Home : The Housing Bubble: Doom and Gloom Don't Pay

The Housing Bubble: Doom and Gloom Don't Pay

Posted by Donald J. Trump on 9/2/2005 at 2:43 PM

Chairman, Trump University

With housing prices continuing to rise into the far reaches of the stratosphere, there's a lot of talk about a housing bubble on the brink of bursting. Scared at the possibility, industry watchers have been preaching impending doom, warning house shoppers to be wary of the real estate market.

As long as interest rates stay low and the dollar stays weak--which is an unfortunate situation, but it happens to be good for real estate--then there will be no burst in the current housing bubble. If interest rates go up precipitously and the dollar gets stronger, then there will be some reduction in housing prices.

How you react to the so-called housing bubble can be a barometer of your business personality. Are you the type of person who takes advantage of positive situations when they present themselves, riding them out as long as they last? Or do you heed every message of doom and gloom, avoiding risks that could be some remarkable opportunities?

Obviously, good things don't last forever. But in a competitive business environment, you have to be willing to take chances. You can't always live in fear. That said, when things start to look questionable, you also have to be smart enough to know when to get out.

Donald J. Trump is Chairman of Trump University.

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12 Comments

Posted by Eric on 09/02/2005 3:39 PM

I find it interesting that you acknowledge that there is in fact a real estate bubble. I personally don't see it bursting anytime soon but, in certain markets such as NY, where prices have increased so rapidly so quickly I believe a decline at some point in the near future is inevitable. If the economy stays strong(ish) than the Fed will continue to raise interest rates. With some reports indicating that as much as 25% of current home buyers are buying as "investments" I think that some people are going to be in a world of pain very soon. However, as you say, it's all about knowing when to get out.

Posted by Jewels on 09/03/2005 8:51 PM

I have been watching this rumored bubble with careful thought. I agree with you. As a single parent it is hard enough to get ahead. I purchased my home at the first sign of lowering interest rates. This gave me the advantage of both low interest rates and lower home prices. I am hoping to stick the "for sale sign" out on the edge of the bubble bursting for maximum profit. Hopefully I will be skipping all the way to the bank to purchase a nicer home at a lower price.

Posted by Eric on 09/04/2005 1:59 AM

With several thousand condo units proposed or under way in the West Palm Beach area, it seems that a small hiccup in the market could create havoc (and buying opportunities). On the other hand, not getting in on pre-sales events could prove costly if things remain stable. I am inclined to wait for a buying opportunity.

Posted by E. Toll on 09/06/2005 9:08 AM

Sir,
I do agree that you can't believe everything you hear. I will remeber your message while I am house-hunting.

Posted by Ronald J Black on 09/06/2005 3:36 PM

Real estate value is tied to personal use or income generation. When we approach rental yields of zero, we will know the market is a nonsense. We are far from that. The dot.com boom started with business models which earned zero from their inception. That's the difference between the irrational exuberance of the dot.com era and the current real estate market. One was a fabricated paper shuffle with no underlying fundamentals from day one. The real estate market will naturally cool itself when rental yields, loan to value ratios and debt servicing makes loans difficult to secure. There will be no big bang. If the current exuberence ends, it will end with a sigh....not a bang. Nothing to worry about - bricks and mortar are real. People have to live somewhere and business need to operate from somewhere. Population growth and a strong economy is the key. If our boarders remian open the former is a certainty.

Posted by Darrell Barker on 09/06/2005 8:03 PM

Some see bubbles, I see champagne.

Here in Arizona, much of the growth in the real estate's accelerating values is due in part to the affordability compared to California's house pricing.

I don't speculate on housing, buying at retail prices, I buy them at "wholesale" with equity already built in so if the alledged "bubble" bursts, I'm still sitting pretty.

Don't get me wrong, I am greatly benefiting from the stratospheric skyward rise in real estate but I'm not counting nor relying on it to be successful.

Don't you just love rarified air?

Posted by Thomas J Supri on 09/09/2005 4:37 AM

WOW! A great message board with great input! I,myself, am CONTRARIAN. I think the market will cool-it's a cyclic thing. But,as pointed out-it will affect in places where the values have over-skyrocketed. My wife is a Realtor and we don't plan on being out of work there. Here, in Minnesota values have gone up, but not wildly like the coasts. We sure could use a HUGE TRUMP project here!

Posted by docta v on 09/11/2005 8:09 AM

Median home prices have already fallen <A HREF="http://biz.yahoo.com/prnews/050905/phm001.html?.v=23">14% since April</A>. Also, you mention that the market will remain strong so long as the dollar is weak and interest rates remain low. However, you do not aknowledge the relationship between interest rates and the dollar. If the dollar continues to weaken, foreign investors will be less willing to hold US Bonds without a greater premium (higher rates). A sudden drop in the value of the dollar would likely lead to a spike in interest rates and sharp pain to the real estate market. With an administration in office that places no value whatsoever on balancing the budget, this scenario grows more likely

Posted by Teresa C. on 09/13/2005 6:42 PM

Wow, this is one of the greatest advice I ever read. I want to buy a house but the prices are high and the interest rates too. So I am thinking of staying in my apartment for another year. But after 2 months, I finally decided to buy. So I got a 2 house in a lot, I will rent the back house which is a studio to help with the mortgage. As Mr. Trump says: "You can't always live in fear."

Posted by Crystal - Aussie on 09/13/2005 10:30 PM

We had a similar thing here in Australia, until a state budget introduced a tax on investment properties along with an increase in land-tax subject properties (and higher rates

Posted by Harrison on 09/14/2005 4:19 PM

In my opinion, this is the perfect time to buy a house or investment property for that matter. Think about it. Interest rates are at their lowest rate. That means your borrowing power goes a long way. You can purchase that more expensive home because of favorable rates. If you lower the price on a house

Posted by Nimrod - Beverly Hills on 10/20/2005 3:05 PM

Chairman Donald Trump, if there is a housing bubble that goes POP!. Good. If there is no housing bubble, good. I am educating myself at Trump University and elsewhere to make money either way. Cash flow is the name of the game. As you have written in the past: "make adversity your friend." And your other pearl of wisdom that I like so much: "take care of the down side and the upside will take care of itself."

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