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Harry Newton's In Search of The Perfect Investment Newton's In Search Of The Perfect Investment. Technology Investor.

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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 disaster-predicting chart::

For yesterday's full story. Click here.

Real estate is about three factors:

1. Location. Manhattan is hot.
2. Availability, namely what's on the market. Phoenix is over-supplied.
3. Speculation. Hot money appears and disappears. .

Some cities:

New 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.

Salt 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:

In Arizona: from today's New York Times:

In Arizona, ‘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.

“People 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.”

No more.

Today, it is the company’s 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.

“All of a sudden, they just don’t 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.

The striking 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 can.

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 even lower.

The reversal 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.”

Tumbleweeds 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 area’s now vanished housing boom.

Road signs welcoming visitors to Pinal County proffer a menu of new subdivisions. Looking for houses by D. R. Horton, the nation’s largest builder? Keep driving, you have not far to go. Make a U-turn for KB Home’s latest four-bedroom Mc-Mansions. For Centex homes in the Johnson Ranch development, hang a right after the next bend.

Don’t worry, 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.

Local officials 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 nation’s recent building boom, along with Las Vegas and Atlanta, as well as parts of California, Texas, Florida and stretches of the Northeast.

Phoenix, with 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.

Until recently, 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 houses.”

The speculators 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 region’s economy remain intact.

Google’s plans to hire several hundred employees here is frequently cited as a sign of vitality.

“We will 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.

“By the 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.”

Economists note 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. ...

The housing 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. ...

Changing 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."

Tourism prevails:
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.

The 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

Really 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 here.

Marvin 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 emerged.

"What is your question, my son?" the guru asked.

Marvin had been rehearsing this for years, and said, "Oh, wise one. What is the meaning of life?"

"Life, my 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 well?!'"

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 . 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. Please note I'm not suggesting you do. That money, if there is any, may help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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