Hve the Good Times Rolled Away

[Rufus T. Firefly]

Originally posted by Zkribbler
True. IMHO, real estate prices have overheated in the past couple of years. Speculators drive up the price of real estate, and rising prices attract more speculators.

But with the looming spectre of higher interest rates, speculators are beginning to realize the party's over.

BTW: There almost certainly will not be a crash like we see occasionally in the stock market. Real estate is illiquid because (a) it takes a while to unload real estate and (b) people have to live somewhere. So, even a worst case scenario will just be a slow decline in prices.

From what I've been reading, the problem with the housing bubble bursting will not be in the housing market, per se -- at least not initially.

It sounds like the problem is that people who got into the market recently often did so using adjustable-rate instruments, and people who took out huge home equity loans against their houses' rising value also frequently did so with adjustable-rate instruments. Now that interest rates are rising, people will find their mortgages and/or home equity loans eating up a bigger and bigger portion of their paychecks. (At the same time, much credit card interest is also adjustable-rate, which is also contributing to the squeeze). As the percentage of paychecks going to debt-repayment expands, the money available for consumer spending contracts -- and that may be where the problem will lie.

[Zkribbler]

Right. That and some people have been using interest-only, ballon payments, and other non-standard financing, in the aniticipate that the value of their homes would increase and they could refinance later.

There'll soon be a fortune to make in home repossessions.

[Agathon]

Probablity of the imminent collapse of capitalism = 3% and rising.

[Kidlicious]

Originally posted by chegitz guevara
How insane is my housing market? Sales ar down 31% from last year, and the median price of a home is up 14%.

Probably people are holding on to the hope that they can make a profit on their home, but the situation for that seems to be changing. That's one thing that can hurt consumer confidence.

[Zkribbler]

And the stock market is down another 2% today because of inflation fears.

[MRT144]

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