Sunday, July 10, 2005

Editorial Questioning the Existence of a Bubble

The thing that makes the stock market less risky than the real estate market is that government rules prevent you from leveraging up more than 50%.


"Now, these trends would be something to worry about if the rush on housing were like the high-tech boom that led to the stock market collapse at the end of the 1990s. But it isn't. As Federal Reserve chairman Alan Greenspan has said, there are "signs of froth" in some housing markets that could lead to a quick drop in prices, but nothing that threatens the economy nationally.

This is because, unlike stocks, real estate - even when it loses market value - still has practical use. A stock can evaporate into thin air, but you can live in a house, rent it, renovate it or tear it down and rebuild. You can even sit and watch the paint peel if you want, because it's yours."



Post a Comment

<< Home