We're all doomed. Doomed! DOOMED!!!
"There's too much money chasing too few good deals, with too much debt and too few brains." The amateurs are going to get trampled, he explains, taking seasoned horsemen, who should get off the turf, down with them.
When top real estate investors are tipping their hands openly, events are becoming very tenuous indeed. Major REIT insiders and hedge funds have been selling into the housing bubble now for over six months. (Learn More?) The refinance industry is a game for losers now. Yet, major web sites have hundreds of banner ads displayed, urging people to refinance today.
Does anybody with half a brain want to borrow 90% of their current home value today? For what reason? Pay off all your credit cards, buy a new SUV, remodel the house, and take the excess and plough it all into the stock market? With the new Bankruptcy Act in force, borrowers will be dead meat when their homes fall in value. Foreclosures will flood the market. Debtors will pay and pay for many years after their homes have been taken back by the bank.
Nothing to see here, people. No bubbles here. No bubbles anywhere. Time to move on.
I heard months ago that even Robert Kiyosaki (the "Rich Dad, Poor Dad" guy who IMO fueled a lot of amateur RE speculation) is not currently in the market.
Cool, does that mean property values will plummet bringing down my taxes? No, didn't think so.
it is called gambling.
know when to hold em, know when to fold em
applies to
* gambling
* stock market
* real estate
* ...
(ok, it is more than chance... but capitalism=risk, there is no way around that fact)
while i agree with the whole "amateurs" are going to get trampled -- that is true in the stock market too -- i think banks providing high risk mortgages (100% financing, interest only loans, ARMs that they know the buyer won't be able to afford in 3 years, etc.) are much more the root cause of any current problems than "too much money chasing too few good deals".
the bursting bubbles will be somewhat isolated... around here you can still go to the sheriff's sale and pick up a house for $30k. when the bubbles do burst (a) banks are going to be the losers and will happily take short sales versus loosing it all and (b) you're going to have a lot of people needing someplace to live.
Bookmark for later reading.
A big Dem and Clinton supporter, along with his partner Winnick of Global Crossing ... and of course a friend of that other Dem Donald Trump.
I would take anything he says with a grain of salt, if not as a contra-indicator.
For example, in my market, only 20% of condo purchasers are investors, a number that has remained steady for 20 years. The rest are owner-occupiers. There is no bubble to burst, at least not in my town. Builders are under cost pressure, but they have years of profits to fall back on, so the project gets built. They just may have to settle for a 15% profit instead of the projected 25%. Of course thay'll tell anyone fool enough to listen that they are losing money on the project and just have to give you cheaper Chinese granite for your counter tops. It's all the usual BS.
Increasing construction costs should increase the value of existing homes. I think this guy is full of it. Perhaps he's trying to drive some risk-averse speculators out of the market to increase his profit margins.
ok, I've now read the Fortune article that the CNN article is based on.
http://www.fortune.com/fortune/investing/articles/0,15114,1117911-5,00.html
As can be expected CNN has taken the article and twisted it into what they want it to say, i.e. "the sky is falling".
All it is is a real estate mogul who knows a good deal when he sees it and a bad deal when he sees it. Worldwide. He also chases 20%+ returns.
And, as stated in the ORIGINAL article, he is not "dumping" his U.S. investments, just not buying them up as quickly. In reality he "dumps" practically everything he buys -- he's a property flipper, but one who plays with a few more zeros at the end than the rest.
"Other U.S. properties occasionally catch his eye too. In January he plunked down $305 million to buy a rental-apartment tower on the ocean in Marina del Rey, near Los Angeles, from Zell's Equity Residential. Why? Barrack calculated that a quick conversion to condos would give him a windfall."
ooh noo, the sky is falling... not.
The reason Barrack likes casinos is that he's licensed to operate casinos in all the major markets, while most other private equity firms and other financial players don't have licenses. Hence, they're locked out of the market, and can't bid against Barrack. For Barrack, casinos are a safe, exclusive preserve, far from the frenzied melee that's makes every other part of U.S. real estate such a dangerous place to play.
---
Hmmm... must have bought off enough of our mafia government to 'make it happen'...
Not that I wish anyone ill, but I have not yet bought a house, so a decline/collapse can only be good for me personally. Oh wait, I do wish one particular person ill, but that is all I will say.
It would make sense: I just paid a too-high price for a home. NOW it'll all fall.
If true, this will just provide me the opportunity to get back into real estate investments...
What is this? Bubble warning # 572? Or # 573?
uh, you don't have to refi at 90% LTV
This guy is very, very smart.
NOW (or two months ago) is the time to cash out of real estate holdings that you don't live in.
The time to buy is when recession forces people to sell at firesale prices.
Basic.
I think Portland has a major bubble, prices just increased on herd buying, nothing to show incomes are up.
When the Nasdaq was at 5000 about 3000 points ago, there were a lot people who thought that they were rich. That is because money was chasing more money, and the momentum looked like it would go on forever. I agree with the author, markets become dangerous when amateurs and newcomers are making money riding the momentum and there seems to be no appreciation of risk. Complacency, when you see it in a market which has prospered it might be wise to take some profits off the table. It would be very unwise to leverage the equity which may have recently came your way. History tells us that momentum in any market is not one directional.