Albert Lowry, Ph.D.: Featured Real Estate Investing Speaker for the 2005 Real Estate Investing Expo

Will Housing Prices Crash?

by Albert Lowry, Ph.D.

After the recent breathtaking frenzy of house-buying and mortgaging, the conventional wisdom is that there must be a bust. “What goes up must come down” says the adage. You look at houses that have quintupled in price and you wonder if this is a bubble, a craze, like the seventeenth-century tulip frenzy in Holland when the growers bid up the price of one tulip bulb to half the price of a stout ship.

“Bubble” said the Wall Street Journal, Business Week, Forbes, Barron’s, Financial World and Money. “No boom lasts forever,” warned Forbes. “All such obsessions have ended in crashes,” warned Business Week.

Could there be a crash in property values? At least, there could be a shakeout of foolish speculators. Obviously, if someone buys ten condos and pyramids them, using unrealized paper profits from one to borrow for a down payment on the next, that speculator can get foreclosed. If rents don’t cover debt service, if taxes go up faster than cash flow, if the turnover game slows down, speculators are vulnerable and so are property prices. Bidders pull back when they suddenly see plenty of property for sale.

A crash in one town doesn’t necessarily cause a ripple ten miles away. There is no central market for real estate, as there is for stocks and commodities, where the whole country reads the same price and reaches for a phone. Moreover, in most places, speculators do not own ten condominiums.

In central markets, falling prices trigger selling if people believe prices will go still lower. But the current generation of homeowners isn’t likely to sell, even when prices dip; they are more likely to hold on and wait, because they need a place to live. There are 66 million houses owned by the people who live in them—and if too many had to sell at sacrifice prices, any government that let it happen wouldn’t stay in office much longer.

Another reason why I can’t see a crash: prices are set by supply and demand. The pent-up demand for housing is enormous and makes itself felt wherever possible, because this demand far outruns the supply. Look around and you see few empty houses and few vacancies in apartment buildings.

And the demand must grow. More than forty million people will reach their thirties in this decade, the largest such group in U.S. history to enter the household-forming age in one period. Married or single, those thirty-year-olds don’t want to live with their parents. They want houses or apartments—in most cases houses, if possible. Even high interest rates and a major recession won’t completely stifle their demand. How can prices crash when housing is scarce???

Albert J. Lowry, Ph.D. is a best-selling author and internationally-known expert in real estate investing. He mentors one-on-one and gives seminars throughout the U.S. and across the world. More than 350,000 students have taken his courses. Albert is also director of the National Investors Association, 7500 W. Lake Mead Blvd #9-428, Las Vegas, NV 89128, Phone: 702-562-1277, Fax: 702-562-1276


	Will Housing Prices Crash? by Albert Lowry, Ph.D. After the recent breathtaking frenzy of house-buying and mortgaging, the conventional wisdom is that there must be a bust. “What goes up must come down” says the adage. You look at houses that have quintupled in price and you wonder if this is a bubble, a craze, like the seventeenth-century tulip frenzy in Holland when the growers bid up the price of one tulip bulb to half the price of a stout ship. “Bubble” said the Wall Street Journal, Business Week, Forbes, Barron’s, Financial World and Money. “No boom lasts forever,” warned Forbes. “All such obsessions have ended in crashes,” warned Business Week. Could there be a crash in property values? At least, there could be a shakeout of foolish speculators. Obviously, if someone buys ten condos and pyramids them, using unrealized paper profits from one to borrow for a down payment on the next, that speculator can get foreclosed. If rents don’t cover debt service, if taxes go up faster than cash flow, if the turnover game slows down, speculators are vulnerable and so are property prices. Bidders pull back when they suddenly see plenty of property for sale. A crash in one town doesn’t necessarily cause a ripple ten miles away. There is no central market for real estate, as there is for stocks and commodities, where the whole country reads the same price and reaches for a phone. Moreover, in most places, speculators do not own ten condominiums. In central markets, falling prices trigger selling if people believe prices will go still lower. But the current generation of homeowners isn’t likely to sell, even when prices dip; they are more likely to hold on and wait, because they need a place to live. There are 66 million houses owned by the people who live in them—and if too many had to sell at sacrifice prices, any government that let it happen wouldn’t stay in office much longer. Another reason why I can’t see a crash: prices are set by supply and demand. The pent-up demand for housing is enormous and makes itself felt wherever possible, because this demand far outruns the supply. Look around and you see few empty houses and few vacancies in apartment buildings. And the demand must grow. More than forty million people will reach their thirties in this decade, the largest such group in U.S. history to enter the household-forming age in one period. Married or single, those thirty-year-olds don’t want to live with their parents. They want houses or apartments—in most cases houses, if possible. Even high interest rates and a major recession won’t completely stifle their demand. How can prices crash when housing is scarce??? Albert J. Lowry, Ph.D. is a best-selling author and internationally-known expert in real estate investing. He mentors one-on-one and gives seminars throughout the U.S. and across the world. More than 350,000 students have taken his courses. Albert is also director of the National Investors Association, 7500 W. Lake Mead Blvd #9-428, Las Vegas, NV 89128, Phone: 702-562-1277, Fax: 702-562-1276 Copyright 2004, Rogue Investor, LLC \| Privacy Policy \| Terms of Use