Real Estate Markets

You might have read the article about the current status of real estate markets in the United States in our Real Estates section.  While there still might be some doubt left, please also consider the fact that Warren Buffett also sold his real estate property in California.

Tom Barrack is correct about the trend of a steep rise of building materials and labor.   "Construction costs have spiked 20 percent in the past nine months," he says. The reasons: Shortages of labor and materials like lumber because of the building boom, and increases in the price of oil, needed to produce everything from plastic piping to insulation to shingles.

The slump will show up first in speculative hot spots like Miami and Las Vegas, he says, where condo developers are preselling their projects for what looks like big profits. When they actually build the units over the next year or two, he predicts, they will end up spending more then the units are now selling for.

At that point, says Barrack, the developers will try to raise prices. "But most of these buyers are speculators," he says. "They will either sue the developers to get the original price or take their deposits back and walk away." The developers will then put the units back on the market, and the glut of vacant condos will drive prices down. "It's the busted deals caused by construction costs that will cause the turn in the market," he says.

Therefore, be careful about the real estate market in Las Vegas, Miami, or even Los Angeles.  Consider buying a condo in Hong Kong.