Vigilant Investor

“FOURTEEN years ago, Yoshihisa Nakashima looked at this sleepy suburb an hour and 20 minutes from downtown Tokyo and saw all the trappings of middle-class Japanese bliss: cherry-tree-lined roads, a cozy community where neighbors greeted one another in the morning and schools within easy walking distance for his two daughters.”

There are still more than a few folks who are skeptical that we are in the midst of a top of a real estate bubble. Others who acknowledge that prices may have gone a bit nutty will justify them with talk that homes are now days “investments”, akin to a savings account, instead of an illiquid, depreciating consumer good that require ongoing maintenance input.

“So Mr. Nakashima, a Tokyo city government employee who was then 36, took out a loan for almost the entire $400,000 price of a cramped four-bedroom apartment. With property values rising at double-digit rates, he would easily earn back the loan and then some when he decided to sell.”

Whatever the case, the one common trait to all bubbles is that those who participate in them rarely see them for what they are until it is far, far too late to safely adjust.

Can we say for sure that the U.S. housing market is in a bubble? We can’t offer any guarantees. We can only offer regular various opinions and assurted evidence for our readers to judge.

“Or so he thought. Not long after he bought the apartment, Japan’s property market collapsed. Today, the apartment is worth half what he paid. He said he would like to move closer to the city but cannot: the sale price would not cover the $300,000 he still owes the bank.”

In our opinion the Japanese Real Estate Bubble is a good case example to study for similarities to the U.S situation. The New York Times published a nice piece (from which the quotes above are poached) covering the subject in all its glory — the go-go atmosphere, the denial, and the subsequent collapse and suffering of owing lots more on a mortgage than a property is worth.

Maybe we are not having a housing bubble. But do you really want to gamble your future that we are not?

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