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-- Posted Tuesday, 12 May 2009 | Digg This Article | | Source: GoldSeek.com
Rick’s Picks Tuesday, May 12, 2009 “Phenomenally accurate forecasts” Will homes maintain their value best in expensive neighborhoods, where homeowners presumably are not under the gun to sell or even to make mortgage payments? I’ve argued the opposite – that in percentage terms, high-end homes are likely to fall the hardest as the nation’s real estate crash runs its course over the next 4-5 years. While it is true that the wealthy, most of whom own their homes outright, do not face jeopardy from mortgage lenders, they could find themselves on the ropes for other reasons, including the failure of a business, or devastating investment losses. That could easily force the sale -- for starters -- of a vacation home, which would put price pressure on all of the other homes in the neighborhood. Keep in mind that prices are set at the margin and that $2 million homes in a high-end development all become $1.4 million homes overnight if just one of the homeowners is forced to sell in a hurry. There is an additional factor working against valuations of high-end residential properties, namely the relative lack of demand, especially in hard times, for custom homes priced above $1 million. Such properties are not in nearly the same demand as 2- and 3-bedroom bungalows, nor do they attract anywhere near the number of bargain hunters. In fact, the market for custom homes with $250,000 kitchens is far more limited than the market for basic homes geared to the broad middle class. ‘Bargains’ in New Mexico The following note from a subscriber reveals how badly the high end has been hit in, for one, New Mexico: “My wife and I have been contemplating moving to Placitas, an upscale area between Albuquerque and Santa Fe. A Realtor I have been working with called me with two smoking deals: 1) A new, never-lived-in house appraised at $1.2 million in 2007, now foreclosure-listed at $749,000. He says I can probably buy for $500,000; and, 2) a house that my wife and looked at during spring break for $650,000, now listed for $599,000, can be bought for $425,000 before it goes into foreclosure. Tempting.” Tempting indeed. But we still believe that home prices will go a lot lower as deflation runs its course over the next several years. Long-Wave (i.e., Kondratiev) cyclists see the trend continuing until around 2015. By then it’s possible that a prediction we billboarded here a while ago will have come true: a Central Park West co-op that has changed hands for as much as $12 million eventually will sell for $250,000. It could be even worse in ski country, where, we’ve predicted, $10 million chalets will change hands for back taxes, and squatters burning furniture to keep warm will have to be evicted. *** Rick's Picks publishes a daily trading newsletter for gold, stock, commodity, and mini-index traders 240 times per year. Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers' initials will be used unless express written permission has been granted to the contrary. All Contents © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Tuesday, 12 May 2009 | Digg This Article | Source: GoldSeek.com
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