Dines:
Still Bearish on Real Estate?
By James Dines, editor
The Dines Letter
Bill Clinton ran for office by first having nailed
down the left wing of his party and then later having moved right
to nail down its center; Bush has been nailing down his right
wing and he will move left to nail down his center!
It is important
to recognize that Bush has very little control over interest
rates, an important factor in real estate. Fedhead Greenspan
can only impact short-term interest rates, which indeed
have been declining, but longer-term rates have been rising.
What the market is saying, to those who are alert enough
to listen, is that pressures for higher interest rates are beginning
to accumulate and that the Fed is trying to hold back the tide.
Real-estate prices have gotten way too high, especially during
an onrushing recession, but so far the weakness has been primarily
limited to the commercial real-estate market, as the excepts
at the end of this feature show.
We flashed a
Major "Sell" signal on real estate back on 7 July 00
at the tippity-top of the previous boom, and see no reason to
disturb that position as of today.
The next phase
we expect is a severe decline in residential-home prices
please don't blame the messenger for the news. Selling a home
differs from selling a stock in that it lacks liquidity and fungibility.
Unlike stocks, selling a house takes time. Unlike stocks, sometimes
there are simply no buyers at all, and so are completely illiquid,
whereas blue-chip stocks can be liquidated immediately.
That is why
real-estate Tops feature an increasing drying up of transactions,
as sellers continue to dream of the high prices of yesteryear.
Later, stalked by Mass Fear, the catch-up slashing of prices
becomes melodramatic and much steeper than the more-orderly bear
markets in stocks. Therefore we conclude that the headlines later
this year or conceivably in 2002 will feature "shockingly
sudden" and steep real-estate declines.
Editor's Note: James
Dines is editor of The Dines Letter, P.O. Box 22, Belvedere,
CA 94920, 1 year, 17 issues, $195.
