Property Grunt

Tuesday, June 14, 2005

More bubble talk

The Grunt spotted this article in the Wall Street Journal about what would be aftermath of a bubble.

Greg IP makes several points out why a pop in real estate would be far more devasting.

The key difference is that stocks are purely financial investments. You can sell a stock on a whim, and you don't have to run out and buy another. By contrast, people live in houses, and if they sell they have to move -- which is both costly and time-consuming.

Stocks also move as a single market more than houses do because they are subject to many of the same influences and often are bought and sold as part of a broad portfolio. Houses are more subject to local influences. Stocks can also be sold "short" by people who don't own them, or via derivatives. You can't bet on declining housing prices the same way. That means when houses appear overvalued, it's harder for contrarians to nudge them the other way.

With these driving forces of higher transaction costs and longer transaction periods IP points out another possible result

The stock bubble did speed up the adoption of new technologies and business models such as Internet commerce, and those benefits have persisted even after the tech bubble burst.

If everything goes to hell in a handbasket, alot of people will want to liquidate as quick as they can. In my previous entries about the perfect storm and outsourcing rental brokers I think the pop will accelerate these trends. When panic hits the streets owners are going to want to sell ASAP and they are well aware of the fees included in selling so if an entrepeneur presents a less costly solution I think defintely the market will go for that.

Looks like craigslist will be getting more business. Everyone invest in Ebay.