Bulls and Bears? Zinybody know? - Posted by Bill Gatten

Posted by Bill Gatten on May 10, 1999 at 17:12:04:


You’ve found your compatriot. I agree.

I’ve screamed for years that a house is only “worth” what it costs to build it or one like it: the rest is only the fluff caused by the de-neutralization of Supply and Demand.

When people stop buying, the prices can only drop to a level a little above the actual price of nails, sheeting, windowpanes, concrete and shingles. The lower they go, the less it pays to build. At the point where the cost of building a new one, or buying a used one gets close, the builders get out and wait until the general inventory is depleted and the profit potential is more obvious. When the supply is grossly diminised and economic forces begin to dictate good profits for builders, they’re back in until the next point of over supply. Then, once again, movement and prices head back down the proveriable “tube.”.

However, when this phenomena synchronizes with a corresponding relative down-turn in the national or local economy, the problems are exacerbated, and you get what California got in 1990 and what Texas got in the late 80’s (only now beginning to rectify here in California). If the two contributing factors are not coincidental, [creative] real estate investing is seldom seriously impaired for long… it’s when the Recession and the Over-Supply occur simultaneously and feed each other that the “frappe hits the fan belt (so to speak)”

Essentially it’s a matter of “…shouting and waiving it about and everyone else wanting one…(as it were).” When those unwilling to take the risks, start hopping in on the backs of the intreped and sturdily successful, the latter is forced out and the market heads south and stays there until the real entrepreneurs decide its time to get back in the game, despite of (or because of) the down-turn itself. Demand and prices are thus driven back up, richly rewarding those “foolish people” who continued buying (or building) at a time when there was just no chance for appreciation. Then the cycle begins again.

I clearly recall an old gentleman in a Real Estate office here in the L.A. area, about three years ago, folding his arms in front of him during a presentation I was giving, and refusing to sign up for our seminar. “Because,” he loudly insisted, “…the days of real estate appreciation are OVERWITH–not only in California, but everywhere else too–and folks better d… well get it through their selfish thick skulls that free lunches don’t last forever.”

Thanks so much for your response for my plea for help in finding the hot and cold spots across the country. 'Really appreciate it.

I’ve thanked each of the other posts (so far) by private e-mail.


Bulls and Bears? Zinybody know? - Posted by Bill Gatten

Posted by Bill Gatten on May 09, 1999 at 17:39:37:

Any ideas as to where the RE markets across the US (outside of Southern California and Hawaii), are today? I’d truly appreciate any input on areas where properties are most likely to be notoriously over-encumbered, upside down or in a downturned market. And, as well, I’d truly appreciate someone else’s take, on where the general boom markets are today.

Highest regards,

Bill Gatten

Your help would be much appreicated.


Re: Bulls and Bears? Zinybody know? - Posted by Rob FL

Posted by Rob FL on May 10, 1999 at 22:30:46:

Orlando is booming like crazy. How long will this seller’s market last? In 1998, 23,000 new home building permits were pulled in just one of its three counties. In 1999, the prediction based on current trends is 27,000. Every home lot gets presold before they even pave the streets. Unbelievable.

Re: Bulls and Bears? Zinybody know? - Posted by Bud Branstetter

Posted by Bud Branstetter on May 10, 1999 at 22:26:11:


Have you looked at the cities where they have had the military base closings. Some of these would be ideal for your Pactrust. Dallas will still be on the upswing because of the economy and not quite what I think your looking for.

Call me a bear… - Posted by Jim Beavens

Posted by Jim Beavens on May 10, 1999 at 15:40:13:

Portland, Oregon has gone through an explosive expansion in the last 6-7 years or so, and is starting to cool off (an argument could be made that Oregon’s economic well-being is in inverse proportion with California’s ;).

1998 saw a rise in the median sales price of 4.4%, after several years of growth up towards the 10% range. And so far I don’t see the 1999 prices being much higher than where they were a year ago. Frankly I’m very hesitant to buy-and-hold in my local market (which is why I went to the midwest for my first investments…I loved Jim Piper’s comment below about the “land of positive cash flow” LOL ). The 1998 vacancy rate, although still at an acceptable 5.8%, is the highest its been since 1990. So far the main casualty of this slight slowdown is average days on market, which was at an obscene 65 days a couple years ago, and is now at 85 days. Again, this is acceptable, but if it gets too far above the magical number of 90 days, then I think prices might be impacted more than they already have been.

In short, the Portland market is much more sane than it was a couple years ago, which is why I’m excited about the prospects of both buying and selling property here. The reason I don’t feel comfortable buying-and-holding any significant amount here is that despite the slight levelling of the market, new construction continues unabated, and I think this spells bad news a few years down the line.

I’ve discussed my bearish feelings with some professionals at my local real estate investors club, and have yet to find anybody that agrees with me. So who knows…

Re: Bulls and Bears? Zinybody know? - Posted by Mark (SDCA)

Posted by Mark (SDCA) on May 10, 1999 at 10:27:50:

Phoenix is very hot.
Las Vegas is warm but cooling (a lot of new houses are dampening the re-sale market right now).

It would appear that… - Posted by Dennis Rush

Posted by Dennis Rush on May 09, 1999 at 19:21:43:

…the Mid-Atlantic and Mid-West regions have a high percentage of troubled loans. Check out:


New York region also appears to be a bit troubled. Hope this helps.


Re: Bulls and Bears? Zinybody know? - Posted by Lorelie

Posted by Lorelie on May 09, 1999 at 19:07:04:

Boston area is hot hot hot. Things are up 10-15% a year for 2-3-years and sell before they reach the market for asking and more.

Have heard from friends that parts of west MA and upstate NY ar in down markets, although thats hard to imagine from here. (I’m in Boston.)

Re: Bulls and Bears? Zinybody know? - Posted by V.P.

Posted by V.P. on May 09, 1999 at 18:31:59:


As far as boom market goes,Dallas-Ft. Worth and Austin
Tx. is hot and has been for several years. Even though
a lot of folks keep predicting a slow down,it keeps getting hotter.

This goes for new s.f. constr.,apartments,and existing
home sales.Some previously more rural counties in this
area are exploding such as north of Dallas where I live.Land and lots are high and climbing.

Seems like about all that’s needed is a piece of property and a for sale sign.