Stock speculators moving into real estate are causing a bubble.

[Michael Rutkowski]

Alright, I apologize if this becomes controversial, or offends anyone.

As an investor and agent, I am seeing a lot of speculation in the market. It seems to me, that stock market speculators, are looking to unload their money into tangible assets across the country, but focusing primarily in large urban areas, where housing prices are reaching insane levels. 

In my opinion, real estate is a commodity and should be treated as such, but it is being speculated on because of the types of investors moving into the markets. Is that good or bad? It's all relative. For me it is fantastic, for those just starting out, it makes it very difficult to break into certain markets. Independent individuals who are looking to build wealth with REI are pushed into marginal markets, while large REIT's and institutional investors are building and building large complexes with inflated rents, and driving up the price of everything. This is a form of the 'syndication' we were seeing in the 80's and 90's, which is now a dirty word.

I've already survived one bubble with flying colors, and have a bomb-proof strategy to survive another. Do you? If your CAPs are low now, you may soon be underwater, just a heads up. What happens in large urban areas will trickle out into the hinterlands, depressing all markets. Some areas will be 1-2 years behind, but it will affect all markets this go around, I promise. In my opinion, I see this market either plateauing or bottoming out in 1-2 years from right now. I like to reference the Case-Schiller Index, but there are so many worrisome indicators out there. The trajectories that we are seeing are by no means sustainable. 

Housing and building is strong now but remember, wealth through real estate doesn't happen overnight, as many new investors are seeing. There is a limit to the rents people can afford. Employment is very strong, but what is more important to look at is the average wage. It will take only a few quarter point rise in the prime rate, or one major Fund collapse, and I can see it all coming down. At that point, I am going to gobble up properties left and right, as oversupply outstrips demand. Watch what you are doing, and do not be blinded by the prices out there. A major worry of mine is these 401k's just dumping money, bi-weekly into ETF's. Can we not remember more than a few years into the past? Are we being blinded by the stock market? 

Anyone else out there thinking along these lines, or I am just crazy over here?