Salad and Garbage

What is the difference between salad and garbage?...................the answer is timing. I found and interesting article from Fortune Magazine (Here) published in March of 2002 predicting that the housing bubble was about to burst. If anyone followed that advice they'd had left anywhere from 50-150% appreciation on the table pending their market. Below are some interesting excerpts to give us a little perspective for the New Year............................................

Fortune Magazine - March 28, 2002.

The Economy: Is Housing the Next Bubble?

...So is that it? Have we just had something like a 15-minute recession, and is it all smooth sailing from here? Not so fast, says a chorus of economists--plenty can still go wrong. Leaving aside such nightmare scenarios as further terrorist attacks, all-out war in the Middle East, or an oil embargo, the thing that spooks some economists the most is housing....

....In fact, housing didn't just hold its own during the slump. It zoomed. Activity has been so strong that sales of new and existing homes hit all-time records last year. Not exactly what you'd expect when around two million people were losing their jobs, is it? What's more, we've seen record growth in mortgage refinancing, and annual home-price increases between 6% and 8% nationally for three years in a row. "That's unsustainable by any measure,'' says David Levy, chairman of the Jerome Levy Forecasting Center. "Especially now that mortgage rates are on the rise." And that's the problem, according to Levy and others. The one sector we've relied on to keep the economy afloat is unlikely to hold up much longer. Worse still, housing could even turn out to be the next bubble--and we all know how that usually ends....

And one really bad prediction from permabear Mr. Shiller.......Mind you.......this is 2002...........

Certain regional markets may already be in trouble. According to data from Case Weiss Shiller, home prices in San Francisco have been dropping precipitously. In the first quarter of 2001 the average price of a single-family home there rose 4%, but by the end of the year had fallen 7%. "We're seeing a bubble bursting right now in San Francisco," says Robert Shiller, an economics professor at Yale University and partner at Case Weiss Shiller. "We've never seen such a sharp drop, and we're expecting it to fall even more." (Actually not quite Mr. Shiller - Santa Clara County median home prices rose from about $450k in early 2002 to currently approx $750k )

So despite short to medium term corrections in market, long term fundamental always eventually win out.