Frazzled bears got a chance to relax Wednesday on news that pending home sales had fallen far more steeply in July than anticipated. Unnamed ‘economists’ reportedly were ‘expecting’ a drop of about 2 percent, but the actual figure was more than six times that, 12.2%. The Dow Industrials fell 200 points during the day as a result, and although the blue chip average recouped some of that on uncharacteristically mellow short covering, settlement was still an ugly 143 points below the previous day’s close.

We don’t personally know any economists who were expecting a mere 2% decline in home sales, but it suggests that there are at least a few out there who live in a warp. CETA holdovers, perhaps? Friends of Larry Kudlow? Whatever the case, it seems obvious that they haven’t been getting out much lately. Neither, I would surmise, has my otherwise astute pen-pal Fred, a Bostonian who thinks a cheap dollar will continue to suck a torrent of foreign money into U.S. real estate. He may be right about that, at least for a while, but I would disagree on whether it will suffice to push real estate prices higher more or less forever.

Upper East Side

Miami Beach and New York City’s Upper East Side are two other places where foreigners have moved far too much speculative money into residential real estate.  You ought to see all of the unoccupied condos in my friend Ellen’s building in Bal Harbour — and the mega-complex of residential high-rises under construction by Trump a couple of miles to the north. A big bust is taking shape in both places, for sure — and what a pity so many of the owners will never have much enjoyed the accommodations for which they paid so dearly. Upper East-Siders reportedly are feeling a little creeped out because grocery stores and other street-level amenities are so uncrowded these days. Who lives in all those $5 million apartments? More and more, the answer is: no one.

Now, Fred would argue that they bought those condos with Monopoly money, and so what if they overpaid. But I would reply that monthly upkeep is going to become quite a drain even if paid in funny money, and especially if the properties are falling in value, possibly precipitously.

Shaq’s Getaway

If you visit Miami Beach, the looming threat of a bust becomes almost palpable: so many $3 million-and-up condos just sitting empty.  Shaq’s condo on the first floor of my friend Ellen’s building is one of the more cavernous see-throughs. Lord knows, he’s one guy who could afford to let it go unused for the next 50 years without feeling even a twinge of buyer’s remorse. But most of the absentee owners are Latin Americans who are not Shaq-rich, just run-of-the-mill rich, and they might have thought twice about sinking $5 million to $10 million into a Miami condo, had it occurred to them that the property might not continue to rise in value by the accustomed 30 percent per year.

We’ve never heard of anyone using a stop-loss on real estate to tell them when to bail out of a property if its price starts to fall. Would you? How about a trailing stop on a house whose value has increased tenfold since, oh, 1975? That’s what we thought. Sounds downright un-American, doesn’t it?