Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST Election Day. Tuesday, November 7, 2006:
Please vote today. Our only hope of getting out Iraq
soon rests on your shoulders.
+ Politics is
not the art of the possible. It consists in choosing between the disastrous
and the unpalatable. -- John Kenneth Galbraith
+ Politics is perhaps the only profession for which no preparation is thought
necessary. -- Robert Louis Stevenson
+ Politics is supposed to be the second oldest profession. I have come to realize
that it bears a very close resemblance to the first. -- Ronald Reagan
Real estate: How fast real estate is implodes
will affect how much the stockmarket implodes. From yesterday's story, this
full story. Click
estate is about three factors:
Location. Manhattan is hot.
2. Availability, namely what's on the market. Phoenix is over-supplied.
3. Speculation. Hot money appears and disappears. .
York: Brokers tell me Manhattan apartment prices are dropping --
a 5% to 7% drop in price is increasingly necessary to close the sale. Brokers
expect a a blip early in 2007 when Wall Street pays its bonuses. But after that
they expect a further easing in prices as 10,000 new apartments -- mainly condominiums
-- come on the market in the next year.
Commercial real estate continues to boom, with high building prices and even
higher rents, Banks are favoring large Manhattan buildings. A friend recently
is a closing on a $100 million+ building with a phenomenal 92% financing.
Lake City: From USA
Today: Even though the number of single-family homes sold in Salt Lake City
fell last month, the average home on the market in July to September was snapped
up in just 27 days down from 42 days in the third quarter of last year.
At the current sales pace, there's only a 2.7-month supply of homes on the market,
less than half the national supply of 7.3 months.
"A lot of
people are moving up from California, Arizona and Las Vegas and saying, 'Wow,
your prices are still reasonable,' " says Sharon Spratley, president of
the Salt Lake Board of Realtors. Chart from USA Today:
Arizona: from today's New York Times:
For Sale Is a Sign of the Times
PHOENIX Until recently, this fast-growing area was a paradise on
earth for home builders. Fulton Homes developments, for example, were
so popular last year that it was able to raise prices on its new homes by
$1,000 to $10,000 almost every week.
were standing in line for lotteries, recalled Douglas S. Fulton, president
of the company, one of the largest private builders in the Phoenix area. And
they were camping overnight begging to be the next number in the next
lot in the next house.
Today, it is
the companys sales agents that do most of the waiting. Not only are
there few new customers to talk to, but many buyers who put down a deposit
are not even bothering to come back for the walk-through.
a sudden, they just dont show up, Mr. Fulton said, noting that
such cancellations often mean the buyers forfeit as much as 5 percent of the
price. The reason? The prospective buyers got cold feet or simply could not
sell their old home.
contrast tells the tale of a housing bonanza turned bust. Today, the number
of unsold homes in the area has soared to almost 46,000 from just a
few thousand in early 2005. And builders are pulling back as fast as they
They have little
choice. Sales cancellations among big builders, not just here but around the
country, are running as high as 40 percent, double the rate a year ago.
Across the nation,
new-home sales are down by more than 20 percent from their peak last year.
Prices fell almost 10 percent in September from a year ago. And that reported
drop does not take into account the extras that builders are throwing in free
or at steep discounts to lure buyers, which means that effective prices are
in fortune is at its starkest here in the West. For-sale signs in some new
subdivisions are so common that Janet L. Yellen, the president of the Federal
Reserve Bank of San Francisco, recently described them as the new ghost
towns of the West.
may not be blowing through the dozen new developments along Hunt Highway in
and around Tempe, but driving down the two-lane road about 30 miles southeast
of downtown Phoenix provides a revealing look into the areas now vanished
Road signs welcoming
visitors to Pinal County proffer a menu of new subdivisions. Looking for houses
by D. R. Horton, the nations largest builder? Keep driving, you have
not far to go. Make a U-turn for KB Homes latest four-bedroom Mc-Mansions.
For Centex homes in the Johnson Ranch development, hang a right after the
there are plenty more down the road.
So it goes in
this and other suburbs of Phoenix, where builders turned scraggly desert and
what were once cotton fields into neat rows of homes so fast that traffic
on many country roads is often backed up a mile or more during rush hour.
issued 60,000 single-family permits in the metropolitan area in 2005,
twice the number issued in 2000. But in the first nine months of this
year, permits fell by 27 percent from the same period last year. And
builders are suddenly refusing to pay the asking prices for developable land.
On the strength
of a local economy that has added 300,000 jobs since 2000 and a population
that grew nearly 20 percent from 2000 to 2005, Phoenix became an epicenter
of the nations recent building boom, along with Las Vegas and Atlanta,
as well as parts of California, Texas, Florida and stretches of the Northeast.
its endless sun, lush golf resorts and myriad retirement communities, also
attracted thousands of second-home buyers looking for bargains and investors
seeking instant wealth.
The influx of
buyers from California, many of them individual speculators, was so strong
that builders overestimated demand and constructed a lot more homes than there
were people wanting to live in them, said John Burns, a real estate consultant
in Irvine, Calif. He noted that investors bought roughly a third of homes
sold in the Phoenix area last year, according to mortgage application data.
the calculation was fairly simple for individual real estate investors. You
put $5,000 down and you sell it for a $100,000 profit, sometimes almost
before the paint dried, Mr. Burns said. And then you roll into 15 more
are gone. But builders predict that the current downturn will last no more
than six months to a year, arguing that prices and sales will start rising
again after the homes on the market are absorbed by the normal influx of migrants
to the area.
Though job growth
here is not as strong as it once was, local developers like Mr. Fulton contend
that most of the positive fundamentals of the regions economy remain
plans to hire several hundred employees here is frequently cited as a sign
quickly grow out of it, said Gregory J. Vogel, a land acquisition consultant
in Scottsdale who advises builders and developers, noting that before the
boom it was considered normal to have about 30,000 homes on the market at
any given moment.
But other experts
are not as sanguine. They worry that the supply of homes overshot demand by
far more than is commonly understood.
time all the dust settles, will this be an 18-month correction or a 36-month
correction? said Thomas Bruin, chief executive of Hearthstone, a firm
based in San Rafael, Calif., that invests pension fund assets in land and
residential real estate. Nobody really knows.
that the construction sector, itself dependent on the housing boom, accounted
for about a quarter of all new jobs created in the last six years.
Lower-paying retail jobs added about 15 percent. ...
correction has, thus far, had only a modest impact on the broader economy.
While home builders have cut back, contractors remain busy erecting shopping
malls, office buildings, schools and civic projects. Builders and contractors
say the costs of concrete, drywall, copper and other building materials remain
high, though the supply shortages seen last year have dissipated. ...
my life: A friend said he dialed a number and got the following recording:
"I am not
available right now, but thank you for caring enough to call. I am making
some changes in my life. Please leave a message after the beep. If I do not
return your call, you are one of the changes."
German electricity company E.On caused the Nov. 4 blackout that left
10 million people in Western Europe without power for an hour, the company confirmed.
The company switched off an electricity line over the Ems River to allow a cruise
ship to pass, cutting power to people in Germany, France, Italy, Spain and Portugal.
virtues of marriage:
Instead of getting married again, I'm going to find a woman I don't
like and just give her a house." --Rod Stewart
neat catalog. B&H photo is New York's largest photo, video, pro
audio store. I buy all my photo stuff from them. They have some really neat
catalogs. Their main catalog comes in Spanish, Portuguese and English. The catalogs
are free and are great reading. Click
and the Guru. Marvin was a deeply spiritual man, a seeker of truth.
He went to synagogue every week for years. Eventually realized his soul needed
more than Judaism could give him. He tried Buddhism, Christianity, Islam, Hinduism,
and New Age religions. He still felt spiritually empty.
One day, he heard
about a great guru living atop the highest mountain in India who had all the
answers. He sold all his worldly possessions, bid good-bye to his friends and
family, and headed east. Once on the subcontinent, he learned that the guru
would agree to see only one person a year and that person would be allowed to
ask only one question. There were many other truth-seekers ahead of Marvin,
so he had to wait nearly twenty years to see the great man. During that time,
he lived in poverty, at the base of the mountain doing menial tasks. When his
turn finally came, he made the perilous journey up the snow-covered mountain,
and waited for a week in the freezing cold in front of a cave, until the guru
your question, my son?" the guru asked.
Marvin had been
rehearsing this for years, and said, "Oh, wise one. What is the meaning
son," said the guru ponderously, "is a deep well."
Marvin's jaw dropped
open. He could not control his shock and anger. He screamed at the guru, "'Life
is a deep well?' That's it? I've given up everything I owned. I abandoned my
friends and family, spent years living in abject poverty, even lost my toes
to frostbite getting up here, and that's the best you can do? 'Life is a deep
The guru looks
at him quizzically. "What? You mean it isn't?"
This column is about my personal search
for the perfect investment. I don't give investment advice. For that you have
to be registered with regulatory authorities, which I am not. I am a reporter
and an investor. I make my daily column -- Monday through Friday -- freely available
for three reasons: Writing is good for sorting things out in my brain. Second,
the column is research for a book I'm writing called "In Search of the
Perfect Investment." Third, I encourage my readers to send me their
ideas, concerns and experiences. That way we can all learn together. My email
address is .
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