WHERE TO PARK YOUR CASH...

Many potential investors looking into the international arena are with the wrong impression that we are in the midst of a real estate bubble which will burst soon.

Memories of the computer industry stocks soaring to astronomical values only to fall more than spectacularly are still fresh.

But the scenario in the real estate market is very different from that that made millionaires from night to day for tech stocks investors (and speculators).

Alan Greenspan testifying before the House Financial Services Committee in mid July said unambiguously that it does not look like a bubble to him and truth is that most economists seem to agree.

Price pressure is not enough to create a bubble.  An indispensable ingredient for the bubble recipe is excessive supply, besides it is worth mentioning that just because there is a bubble, that does not mean it has to burst necessarily. A possible scenario is a slow in home prices that move at a moderate rate or even one that stagnate but not a burst necessarily.

Moreover, home supply is inhibited by factors such as limited space (geographical resources are not unlimited), zoning (and/or municipal) laws that limits or restricts building, such as others. This factor which characterizes the nature of home supply as being quite lean and relatively inelastic is not very helpful for bubbles.

Historical data in the U.S. real estate market shows clearly a lean supply of homes, and since the National Association of Realtors (NAR) began keeping records in 1968, home prices have never declined nationally from one year to the next. If you add to the precedent, that interest rates are in its lowest since 35 years, the answer to the parking spot for your cash seems quite unequivocal.

Joe Weberhofer

Real Estate Broker

PRIME INTERNATIONAL PROPERTIES