New Book, The Great Housing Bubble, Calculates Real Estate Fundamental Value and Investment Premium
Submitted by: pressreleasepoint
The Great Housing Bubble, authored by real estate insider and housing bubble Cassandra, Lawrence Roberts, calculates the fundamental value of residential real estate and the investment premium and illustrates the difference between investors and speculators.
Irvine, CA (OPENPRESS) December 30, 2008 -- Lawrence Roberts, author of "The Great Housing Bubble," details the calculation of the fundamental value of real estate. Roberts notes, "To identify a housing bubble requires a yardstick to measure prices against. Price-to-rent ratios and price-to-income ratios provide this basis." In the book, he examines many variables that move prices and identifies the primary mechanisms of price movement as well as secondary price influences.
In a series of calculations using a technique known as discounted cashflow analysis, Roberts quantifies the investment premium buyers can pay above the fundamental value and still obtain a return on their investment. He observes, "During the bubble, people were paying a premium 100% higher than fundamental valuations in some markets. A rational premium is about 10% at best. The markets were clearly showing signs of irrational exuberance." Some markets in California saw greater than 50% declines in home prices between 2006 and 2008.
Roberts comments that many people who thought they were investors were really speculators with an ill-defined exit strategy. In the book, he defines investors as people who acquire assets for its probable cashflow, whereas speculators are people who acquire assets because they believe future sales prices will be higher. Roberts opines, "Homeowners were behaving as speculators, but they believed they were investors because they intended to own the house indefinitely. The long period of ownership does not make them investors; it makes them speculators without a plan." Many individual homeowners and institutional lenders lost a great deal of money in the deflation of the housing bubble.
About the Author, Publisher and Book
Lawrence Roberts, author of "The Great Housing Bubble," is known as the Housing Bubble Cassandra. He publicly predicted the housing price crash as the primary writer for the Irvine Housing Blog (http://www.irvinehousingblog.com/). From his unique vantage point in Irvine, Calif. - the center of the subprime universe - Roberts carefully documents in his book the conditions and practices that inflated the largest real estate bubble in history. He holds a Master of Science in Land Development from Texas A&M University, and he consultants to the land development industry.
Monterey Cypress Publishing is a small press specializing in real estate and personal finance related books, audio books, and video presentations.
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