Sir John Templeton: the person who really predicted the housing crisis

[Guest JackRiver]

I remember years ago when he suggested it, that housing prices in the US could fall 50%.  I thought to myself at the time, sure they could go down a bit, but 50%, Sir John has truly lost his marbles.  He's dead and gone now, so unfortunately we are stuck with media fakers and flip a coin prognosticators.

 

Yours

 

Jack River

 

 

[Guest dealraker]

Hey Jack,

 

I think what I rememeber he said in one of his last interviews that CA home prices would fall 80%.  I thought he was being quite extreme although I too thought real estate prices, particularly on our coasts, would fall dramatically.

 

Charlie

[nomore]

It's exactly 5 years today in a SmartMoney interview that Sir John said the following.

 

Q: Do you think there is a real estate bubble in the U.S.?

 

John Templeton: Yes. Real estate is very different from the stock market because it's so local and separate in terms of type. But in many locations and many types of real estate, prices are dangerously high right now. And in real estate it's easier to say what's dangerously high. You just look at what it costs to rebuild. Right here in the Bahamas, I have recently seen people pay four or five times for a house what it would cost to rebuild.

 

source: http://whereiszemoola.blogspot.com/2008/07/tribute-to-sir-john-templeton.html

[nomore]

Here's another article: http://www.newsmaxstore.com/newsletters/fir/reports/FIR_16_Templeton.htm

 

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Housing Prices

Now the U.S. has this extraordinary thing - I think in some places we see 50% to 100% gains on the housing market. Other places across the country might be up 25% to 30% in just a matter of three to four years. Incredible gains.

 

When you invest in stocks, you get the same value all over. The same stock sells at the same value, no matter what nation you're in. But that's impossible in real estate. Real estate value depends on locality. If you're going to be a real estate investor, focus on location, location, location.

 

So when you're trying to invest in real estate, you have to do a lot of serious research on whether this location is likely to be popular in the long run.

 

That's why I wound up believing beachfront property is a good investment. I don't think there's ever going to be any more beachfront than there is now. Now people are getting bigger and the amount of money is getting bigger. So beachfront is pretty sure to go up in value.

 

Owning a home on the ocean is better than owning one that's not on the water.

 

But there are large tracts of oceanfront property still available in South and Central America in countries where there is a rule of law. You used to be able to buy land at very low prices. But still there are some good deals.

 

A 50% drop off in prices is quite possible.

 

I've never, never ever had a mortgage on any house. I learned that long before you were born. When I was a child in Tennessee, I watched so many people lose their farms because they had tiny mortgages, but they got to the end of their years, when it was impossible to earn a profit on the farm. They couldn't meet their payments and their mortgage was sold at auction in the courthouse.

I don't rule out borrowing money. But I think it's risky.

[oldye]

 

"That's why I wound up believing beachfront property is a good investment. I don't think there's ever going to be any more beachfront than there is now. Now people are getting bigger and the amount of money is getting bigger. So beachfront is pretty sure to go up in value."

 

Take a drive on PCH(1) in California.  Lots and lots of pristine land that hasn't been developed and may never be but its there.