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Housing bust & Oil boom...both heading for the same fate???

By
Real Estate Agent with RE/MAX Shoreline New Hampshire & Maine

One can only hope.

I just read an article in Fortune Magazine by Shawn Tully, editor at large, who makes a compelling and logical case that oil is headed for the same fall that housing is currently experiening in many parts of the country and for the same reasons; supply and demand.

"So when the economy roared back in 2002 and 2003, builders couldn't turn out homes fast enough for buyers armed with those cheap mortgages. As a result, prices spiked. They no longer bore any relation to the actual cost of buying and improving land, or constructing and marketing a new house (at some reasonable profit margin). Instead, frenzied buyers were setting the price. Because builders were reaping huge windfall profits, they rushed to buy and develop land. And sure enough, those new houses were ready just as buyers were retreating to the sidelines because they could no longer afford to buy a home. That vast overhang of unsold homes is what's driving down prices today. The story is much the same with oil, with a twist."

Very interesting article and worth reading.

I wonder how many will agree with Mr. Tully???

Posted by

Jim Lee , REALTOR®, Certified Residential Specialist (CRS)

http://JimLee.com  RE/MAX Shoreline

100 Market St., Suite #200, , Portsmouth, NH 03801 Phone: (603) 431-1111 x3801

Visit New Hampshire Maine Real Estate.com to search homes, get Seacoast area information, and find out how great living on the New Hampshire and southern Maine Seacoast really is.

 

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Pam Joffe
Solaris Realty - Tampa, FL

Good afternon Jim - I think for the oil to bust, the demand has to decrease and that hasn't happened yet.

Jun 07, 2008 09:42 AM
Thesa Chambers
West + Main - Bend, OR
Principal Broker - Licensed in Oregon

I found this very interesting - thanks for sharing

Jun 07, 2008 09:49 AM
Betty Knowles
Southwest Missouri Realty - Springfield, MO
Ready to sell? Call Betty!

Jim, I hope this comes true. The only problem is we've shown them how much the market will bear so they probably won't come down much. Hopefully supply and demand will kick in.

Jun 07, 2008 09:56 AM
Rony Chavez
Choice Homes-Little Elm from $140's - Little Elm, TX

Great article!

I agree with his assessments. In the immediate future, I believe oil prices will stabilize due to adjustments in consumption by governments, industries, and people. It's not endless however, so 100-200 years from now, when there truly could be a shortage, we would have adapted to alternative energy sources. Our great grand children may be dealing with the cost of captured sunlight cubes to power their homes due to global cooling. Who knows?? 

Jun 07, 2008 10:27 AM
Lynda Eisenmann
Preferred Home Brokers - Brea, CA
Broker Associate ,CRS,GRI,SRES, Brea,CA, Orange Co

Hi Jim,

Thanks for the info, I hope he's right yet I'm doubtful.

What I know about things like this you could put in a thimble and still have room. However, it seems like the global demand is growing so rapidly, China and India for example. I'm a believer we need alternative sources for energy.

Jun 07, 2008 11:00 AM
Randy L. Prothero
eXp Realty - Hollister, MO
Missouri REALTOR, (808) 384-5645

I am amazed by the politicians whop claim that if we pump more oil in the U.S. it will not help, yet they are asking OPEC to increase production.

Jun 07, 2008 12:16 PM
Jim Lee, REALTOR, CRS, ABR
RE/MAX Shoreline - Portsmouth, NH
Buying or Selling? Ann & Jim are the local experts

I believe the point Mr. Tully was making that high prices will attract more oil producers to bring what was formerly marginally profitable oil to market and increasing the supply thus driving down the prices.

Lenders put more marginally qualified buyers into houses they ultimately couldn't afford and that led to the current glut of foreclosures and the end of sub-prime loans to people that should not have gotten them in the first places.

On the other side of the coin builders kept building tons of houses that there turned out to be no buyers for.

 

Jun 07, 2008 01:12 PM
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro

Jim, it was an interesting article.  I'm not sure if I buy it but I guess time will tell.

Jun 08, 2008 03:55 PM