explained, the only way you're getting private funding for this deal is if you win Powerball.

You need to get in touch with a well known area high end builder. If you have the land, they have probably come to you already, no? So those relationships should be easy.

 

[c3web]

There is no bubble!!!

 

[Creepusmaximus]

There's a middle class I'm going to rich off of my second home bubble. Mark my words.

 

[gotmilk]

Aren't you worried you'll have to spend even more to get construction done while weather permits?

Yes. Obviously.

Same basic layout?

We're not pre-selling lots Matt...we are building 14 homes based on the designs of our architect. Obviously, we have to be different but we use the same materials, same styles. The buyers can customize the interior however they want but the exterior and layout are realtively consistant.

One of the members on here is a designer in the Hamptons....same crowd as Aspen. if you think the "same basic layout" will apply, you better get used to trophy wives complaining that they don't like the color of the grout in the sixth bathroom.

I was refering to exterior, framing, materials. Not the interior design.

You need to get in touch with a well known area high end builder. If you have the land, they have probably come to you already, no? So those relationships should be easy.

This is my second Aspen Development. I realize how people live there...

We made the mistake of sellling the lots to a developer last time. West Aspen, Aspen Highlands both still sold well. This time, we have prime acres near the center of town.

 

[MattTheSkywalker]

Yes. Obviously.




We're not pre-selling lots Matt...we are building 14 homes based on the designs of our architect. Obviously, we have to be different but we use the same materials, same styles. The buyers can customize the interior however they want but the exterior and layout are realtively consistant.



I was refering to exterior, framing, materials. Not the interior design.



This is my second Aspen Development. I realize how people live there...

We made the mistake of sellling the lots to a developer last time. West Aspen, Aspen Highlands both still sold well. This time, we have prime acres near the center of town.

Cool. Would love to see it work out for you. Seems like a tough project.

 

[gotmilk]

It's tough because like you stated...the interiors are the hardest part.

I can build a great home but you get buyers who are so friggen picky you literally cannot finish the insides until you sell the home.

I have a pic of one in my gallery that was built last year in West Aspen.

We made the mistake of selling the parcels last year to a couple of developers. This year, we'll do it ourselves

 

[c3web]

Where do we sign up to buy one?