Unreal Estate

By Ramesh Akkineni
Jim Rogers says this about real estate boom - Even though a home will rarely lose all its value as shares of a company stock or a 401(k) can, those who think that real estate is a guaranteed moneymaker are living in a dream. I like to peruse the real estate section of the newspaper every week to get a sense of what my home is worth. Based on what I've seen, I ought to sell. Here's my rule: If the price of your home is more than you would spend yourself, you should seriously consider selling, especially if it's a second home or an investment property.
Obviously, no one wants out of a good thing while it's still flying, but prudence has its benefits. In 1987, the Nikkei index broke 20,000 for the first time. People said it would never stop. Others got out, saying it was overpriced. By December 1989, it had reached nearly 40,000. Today it's trading at around 11,000. What did a wise investor once say when asked how he got rich? "I always sold too soon."
People want to believe a boom, whether in oil, real estate, or the Internet will last forever, ignoring history and experience. Builders and developers will argue otherwise, saying that yes, prices may go down a bit, but not where they are selling, not where they are building houses. They have better locations, better designs, more house for the money. It's the same thing you hear in any bubble; the "Goldilocks economy" we heard so much about in the 1990’s; not too hot, not too cold; It's just right. They say we'll have a soft landing. But has there ever been a soft landing when a bubble popped?

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