Winnipesaukee Forum - View Single Post

secondcurve · 10-20-2005, 09:15 PM

Skip:

The reason I am starting to disagree with people who feel there is no bubble is a simple thing called liquidity. Since virtually anyone can get 100% financing, there is an artificial demand for property. As property increases in value due to easy liquidity the herd mentality, that is so prevalent in human nature, kicks in and property values increase further. My slip example illustrates the point clearly. A previous poster noted that unless you bought the slip you wouldn't build up equity. True, but if you put the cash flow saved by not owning the slip in the stock market or bank, over a 30-year period you would have a pretty good nest egg that might be worth more than the slip! Yes, property values can decline over long periods of time. Look at Japan, property values rose this year for the first time in 15-years! The bottom line is that booms are followed by busts. This is an economic reality.

10-20-2005, 09:15 PM	#24
secondcurve Senior Member Join Date: Jan 2005 Posts: 2,084 Thanks: 1,267 Thanked 557 Times in 286 Posts	Liquidity Skip: The reason I am starting to disagree with people who feel there is no bubble is a simple thing called liquidity. Since virtually anyone can get 100% financing, there is an artificial demand for property. As property increases in value due to easy liquidity the herd mentality, that is so prevalent in human nature, kicks in and property values increase further. My slip example illustrates the point clearly. A previous poster noted that unless you bought the slip you wouldn't build up equity. True, but if you put the cash flow saved by not owning the slip in the stock market or bank, over a 30-year period you would have a pretty good nest egg that might be worth more than the slip! Yes, property values can decline over long periods of time. Look at Japan, property values rose this year for the first time in 15-years! The bottom line is that booms are followed by busts. This is an economic reality.