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Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade - And How to Profit From Them Hardcover – February 22, 2005
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For most people, their home is their biggest investment. In 2000-2002, when stocks suffered and many businesses went under, the real estate market was a source of stability for the economy. A number of factors, including low interest rates, streamlined mortgage approval, and Internet listings, have helped to fuel the real estate boom in recent years. Although some economists believe that the real estate market may be headed for bubble territory, Lereah disagrees, arguing that continued low interest rates, a healthy boomer population, and the "boomer echo" of next-generation buyers should keep the market healthy for at least the next 10 years. But he says that in order to profit from this sector you should invest now. He offers tips on how to select a real estate agent, the ins and outs of mortgages, tax strategies, home improvements, investment properties, and vacation homes. Senior vice president and chief economist of the National Association of Realtors, he has written numerous articles on the subject. David Siegfried
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“An invaluable book . . . Today’s real estate markets are booming and Lereah makes a convincing case for why the real estate expansion will continue into the next decade. This book should prove to be a truly practical guide for any household looking to create wealth in real estate.” —DEWEY DAANE, FORMER GOVERNOR OF THE FEDERAL RESERVE BOARD OF GOVERNORS
“An important book, whether you agree with the author (as I do) that housing will remain an excellent investment or are convinced that home prices are poised for a plunge, David Lereah lays out a compelling vision of housing as a continuing positive investment—and how you can profit from real estate if you already own the home you live in, are looking to move from rental housing to an owner-occupied home, or want to use real estate as an investment.” —DAVID BERSON, CHIEF ECONOMIST, FANNIE MAE --This text refers to an out of print or unavailable edition of this title.
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A title like this might be helpful, though:
"How to Write Bubble Books to Create Your Own Financial Freedom"
But why this book is important, and why I'd suggest that every investor read it, is because it illustrates exactly the sentiments that lead to absurd behavior in asset markets. Silly assumptions. The belief that the price of some asset will continue to rise. Desperate rationalizations for those price increases. The resulting behavior is not necessarily illegal or unethical (as some other reviewers have suggested), rather it provides a classic case of the mentality that leads to excesses in asset markets. Read this book and learn from it. Because you don't want to get caught up in this kind of garbage.
BTW, I pity the author. Not simply because so many people attack him as an idiot or a shill for the realtors, but because his timing was so appalling. Shiller, who became famous for calling the peak of the dotcom bubble, often thanks his publisher for getting his book out at the right time. This guy's publisher was way way off. (Of course, it also helps if you're not, in fact, an idiot. Sorry David.)
He spins webs of demographics and interest rates, but he never ever addresses the core issues that determine housing values. What is lost here is that housing in itself creates no value, its value is completely predicated upon peoples ability to pay for it. Ergo, housing prices for the last 100 years have tracked income remarkably closely, that is, except for the last five years. Historically, the ratio of housing price to annual income has been 2.1, with very little variation. In many parts of the country, this ratio is now approaching 10.5! Can you say "major correction?" Further, the amount of leverage used to buy homes during this boom has been increased to absolutely unprecidented levels. Even during the last boom of the late 80s/early 90s, the standard was still 30 yr fixed and 20% down. Not anymore. Last year, less than 15% of borrowers put down 20% or more! Further, the 30 yr fixed has been replaced by the IO, or interest only loan. See now, we have the same borrower capable of bidding 30-40% more for a propery without any better credit or ability to repay. Neat trick, but sadly, Lereah at no point addresses any of these fundamentals.
Our stock/housing pattern appears remarkably similar to the one Japan had 20 years ago. First the stock market busted. Right after, the real estate market rallied, and it busted too. The current Japanese real estate market is in a 14 year slide to date, and houses are going for roughly their 1980 value.
Keep talking Dave - we'll need the comic relief soon!
Here is a recent quote from Lereah himself from a May 6, 2008 Newsweek article about the housing market:
"We're not at the bottom," he says. "[People] want it to be near the bottom, but we're not there yet. The leading indicators are still very bad. Pending home sales are still in bad shape. Mortgage applications are low ... There's still supply out there in abundance ... This thing is going to get worse before it gets better."
"We're probably going to end up with a 20 percent [decline], but if I'm wrong it will be even more than that."
Well, since the title of his book is clearly shown WRONG by current events, it would be advisable to skip this boatload of malarkey.