Real Estate Reference Housing Bubble: The New Real Estate Conspiracy
Thursday 28 March
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  by Dr. Steve Sjuggerud

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  sale today was likely less than $300,000 back in 1999. Now they're asking $999,000 - for a cookie cutter-house, in a cookie-cutter neighborhood, with nothing special about it.

It's a frenzy in Florida now. "Get in before you can't afford it anymore." That's the name of the game. Don't worry. Reality will assert itself...

Some "Real Facts" on the Housing Bubble

So that's some anecdotal evidence. Now let's look at some housing bubble facts...

For hard evidence, Jim Grant reported some fascinating numbers in his latest issue of Grant's Interest Rate Observer. Jim says that from 1983 to 1998, housing sales stayed relatively constant, representing between 8% and 10% of GDP (the economy). Then things took off...

As of the latest numbers, home sales as a percent of the economy are at 17%. For the statisticians out there, that's 3.4 standard deviations from the mean. For the non-statisticians out there, speculation in home buying is literally off the charts. Said another way, it's not a Wall Street conspiracy that speculation in housing is at a statistical extreme; it's a fact.

Grant simply can't fathom the speculation in housing. Grant brings up a point about this: He basically says if you buy a house hoping to flip it within a year, you're hoping for miracles... as you have to sell the house at a profit of greater than 15% more than you paid for it, just to cover the expenses incurred along the way (commissions, property taxes, taxes on the transaction, the interest incurred from holding it a year, maintenance, etc.)

It's hard to be a short-term trader of real es
 
     
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