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Originally Posted by raveneye
That makes a lot of sense . . . and it implies that as the interest rates inevitably start to rise, the prices will fall there and everywhere else that is dependent on those California prices and speculation. Some markets will stay stable for sure, but southern California I think is at the top of the heap, and I think they will be the first to feel the bubble.
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Yeah. Saw a report on the real estate boom on PBS last night; it's getting to the point where most people buying in the "hot" areas are coming in with five-year interest-only loans which configure as regular loans (sounded like mostly with variable interest rates). Some people do it because it's the only way they can get into the market, and they think it's their last chance. Others do it to buy as much house as they possibly can, because they think that'll bring 'em more money when they "trade up" in a few years.
Such strategies presupposes continued low interest rates for years, and I think that this is a very shaky assumption. I do know that, privately, real estate agents in my area are urging older homeowners to _sell now_ to get the most out of their house before the market turns, at the same time that they tell younger buyers to _buy now_ to get into the market before it moves out of reach forever. Nice guys, I tell ya. But their job is to move houses, and that they do. One of my neighbors is a financial advisor for well-heeled Silicon Valley types, and she tells me that most of them still have a blind faith in real estate as the ultimate safe investment because "you never lose money." And that's really not true.
At any rate, a lot of very expensive houses have just come on the market in the past month around here; there are "for sale" signs all over, where several months ago hardly anything was for sale. And in my neighborhood, several of these are homes that were just bought in the last five years or so, and then remodeled. The smart money -- which is to say, people who already have money and property and/or have speculated -- are cashing in on the housing boom and getting out before it goes bust. Someone else will be left holding the bag.
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We're actually thinking seriously about moving to Croatia (from Miami) right now -- we have family in Zadar and Berlin, and could set ourselves up very nicely near the Adriatic; possibly also keep an apartment in the states, probably Portland, so that we can come back if necessary. But Croatia is at the beginning of a boom right now, very safe, and beautiful, and cheap, because still not part of the EU.
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Well, that's sure taking yourself out of the equation. Are you going to move your money into euros while you're there? Could be wise.