Is Real Estate the Achilles' Heel of Capitalism?

The Recession in US Real Estate seems to be the corpse the Recovery is chained to this time around, with no help in sight.

Now we are hearing that a drop in Chinese Real Estate is threatening to have worldwide effects.

It occurs to me the tendency to over-leverage is a vice the real estate markets cannot swear off, leading to a period of sober de-leveraging that can crush markets for months/years. Capitalist systems go through cycles but the ones associated with real estate just about do us in seems to me.

Quote: odiousgambit

The Recession in US Real Estate seems to be the corpse the Recovery is chained to this time around, with no help in sight.

Now we are hearing that a drop in Chinese Real Estate is threatening to have worldwide effects.

I don't know if it is real estate or simply over leveraging in general. I think that leveraging capital for stock purchases caused the great depression of the 1930's, and partly the money from the stock market shifted into the real estate market at the end of the 1990's.

Markets are self correcting in the same way that populations regulate themselves through famine and disease. It works, but it is incredibly painful.

The single biggest thing that people have thats tied to their personal net worth is the real estate they own. Europeans moved here in the 18th and 19th centuries because they couldn't own real estate in Europe, only the rich could afford it. Every country that comes up out of 3rd world status is directly tied to its real estate prices. The richest people in the US are old family property owners in NYC, Boston, and Philly. The wealthiest families in Manhattan have had the same property in their families for 250 years or longer. They have been so rich for so long that you never hear of them, and thats the way they want it. They don't own the skyscraper, they own the ground it sits on. The wealth of the private sector is built on real estate value. When its devalued on a massive scale, like now and in the Depression, we're in for a very bumpy ride.

There's a huge chain of privately owned stores in MI and 5 states called Meijer. It was started in the 1930's with one store and they now have almost 200. Its completely family owned and they're billionaires. Their success is due in part to the fact that the old man who started it refused to build a new store until he completely owned the land under it, and whatever they had to borrow to build the store was just a small part of the total cost. The result was, they were never over extended, they owned all their stores outright and could weather any storms in the economy. Thats why they're still family owned, they were smart about the real estate.