Crew Capital Management Thoughts on Investment

Welcome to the Crew Capital Management Thoughts on Investment blog. At Crew Capital, investment education is key to how we work with our clients. We hope our conversation and analysis entice you to think further on your investment strategies and planning. For further discussion, please contact us at rjung@crewcapital.com

Thank you!
Robert F. Jung, CFA CPA*

*CPA inactve

Wednesday, May 7, 2008

Real Estate Bubble - POP!

Real Estate prices are in a free fall. "Of the homeowners nationwide who purchased when the U.S. home values peaked in 2006, one out of every two (51.6%) now owes more on their mortgage than their home is currently worth." The following outlines by year of purchase the percent of home that are underwater, i.e. mortgage is greater than the current value of the house:

  • 2003 7%
  • 2004 16%
  • 2005 42%
  • 2006 51.6%
  • 2007 45%
Las Vegas and Stockton, CA are the worse hit. According to Zillow.com homes purchase in Las Vegas, 2006 have fallen 25%. 90% of the homeowners now owe more than their homes than they are worth. Stockton, CA ( the unofficial foreclosure capital of the U.S.A.) is worse with 96% of the homes purchased in 2006 underwater.

One of the primary reasons for this problem is "too low of down payments", which have averaged 2%. A few of the others are manic appreciation and speculation. After the dot.com mania and speculation one would think we'd learn and adjust our behavior. Not so.

This is a primary reason why a professional advisor is need - they provide objectivity, which is paramount. They look at the whole picture not just the wins mentioned over cocktails. It's amazing how many times I have people discuss the wins but forgetting to net out the losses. People act irrational. It's interesting to note that the Fidelity Magellan Fund, which as a good track record has had over 50% of its shareholders loose money. Why because they bought high and sold low. The opposite of what is required to make money.

I strongly suggest a more rational course. See are website, crewcapital.com for more information. We are founded in the belief that the best way to outperform the market is to learn from those who have done so in the past.
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