Thursday, June 08, 2006

Sell Now!

A casual glance at the striking cover of “Sell Now!: The End of the Housing Bubble” by John R. Talbott gives the distinct impression that a reader will be treated a popular characterization of modern times with a decidedly “doom and gloom” outlook.

Although it’s true that the book does forecast some pretty gloomy times ahead, it’s hard to dispute the data Talbott presents.

After dispelling some common myths (baby boomer demographics, construction regulations, immigration, etc.) that otherwise might substantiate the hyper inflated run up in home prices virtually every major metro housing market has experienced in the last 10 years, Talbott goes on to present both the reasons for our current national housing bubble as well as predictions for where things may be going.

Particularly interesting was a section that covered the housing bubbles that have been occurring simultaneously all over the world (except Japan and Germany). This provided some compelling evidence that would suggest that any “local” explanation of the US housing bubble, that is, one that relies heavily on statistical evidence found only here in the US, is probably incorrect.

In Talbott’s view, (with some significant substantiation) the housing bubble was caused primarily by a relaxation of lending standards that had the effect of both creating many more home buyers as well as enabling each buyer to borrow significantly more money with significantly less (and even no) initial investment. Couple that with the basic foibles of human nature as it relates to the frenzy of market speculation, as well as the basic desire for many to both seek and flaunt exclusivity, and you’ve got the first class makings of a mass hysterical, hyper-inflated bubble.

The US Census data does seem to support Talbott’s case as the level of home ownership rose only 1.9% from 1960 to 1994 (that’s a 34 year span) but then abruptly jumped an additional 5% from 1994 to 2004. Additionally, total mortgage debt in the US has nearly doubled in just the last five years.

This book is particularly revealing to the reader who has only been a homeowner during the last ten years, as it dismisses some common misconceptions that have simply become all too commonplace in an environment where prices always seem to rise.

Most importantly, inflation adjusted home prices, that is, real home prices, have generally stayed flat from 1890 to the mid 1990s. Sure, there where ups and downs but over the long run, residential real estate is not that great of an investment if viewed only from a price standpoint. Long term, home owners should consider themselves lucky if they merely beat inflation.

So where does Talbott see things going in the next five years? Well, he presents some compelling evidence to suggest that the basic fundamentals that typically drive housing prices such as household income and inflation have remained relatively flat for the last 10 years. Given this, Talbott insists that one end of the market pricing has to be wrong. Either 1997 home prices were grossly undervalued or 2006 home prices are grossly overvalued, you can’t have it both ways, one end is wrong. Obviously, in Talbotts view, 2006 prices are wrong and will soon correct to account for that error.

If you want to know where things may go in your area, Talbott produces a chart that lists many (if not most) major US housing markets with his predictions of how far each market may drop over the next 5 years. Its disturbing to see just how many markets may be as much as 40% to 50% overvalued. Clearly if Talbott’s predictions are correct, we are in for some gloomy times indeed.


  1. It is striking me most that the housing bubble and the recession was anmalyzed and predicted by the book before. At that time when he has written the book, there everyone were happy with the bubbles and some people can only sense that the bubble is going to burst. I had checked some blogs on finance also which had predicted them before. Hope everyone had read them before and rectified them accordingly to avoid the recession.

  2. The idea using the Nike soccer cleats Elite Legend soccer shoes, may maybe be considered a carry out result of Nike's extensive investigation and participant testing. Their findings showed the Nike Football Cleats common energy expenditure of an elite participant is greater than 1,000 Kilo fat laden calories every Cheap Football Boots online game for just about any 75kg player.

    minimizing the unwanted fat carried by New nike soccer shoes game fanatics facilitates reduce the energy required greater compared to program of 90 minutes. By Nike Mercurial Vapor Superfly delivering a super-strong and lightweight carbon fibre plate, the Elite Nike Tiempo Legends are lighter compared to common Best Football Boots boots to provide game fanatics an borders through the decisive last stages of the game.

  3. The Nike Elite football boots are supplying new quantities of performance, as well as the Nike Elite Tiempo Legend Nike mercurial soccer cleats really are a testament to this. We'll be looking for to create once the Mercurial Vapor Superfly 3 likes of Gerard Pique, Raul Meireles, Andrea Pirlo and Joe Cole pastime these new celebration Red/Metallic Silver Nike Football Boots Sale Elite Tiempo Legend football boots.

    A new Nike Mercurial Superfly age of 'smart football' has arrived for adidas. The adizero miCoach engineering delivers intelligence for that place of play. By permitting which you totally grasp your all round Mercurial Vapor Superfly standard performance data, you can educate using the would like even although comparing your information for that World's most beneficial athletes and breaking your Mercurial Vapors particular assortment and amount records.