The last part of the series..Investors flipping over second homes
Prashant and Dave could have done some good by illustrating some of the current risks inherent in real estate speculation, especially today.. Unfortunately, I think they have done more harm than good by justifying the current run up in prices and almost entirely neglecting to discuss the downside risks of a reduction in value..
I read a quote like this:"I don't see how you can lose money," he says. "You might not gain a lot, but I don't think you can lose, especially the way real estate is going."
And think to myself, "This guy is an idiot, he's ignoring any warning signs and is nothing but a stereotypical speculator looking for huge short term gains".. However, I'm sure there are plenty of people that see a quote like that in print and see it as a rationalization or even use it as support for making a dumb decision..
These articles all seem to start on the same foot, Joe Speculator making a windfall. They then move on lightly tread across some minor risk, then finish up by saying it really can't happen here.
In this case, we've got the windfall, we talk about some minor risk, point to Miami and South Florida as risky areas, and end with a note on builder non-speculation clauses in NJ (Can happen there, but certainly not here).
Prashant and Dave, sorry if I'm being hard on you guys, I do feel that you've done good work, but you've got to understand our standpoint. We've seen nothing but cheerleading from the media filled with anecdotes about easy money and little risk. The conditions that fueled the boom are radically shifting, and new buyers are facing significant financial risks, and it seems that the media is more concerned with bragging about easy money. New and first time buyers have no where to look for real market information. Agents, brokers, builders, and lenders have a vested interest in the boom continuing. The media, while attempting to be neutral on the issue, seems fixated on the easy money, further fueling the problem. Nobody seems to care about the potential downside risks except possibly the Fed, and only as of very recently. This is why I have to be the bad guy, the doom-and-gloomer. I need to emphasize the downside as strongly as everyone else emphasizes the upside. If I save one new buyer from financial disaster, I'll feel my work was worthwhile.