The title link will take you to an article with an explaination of why a real estate crash is inevitable. The old saw among stock investors, "When everybody thinks the same thing, nobody’s thinking," has never been more true. Is there anyone who owns real estate who doesn’t think it will be worth more tomorrow than it is today?
The main reason investors should worry about real estate bubbles is this: most experts say that real estate bubbles are simply impossible – at least on a national scale. In a recent article posted on bankrate.com, David Lereah, chief economist for the National Association of Realtors, was quoted as saying, "There is no national price bubble. Never has been; never will be."
To anyone not participating in it, the bubble here in Costa Rica is almost as obvious as the rapidly collapsing real estate balloon in Key West. "Se Vende" were the first words of Spanish I learned. "For Sale" signs festoon buildings and lots all over the country. The P/E ratio for housing here has reached the lofty heights of the Keys market, 20 to 40 times annual rent. The historic mean is under 10. Everything returns to the mean.
Technorati Tags bubble /real estate/ economics/ Costa Rica
The expats here like CR and how developed it is. But there is little doubt that the frenzy for CR real estate is cooling. I’m traveling with my family to Nic. in the next week or two to have a look around. I friend of ours from Key West owns a little house on an island in the lake. I’m looking forward to it.
I believe the real estate bubble is world wide, but of course, real estate markets are local. Not everywhere will be effected the same way. The best buys will always be where the traditional ratios are the most attractive and in places that are neglected and unknown. Nic also needs a few more years of peace behind it before elderly Gringos will feel comfortable there.
I wonder if you hear of people leaving C.R. for Panama or Nicaragua? I’m in Nic. and prices are a lot cheaper here, though there is a little bubble area around San Juan del Sur right now I believe.