Tuesday, December 17, 2002

Location, Location, Location

Yale economist Robert Shiller, whose best-selling work "Irrational Exuberance" called the top of the "bubble" market almost to the day, has a piece in today's Wall Street Journal that looks at the housing market "bubble." Shiller argues that the housing market is largely stable across the country, except in places like New York, Boston, Los Angeles, Silicon Valley, Denver and Seattle. In those areas, Shiller contends, a sharp correction (if not a crash) in home values is possible (and maybe probable).

At dinner last night, Reed Hastings, the chief executive officer of Netflix, said that the real estate correction in Silicon Valley (particularly on the commercial side) is gathering steam. "We pay $5 a foot right now (for Netflix warehouse space)," said Hastings. "When the contract expires, the price will probably be $2 a foot."