Real estate warning signs

Tom Barrack's selling all of his US real estate.

'Cause there's a bubble.

Duh.

But here's one little gem that stood out. I love being proven right. One of my biggest soapboxes about real estate lately has been the practice of housing construction "futures."

Check this out:
"The slump will show up first in speculative hot spots like Miami and Las Vegas, he says, where condo developers are preselling their projects for what looks like big profits. When they actually build the units over the next year or two, he predicts, they will end up spending more then the units are now selling for.
At that point, says Barrack, the developers will try to raise prices. "But most of these buyers are speculators," he says. "They will either sue the developers to get the original price or take their deposits back and walk away." The developers will then put the units back on the market, and the glut of vacant condos will drive prices down. "It's the busted deals caused by construction costs that will cause the turn in the market," he says. "

And it's not just condos. Out here in Cali (as we Californians never call it. I think.) housing developments have waiting lists years before ground is broken. Houses are "flipped" before the house is even built. That is, a speculator puts a deposit on a lot, waits a bit, and then sells the rights to the lot to the next dummy.

Risky stuff. The real estate market is quickly going to degrade into a roller derby: lots of flying elbows, kicking, and hairpulling. And lots of bodies flying into the stands.

Tom Barrack sells his US RE holdings