Fortune Magazine RE Article - Boom/Bust

Comments(6)

• 
  Dumdido24th September, 2004

  Interesting article - Thanks for the link

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  jeff1200225th September, 2004

  It's gone now. Didn't stay up very long.

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  Gerrym25th September, 2004

  It's still there. You just have to use the complete address:
  
  http://www.fortune.com/fortune/investing/articles/0,15114,693864,00.html

• 
  64Ford25th September, 2004

  Forsome reason the last few digits of the link are being printed on the page by tci, but not included in the link. Just copy and paste those numbers and you should be able to find the article. Good Luck!
  
  http://www.fortune.com/fortune/subs/article/0,15114,693864-1,00.html

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  rajwarrior25th September, 2004

  This story is only available to Fortune Mag subscribers. If it is of interest to the REI community, please get permission to reprint and submit it to the articles section.
  
  Roger

• 
  NailDriver25th September, 2004

  Interesting article which, however, exhibits a flawed logic from some of the "experts."
  
  One analyst states, for instance, "...rents exercise a gravitational pull on housing prices."
  This seems to assume that owners and renters occupy the same consumer pool, and that renters exercise an economic decision when choosing to rent rather than buy. But, that's overly simplistic and actually flawed logic.
  
  These are not identical populations. Renters are actually homebuyers-in-waiting. They are green to the market -- often young people who are not ready for ownership, or potential buyers prevented by present circumstance. The test of this is that you won't find many consumers who believe it is economically advantageous to pay rent when they could own. That why most every renter eventually becomes a property owner.
  
  Therefore, I disagree with the logic that says rental prices will act to keep purchase prices down. Nor do I beleive that rental prices are what buttress home values. Home values are, rather, a matter of simple consumer demand and the ability of consumers to meet the price. Have you ever heard of a consumer reasoning thusly?...: "Well, I'm not going to pay $500,000 for that house since my mortgage payment would be $6500, and I can rent one for just $4000 a month."
  
  Is that supposed to make economic sense? Even a high school drop-out can tell you that a year of such rent is $50,000 thrown away.
  
  No, the "disconnect" these analysts cite between rental prices and home prices is not one of economics. It is one of demographics.
  
  Therefore, it is flawed, I beleive, to say that housing prices must "come back" more in line with historical ratios of rents-to-ownership cost. Demographics set the economic trends, they don't necessarily follow them.
  
  So, I fail to see how low rents will act to burst a "housing bubble."