12/15/04 Bill Bonner
There is nothing so paltry or coincidental that people don’t find something in it to flatter themselves. One man takes pride in the way his hair waves.
For another, pride is found in a victory of the hometown football team. Is it any wonder we feel like geniuses when our property goes up?
“I don’t know where these people are coming from, but they keep coming. And they want a different type of community. It’s part of a trend called ‘new urbanization.’ These are people who are tired of the northern suburbs. They’re in their 50s. Their children are grown. They want to live in a city and walk to shops and restaurants. But not a real city, of course. Real cities are grimy and have a lot of people in them you wouldn’t want to live near.
“Of course, Delray Beach wasn’t a city at all. It was just a sleepy little resort town by the ocean where people had small cottages on small lots. But now it’s becoming like a city. They’re building low-rise condos and apartment buildings all over the place…right up to the sidewalk. And there are dozens of new sidewalk cafes along Atlantic Avenue. The place is booming.”
A bull market creates geniuses, we recall, and the boom in Delray real estate has created a whole town full of them.
“Well, yes, the prices do seem absurd,” continued our friend. “But people keep coming. And they seem willing to buy even at these higher prices.”
And why not? They can buy a little bit of paradise and get rich doing it. A $750,000 condo rising in value at 20% per year adds $150,000 in extra ‘wealth’ each year.
“It’s much better than that,” our friend explained. “They don’t pay $750,000. They just put down a deposit of 10%…they may even sell the place a year later without ever moving in. They’re making 200% on their money in a single year. Talk about feeling like a genius…”
The longer the boom goes on, the more confident the buyers become. They’ve been warned that the market could collapse at any time. But no matter how thin the ice is supposed to be, it never seems to give way. Instead, they skate to profits – getting rich while the worrywarts make nothing. Is there any better proof of true genius?
“The higher prices go, the more sure people are that they’ll go higher. You begin to believe that there is something special about this situation that separates it from other examples of boom-bust markets. You begin to think that the boom will last forever. Or, even if there is a bust, it is likely to be modest. After all, people really do want to move here. And there are reasons to think this could catch no nationally – like Sausalito or South Beach. It’s a pretty little town and a quick walk to the ocean. Why shouldn’t condos be worth $1 million?”
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