Monday, June 27, 2005

"Everybody Knows this is Nowhere"

Plenty of people have come up with similarities between the bubble in Internet stocks in the late 90s and today’s bubble in real estate. One similarity that I have noticed lately is the apparent interest in third-tier cities or non-vacation types of rural areas by real estate investors, and the late 1999 interest by stock investors in extremely questionable companies.

In the last days of the Internet bubble, a lot of totally worthless companies got bid up because they simply had a domain name. Some of these companies, like and never had a remote chance of making any money. There only appeal to investors was that someone else might pay more for the shares than they did. This is what I believe is happening to real estate in some areas of the company. People are buying properties in very undesirable locations for the simple reason that, 1.) they can only afford to buy in that area, and 2.) someone might pay more in the future. These areas include places like Pahrump, Nevada, which is a dusty trailer park an hour and fifteen minutes from Las Vegas, Bakersfield, California and the boondocks of Maine. In short, these parts of the country should not ordinarily attract any outside interest from real estate investors and I believe that the only reason they are attracting interest is because of rampant speculation.


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