Real estate-crazed Americans have started behaving in ways that eerily recall the stock market obsession of the late 1990's.

In Naples, Fla., some houses have been bought twice in a single day, an early-21st-century version of day trading. Buying stocks on margin has morphed into buying homes with no money down. The over-the-top parties of Internet start-ups have been replaced by flashy gatherings where developers pitch condos to eager buyers.

Five years ago, the cable channel CNBC sometimes seemed like a backdrop to daily American life. Its cheery analysis of the stock market played in offices, in barbershops, even in some bars. Today, "Dude Room," "Toolbelt Diva" and other home-improvement shows are the addictive fare that CNBC's exuberant stock shows once were.

"It just seems like everyone is doing it," Laurie Romano, a 26-year-old self-described real estate investor, said with a giggle as she explained why she was attending an open house this month for the Nexus, a 56-unit building going up in Brooklyn's chic Dumbo neighborhood. She and her fiancé, a dentist, had already put down a deposit on a Manhattan condo earlier in the week and had come to look at another at the Nexus.

Nobody can know whether the housing boom of the last decade will end as the dot-com frenzy did. But the parallels are raising alarms among many economists, even those who acknowledge that there are important differences between homes and stocks that significantly reduce the chances of another meltdown. For one thing, houses are not just paper wealth: you can live in them.

Still, perhaps the most troubling similarity, some analysts say, is the claim that the rules have somehow changed. In an echo of the blasé attitude that "new economy" investors took toward unprofitable companies, the growing ranks of real estate investors are buying houses they never expect to be able to rent at a profit. Instead, they think the prices of houses will just keep rising.

Indeed, the government reported yesterday that sales of new homes jumped sharply in February, in the biggest monthly increase in four years. A strong economy and an improving job market contributed to the gain. But many buyers were also trying to beat rising mortgage rates, which could eventually cool the market.

Adding to the parallels between stocks and housing, some of the doomsayers from the 1990's have returned with new warnings.

"We're going through something very similar in real estate that we did with stocks," said Robert J. Shiller - a professor of economics at Yale, whose prescient book on stocks, "Irrational Exuberance" (Princeton University Press, 2000), appeared just a few months before technology stocks began their slide. "It's driven by the same forces: that investments can't go bad; that it has the potential to make you rich; that you'll regret it if you don't do it; that it looks expensive but is really not."

A new edition of Mr. Shiller's book will be published next month. The cover promises an "analysis of the worldwide real estate bubble and its aftermath."

Premonitions of a bubble on the verge of popping do not ruffle those who are bullish on real estate. In Miami, Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors, predicted that a limited supply of land coupled with demand from baby boomers and foreigners would prolong the boom indefinitely.

"South Florida," he said, "is working off of a totally new economic model than any of us have ever experienced in the past."

The can't-miss aura of real estate has also helped nudge many families to invest more of their personal wealth in real estate by buying more expensive homes and taking on riskier mortgages - much as ordinary workers used their 401(k) plans to bet on company stocks.

There are certainly serious reasons to believe that house prices will not suffer the fate of technology stocks. Not only are houses more tangible, but people do not sell their homes as quickly as stocks, making a panic much less likely. Because of tax advantages, few owners are likely to sell and rent something else simply because local house prices start to decline.

As high as they might seem now on the coasts, home prices nationally have not quite doubled over the last decade; during the 1990's, the Standard & Poor's 500-stock index more than quadrupled.

"I just don't think we have what it takes to prick the bubble," said Diane C. Swonk, chief economist at Mesirow Financial in Chicago, who was an optimist during the 90's. "I don't think prices are going to fall, and I don't think they're even going to be flat."

Such confidence about real estate has created a 1990's-like stampede of new investors. The night before the Nexus party, Patrick Cullert, 31, and Jennifer Mathews, 29, who are engaged, camped out to ensure they would be near the head of the line for one of 16 condos to be sold at the party. It was today's version of pestering a broker for shares in a hot public offering.

And many former stock market enthusiasts are now turning to housing. Douglas Paul, a 46-year-old former analyst, left AT&T in 2002 to buy and sell stocks on his own. But he soon decided that real estate could be another way to make quick profits. Mr. Paul owns two condominium units around Fort Lauderdale and one in Miami Beach, all bought during the last year, in addition to the one where he lives. He plans to sell one of the Fort Lauderdale condos in June for what he believes will be double his investment.

"It really is a very hot real estate market, and I don't know how long it's going to continue," he said. "But in the short term, why not profit from it?"

Mr. Paul's path is an increasingly common one. The National Association of Realtors estimates that nearly one-quarter of home purchases last year were made by people who thought of the house as an investment rather than a place to live. Seminars promising to teach amateurs the tricks of real estate speculation have proliferated.

Even at Harvard Business School, where students have traditionally gravitated to careers in investment banking and corporate marketing, real estate is suddenly hot. About 25 graduates have taken real estate jobs in each of the last two years, up from only six in 2001.

It is not quite the gold rush of 2000, when about 200 Harvard M.B.A. graduates flocked to technology companies. But even if they are not working in real estate, some of those graduates are now investing in it.

Andrew Farquharson, a member of the class of 1999, said he recently teamed up with a high school friend to buy a home in the Central Valley of California "out of pure speculation." He knows of other classmates who have made similar investments.

"I look at this as a short-term investment," said Mr. Farquharson, 36, who works for a venture capital firm, "and plan to unload it as soon as things look dangerous."

In addition to the flood of investors, the parallels between real estate and stocks extend into mainstream culture.

Real estate bulletin boards and blogs like Curbed.com and Real Estate Pimp have taken the place of financial chat rooms like Tokyo Joe's. ABC has a breakout hit in "Extreme Makeover: Home Edition," and Home and Garden Television, a once-obscure cable channel, now draws an average of 827,000 viewers in prime time.

The seemingly inevitable how-to guide inspired by Donald Trump - "Trump Strategies for Real Estate" (John Wiley & Sons) by George Ross, one of Mr. Trump's assistants on his hit show "The Apprentice" - is a strong seller, already hitting No. 177 on Amazon.com's list in March, less than a month after its release.

At the Nexus party in Brooklyn, Steve Nguyen, Ms. Romano's fiancé, said he was heeding Mr. Trump's advice. "He says buy, buy, buy," Dr. Nguyen said.

The same message is being trumpeted by David A. Lereah, chief economist of the Realtors association, who argues in his new book, "Are You Missing the Real Estate Boom?" (Currency), that real estate investors will "experience substantial and satisfying wealth gains" into the next decade.

The question that looms over these books is whether they will suffer the fate of another optimistic talisman, "Dow 36,000" (Times Books), which was a best seller in late 1999. Its authors, James K. Glassman and Kevin A. Hassett, argued that stock prices, despite five years of roaring gains, "could double, triple or even quadruple tomorrow and still not be too high."

The Dow Jones industrial average hovered around 11,000 when "Dow 36,000" was published. It dropped below 8,000 in 2002 and closed at 10,442.87 yesterday.

Another lingering echo of the stock market boom is the role of the Federal Reserve, the nation's central bank. In the 1990's, the Fed kept interest rates relatively low because it saw little risk of rising inflation despite a booming economy, helping feed a fever for stocks. Alan Greenspan, the Fed chairman, famously asked aloud in 1996 whether "irrational exuberance" was driving the stock market, but then backed off from second-guessing investors.

After the market plunged and the economy weakened, the Fed pushed interest rates down to 50-year lows, helping to fuel the housing boom. This month, Mr. Greenspan made some comments about housing that offered a faint echo of his 1996 musings.

"Analysts have conjectured that the extended period of low interest rates is spawning a bubble in housing prices in the United States that will, at some point, implode," Mr. Greenspan said in a speech in New York, adding that real estate speculation had shown a "marked increase." Nevertheless, he said he did not expect a "destabilizing" drop in prices, in part because home prices across the country have never fallen significantly.

But by one measure, houses in at least a few metropolitan areas are as expensive as telecommunications stocks were in 1999, relative to their underlying value.

The average house in San Jose, Calif., costs 35 times what it would cost to rent for a year, according to Economy.com, a research company. In New York and West Palm Beach, this ratio - a rough equivalent of the price-earnings ratio for stocks - is almost 25.

In March 2000, the price-earnings ratio of the Standard & Poor's 500 - the combined price of the stocks, divided by their profits per share - peaked around 32, and it was briefly even higher for telecommunications stocks. The S.& P.'s P.E. ratio has since fallen to around 20.

Still, no matter how expensive real estate might be, it continues to provide many owners a return worth boasting about.

Holly Peterson, who is writing a novel about the idiosyncrasies of New York's rich, said that at dinner parties in Manhattan, she frequently hears complaints about high home prices, followed by claims of quick profits. "They always hit you with their last jab: 'Of course my money's doubled three times over since I got married,' " she said.

Five years ago, she said, friends at parties were crowing about "making millions of dollars on paper with $25,000 and $50,000 investments." But "most of those people," she added, "got wiped out."

Now, the second piece from the Los Angeles Times:

By David Streitfeld, L.A. Times Staff Writer

SAN FRANCISCO — Chris Boome, an insurance agent in the suburb of Burlingame, doesn't want to work the rest of his life. Who does? But at 58, Boome knows he hasn't saved enough to retire. So a few weeks ago, he revamped his retirement accounts. He sold most of the mutual fund shares and used the cash to buy an $83,500 chunk of land in the Nevada hills, a stretch of ground he had seen only in a photograph.

"This is more exciting than a mutual fund," Boome said. "It feels safer too. You buy a piece of dirt, you feel you'll always have a piece of dirt."

The astounding rise in home values is enticing many middle-class Californians to bet on dirt, gambling their retirements that they can do better with property than with any other investment.

In the same way that the stock market's apparently limitless ascent in the late 1990s seduced investors into buying shares in untested dot-coms, relentlessly rising house and land prices are spurring people to do things that used to be considered unusual — if not irresponsible.

They're cashing in retirement funds, selling stock and taking out second mortgages. They're pouring the money into real estate, often in distant states, often without seeing the property.

"Markets are ruled by either fear or greed," said Robert Campbell, a San Diego investor who has written a book on timing the real estate market. "At the moment, it's all about greed. Huge numbers of people are buying in at very high prices."

Economists have been wondering for at least a year if real estate is in a manic phase that will end unhappily.

Federal Reserve Chairman Alan Greenspan, whose policy of low interest rates gets credit for launching the real estate boom, also has begun to fret. "I think we're running into certain problems in certain localized areas," he told a congressional hearing last month.

Some speculators have already been burned in Las Vegas, until recently the hottest market in the country. But for most investors everywhere else, any risks are outweighed by the potential rewards.

"People who did this five years ago aren't working today," Boome said.

Like just about every longtime homeowner in California, he's already made a bundle on real estate, at least on paper. Boome estimated his three-bedroom San Carlos home increased in value last year by $140,000 — about what he and his wife, Sharon, a nurse, made at their jobs. In the super-charged Bay Area housing market, their home is worth at least $1.2 million.

If one property seriously boosts your net worth, investors have concluded, a handful could make you downright rich.

The number of homes bought not as primary or secondary residences but solely for investment jumped 50% in the last four years, according to the San Francisco research firm LoanPerformance. They made up 8.65% of all prime mortgages in 2004, the company said.

The National Assn. of Realtors contends the total is higher. About a quarter of home purchases in 2004 — 1.8 million — were made by people intent on becoming landlords, the association's surveys show.

Lenders are so eager to provide funding that it's easy to do a deal with a down payment of only 5%. If the house increases in value by 5%, you've doubled your investment. Many homes in California, the Northeast and Florida have increased by more than 20% annually for the last three years, a run-up with few historical precedents.

New investors like Boome realize they're coming to the party late but feel they have little choice. The stock market has been lackluster. Salaries are stagnant. The debate over Social Security has heightened Americans' worries about how to support themselves during retirement. And even those million-dollar houses are often less valuable to their owners than they may appear. Second mortgages and home equity loans have taken away large slices.

"Every time I took money out of the house, I should have invested it," Boome said ruefully. "But I used it to go on vacation or buy a car."

The Price of Proximity

Traditionally, people invested in real estate near where they lived. That way they could inspect the purchase and keep an eye on the tenants. For most Californians, proximity is no longer affordable. Houses in the coastal cities are so expensive that it's very difficult to charge enough rent to cover the monthly mortgage payment.

That's led to an explosion of buying in the Central Valley. When investments are calculated as a percentage of all purchases, the biggest market in the country is Redding, according to LoanPerformance.

Investors bought nearly one in five Redding homes sold in 2004. Not far behind were Merced, Visalia, San Luis Obispo, Chico, Fresno and Bakersfield.

"I looked in Merced and realized I was three years too late," Boome said.

That pushed him over the border to Nevada.

"Friends, Internet sites, articles I read — they all kept saying, Reno, Reno, Reno. You think of Reno, you think of desert. But it's growing a lot, no question."

The Boomes visited the Virginia Highlands, a hilly, largely undeveloped area south of Reno. They stopped to ask a couple walking their dog a few questions. The woman was a real estate agent. Boome promptly signed on as a client.

He bought his 10 acres on the strength of his favorable impression of the area, his agent's recommendation and a photograph she provided. "It was a great deal," he said.

Complicated too. The rules for buying real estate with an investment retirement account are stringent: The purchase must be made through a specialized administrator, and it must be transacted with all cash. A week ago, the paperwork was done. He went to visit his dirt.

It wasn't quite the way he imagined. "It was steeper. And there's a lot of rocks. Big rocks." He's having a local builder look at the land before the deal is irrevocable.

If this is a setback, it hasn't dented Boome's enthusiasm.

"It could be worth nothing, but I'm willing to bet it's going to work out," he said. "I've got a good feeling."

Other California investors are going much farther than Nevada — and using different strategies to come up with the down payments.

"Five years ago, I was like everyone else, trying to get rich on stocks. I thought real estate was for the wealthy," said Darryl Wortham, a software engineer with Cisco Systems.

The San Jose maker of computer networking gear was one of the great stocks of the 1990s, making millionaires of its early employees. Wortham joined the company in mid-1999. That was too late for the boom but just in time for the bust.

"My biggest block of Cisco stock options is underwater," he said, meaning they'll be worth money only if the stock rises substantially. "Lord knows when I'll see anything from it."

Last fall, the 38-year-old Wortham cashed in some of his viable options and sold company stock he had bought through an employee purchase plan. He then joined an Internet investment group and bought three houses. All are in Georgia, all cost less than $200,000, all were bought with 5% down.

The engineer has seen two out of the three but intends to keep his distance from all of them. He doesn't want to hear about busted plumbing from 3,000 miles away. An agency handles the tenants.

"Who wants to drive by every week and look at a property and manage it?" he asked. "I already have a job."

The ranks of investors like Wortham and Boome have more than tripled in five years, according to the National Assn. of Realtors. In 1999, 20% of the second home buyers surveyed by the association said they were doing it for investment purposes. By 2002, it was 37%; by last year, 64%.

David Holoboff, a programmer for the Hollywood website Filmstew.com, bought a house five years ago near Bob Hope Airport in Burbank for $230,000, sold it last year for $405,000 and immediately bought a new place in Burbank for $569,000. It was recently appraised at $675,000.

Emboldened, Holoboff was browsing the Internet when he happened on a website that listed mobile home parks for sale. By the end of the night, he decided to buy a park in central Texas for a sum he described as "less than a condo in Burbank." The deal will be finalized in May.

"A mobile home park is like an apartment building, but better. You can get additional rent without having to build additional units," said Holoboff, 36. "I just have to fill the park up."

He hasn't visited the park yet but has studied the owner's photographs and talked to city officials about the site's viability. Meanwhile, he bought two homes in Atlanta for about $100,000 each, paying only 3% down.

Since Holoboff and his wife, Karma, have few other investments, the real estate is being paid for with $100,000 in equity taken out of their house. This has increased their monthly payments by $440 but that feels a worthwhile price.

"This is so insanely simple. I didn't have to attend a seminar. I didn't have to read a book," he said.

Enter, the Salesmen

The only thing better than making a lot of money is doing so effortlessly. A variety of middlemen have sprung up to relieve real estate novices of the burden of doing anything besides forking over a wad of cash.

They'll find the property. Suggest a mortgage lender. Arrange for a management company to find tenants. And repeat, over and over and over, what a smart thing it is to be doing this.

Mile High Capital Group, a Denver firm, has been making repeated forays to California to sell duplexes it plans to build in Colorado, Florida and North Carolina. Presentations in San Francisco in January and Los Angeles in February drew about 400 people each, some simply curious, others brandishing checks.

On the stage, the Mile High speakers sell the idea of real estate. "I'm telling you, from the bottom of my heart, you gotta do this," Chief Executive Rick Dryer exhorted the crowd at the San Francisco convention center.

The firm's sales pitch is that it has done extensive research to determine which communities will be experiencing substantial growth, which will lead to a brisk demand for rental housing.

One of Mile High's developments is in Fort Lupton, north of Denver. "Few areas in the U.S. afford you to go skiing one day and golfing the next," a company brochure explains with enthusiastic if idiosyncratic English.

At the side of the room, representatives of the mortgage brokers Investment Property Funding offered counsel. In the rear, Mile High representatives unfurled scale drawings of their new neighborhoods. People could mark off the duplex they wanted, provided they were willing to immediately fork over 5% of the price, which was usually $330,000. They won't see the finished product for as long as two years — an eternity for investors.

There are other hurdles. One potential investor asked why the Florida duplexes, located northwest of Orlando, were described as bringing the owners less than $30 a month after mortgage payments and other expenses — hardly worth bothering about.

"If you buy in Florida," said sales director Andrew Eikenberg, "you're really betting on appreciation."

That investor walked away, convinced the bet was unwise.

Those who bought had more faith: that their project will be finished, that the communities in which they're located will become vibrant, that tenants will be plentiful and eager to pay enough rent to allow investors to recoup their costs.

And if any of these things don't come true? The contract states quite clearly: The buyer assumes all risk, and the 5% down payment is not refundable.

"Maybe I'm naïve," said Massoud Balbas, a Laguna Niguel computer consultant who attended the L.A. presentation, "but I thought [the speakers] were genuine."

Balbas bought a lot of tech stocks in the late '90s, an experience that left him unhappy. "I had no idea what I was doing. I put everything in one basket. Real estate is different. People are always going to need homes."

His own home has ascended in value from $400,000 to $1 million. That makes the Colorado duplex he agreed to buy from Mile High look inexpensive. Balbas, 60, has never been to Colorado and said he had no plans to go anytime soon.

Not-So-Happy Endings

One sign a boom is peaking is that prices have risen so much it appears perfectly natural and inevitable that they will keep doing so. Believing the game has only winners, new investors pile in.

It was against this backdrop that Kim Kaul bought a house last summer in Las Vegas.

By traditional criteria, Kaul, a 36-year-old San Diego homemaker, was an unlikely player in the real estate investment game. She and her husband, Michael, who worked for his father's auto-wrecking yard, are of modest means, with four young children and a rented apartment.

This was part of the appeal, of course. In San Diego last year, it was impossible not to talk about real estate, as prices rose 25%. Las Vegas was even more feverish and had the lure of a much lower entry price. So when Kaul saw a posting on the Internet bulletin board Craig's List by a man selling a contract to buy a new Vegas house, she got in touch.

The seller said he had contracted with Pulte Homes in June to buy a three-bedroom house in the suburb of Henderson for $425,000 but that his financing had fallen through. He sold the contract to Kaul in August for $8,500, money she took out of the family's meager savings. Her new investment, which she bought with no money down, was appraised at $460,000. An agent told Kaul she would be able to sell in six months for a $100,000 profit. In a market where prices had gone up by 50% in the previous 12 months, that appeared reasonable.

Instead, on Oct. 1, the Vegas market caught a chill. In the face of weakening demand, Pulte cut prices. More than 500 would-be investors fled, abandoning their deposits rather than taking possession of something whose value might decline further. The speculators' party was over.

For Kaul, whose model could now be had for $335,000, it was too late. She had closed on her purchase.

During the fall, she was hopeful or maybe just unwilling to see reality. She found a tenant, who pays $1,250 a month. But her mortgage was $3,000.

When her husband lost his job, the situation became dire. The couple paid the January mortgage with borrowed money, then gave up. Their lender is in the early stages of foreclosure, a process that will ruin their credit rating.

Kaul is chastened but still believes in real estate: "I'm sure the market's going to pick up, but I can't hold out that long. This is kind of a bummer."

As real estate prices have increased, so have the number of homes bought not as primary residences but solely for investment.

Most popular areas for investment, ranked as a percentage of all homes bought solely for investment in 2004

Redding, Calif. 19.08%
Medford-Ashland, Ore. 18.78%
San Luis Obispo-Atascadero-Paso Robles 18.20%
Visalia*, Calif. 17.98%
Merced, Calif. 17.53%
Chico-Paradise, Calif. 17.52%
Fresno 17.48%
Tallahassee, Fla. 16.78%
Bakersfield 16.56%
Reno 16.18%

*Also includes Tulare and Porterville.

OK. It wasn't Passover. It was Purim:
OK. I know it wasn't Passover. It begins on April 23. But I had this great Passover joke, and I mushed the facts for a great punch line. In case you missed Friday's column, here it is again:

Getting to the Promised Land.
Moses is taking his people out of Egypt. He gets to the Red Sea. He calls for his VP Engineering: "Please build us a bridge."

Replies the VP Engineering. "No way. We're in the desert. There's no wood."

Moses calls for his VP Sales: "Please ride back and negotiate a deal with the Egyptians, which are chasing us."

Replies the VP Sales, "No way, boss. They want us dead. There's no deal."

Moses calls for VP Public Relations: "What can you do for us?"

Replies the VP PR: "Stand on that rock. Ask God to open the Red Sea. Take the children of Israel through the Red Sea. When you get to the other side, you'll find another rock. Stand on it, wait for the Egyptians to be in the Sea. Then ask God to close the Red Sea. Bingo, all your enemies will be drowned."

Moses look quizzically, "This is going to work?"

Replies the VP PR. "Boss, I don't know. But if it does. I'll get you two pages in the Old Testament."

My friend Ed, a good Jewish boy, is visiting his mother in Florida:
Ed, this one is for you.

A man calls his mother in Florida. "Mom, how are you?"

"Not too good", says the mother. "I've been very weak."

The son says, "Why are you so weak?"

She says, "Because I haven't eaten in 38 days."

The man says, "That's terrible! Why haven't you eaten in 38 days?"

The mother answers, "Because I didn't want my mouth to be filled with food if you should call."

Harry Newton

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 . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads. Thus I cannot endorse any, though some look mighty interesting. If you click on a link, Google may send me money. That money will help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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