Where will the real estate bubble end?
Wednesday, April 30, 2008 | Sloopster Is this Spam?The pundits say that this market is cyclical. Each bubble has a wave to come in behind it, and at some point float it again. I'm not sure this is so true with this particular real estate bubble and the demographics of our country right now.
In other bubbles, there is growth to suck up excesses. After the internet bubble, companies went bankrupt, consolidated or thrived. Those without earnings vanished, their servers, offices and personel found other uses. Those with good business models went on to be the Amazons, Ebays and Googles. There were markets for their products and the strong survived. They cut into traditional businesses that often had to reinvent themselves. Money appeared out of nowhere and vaporized just as quickly.
With houses, the picture is different. These are dwellings that are empty; waiting to be occupied, bought up, rented, finished or whatever they need. But the big question is who is waiting to come in behind to fill the vacuum. The number of people to fill the void is not growing as it always has in the past. Families aren't having as many children, houses are bigger and more expensive than ever to fill with furniture, heat and maintain. Builders are building dream homes in huge numbers (or were) and people can't afford the price, let alone the upkeep.
There may be a few areas that will come out of it. South Florida has room for the baby boomers soon to retire. They are still flocking in droves and the weakness of the dollar may allow foreigners to come in and suck up some of the property at fire sale prices. Southern border states may have enough illegals to buy some homes, but what about development in the rust belt, where industry is leaving?
This may be a long haul before the anchor chain is cut.
