US Median House Prices Fall

[Colonâ„¢]

Originally posted by DanS


I don't think you can say that. There are a lot of factors in our economy besides house prices.

You must certainly can say that. Even that Greenspan of yours acknowledges that home equity extraction has been underpinning consumptions growth to the tune of hundreds of billions a year and that this represented substantial risk to the economy were the house market to crash.

[Cort Haus]

Originally posted by DanS


I don't know how anybody with a normal income can afford to live in London. It's tough enough finding something nice in some U.S. cities nowadays.

Renting is possible, sacrificing just about everything else, but buying is a complete nightmare.

[Kidlicious]

Originally posted by Colonâ„¢


You must certainly can say that. Even that Greenspan of yours acknowledges that home equity extraction has been underpinning consumptions growth to the tune of hundreds of billions a year and that this represented substantial risk to the economy were the house market to crash.

[DanS]Nothing can happen as long as profits keep increasing[/DanS]

[Snotty]

Originally posted by DanS


I don't know how anybody with a normal income can afford to live in London. It's tough enough finding something nice in some U.S. cities nowadays.

renting is affordable but you have to house/flat share with multiple people and live outside the centre, but afaik this is the norm and has its own appeal. You can still live close enough where the public transport is easily available for a 15 minute trip to get into the centre. (80 pence each way on an oyster card?)

If you live further out in the suburbs you still wont be able to live easily alone on a low income. Buying as a couple out this far is possible but probably not if you are both on a low income. You will be looking at a 45-50 minute each way commute to work in the city though. However you will also be living close to some other suburban commercial/social hubs

[TCO]

Originally posted by Victor Galis


Assuming of course that you don't lose your job in the process. High housing prices are financing borrowing in the US, a hard crash will lead to bankrupcies and a general decrease in consumer spending. This will result in an economic downturn. The severity of the housing market decline will determine if this is a minor dip or a recession.

of course.

[Victor Galis]

Originally posted by DanS


I don't think you can say that. There are a lot of factors in our economy besides house prices.

True, but a housing bubble burst would cause a recession imo. Not necessarily something big, but consumer spending would be down a lot in the short term. Now if the housing market declines more gradually, I think other factors will overwhelm it.

Thats the way I feel. My house is up HUGE is the 4 years since we built it and if I sold I could probably pocket about 350K.

But whats the point? Unless I change cities I would just end up buying back into the same market -- -

Banks let you borrow against the new equity after an appraisal so its all good

Depends though. If you can sell it, and get out of the market for a year or so and rent something then you can make some serious money. Then again if you have a family with kids and such already, it might not be worth it.

Renting is possible, sacrificing just about everything else, but buying is a complete nightmare.

What's the rental cost for a one room flat with separate kitchen and bath in downtown London?

[Eroberer]

I'm still not really following the connection between the looming housing bust and the fall of the whole economy. I mean, I can see how, 1) individuals "lose" money when they want to sell a house, and 2) individuals can't take out such loans (is that how it works...the house is collateral?), but I don't see how this affects businesses.

Is this supposed to make the American consumer buy fewer things? I can see how that would affect somebody. I'd appriciate any explanation. I mean, I'm going to be in the market for a house in a few months or so, and I keep getting giddy when I hear prices are going down.

[Victor Galis]

A lot of people in the US take out loans using their house as collateral to finance purchases. This is similar to using a credit card, except since the loans are secured by something (the house) they are much lower interest.

Once housing prices fall, people will be unable to take out further home-equity loans because their debts will be greater than the new value of the house. If housing prices fall hard, then it might even be better for them to let the bank foreclose on the house since it's now worth less than if they paid back the loan.

[Provost Harrison]

Originally posted by Victor Galis
What's the rental cost for a one room flat with separate kitchen and bath in downtown London?

You're going to be talking over £1000 a month...and that is without being anywhere particular fancy...

[Victor Galis]

Originally posted by Provost Harrison


You're going to be talking over £1000 a month...and that is without being anywhere particular fancy...

Wow, that makes Cannes look cheap (Not even going to mention how cheap that makes my current living arangement in comparison.)

[Provost Harrison]

I rent a two-bed house out here and that costs me enough...

[Eroberer]

Originally posted by Victor Galis
A lot of people in the US take out loans using their house as collateral to finance purchases. This is similar to using a credit card, except since the loans are secured by something (the house) they are much lower interest.

Once housing prices fall, people will be unable to take out further home-equity loans because their debts will be greater than the new value of the house. If housing prices fall hard, then it might even be better for them to let the bank foreclose on the house since it's now worth less than if they paid back the loan.

That makes sense, but how many purchases are actually made like this, with the house as collateral? I've never really reasoned that there are enough purchases made like this so that the whole system falls when you can't do this. Is there an "economic indicator" that measures this value?

[Victor Galis]

I've heard that the average American family's savings rate is -.2%.

It's not so much that the whole system falls apart, but rather that a decrease in consumption causes companies to lay off workers who then also stop consuming, and so on.

I honestly don't know, because the idea of borrowing to consume more is alien to me.

[Eroberer]

Originally posted by Victor Galis I honestly don't know, because the idea of borrowing to consume more is alien to me.

Agreed. All I've ever heard is that Americans don't save enough. Unfortunately, I think the huge 18-25 year old generation will only make that worse. Oh, and Social Security will help nobody.

[Jon Miller]

I take out educational loans to consume more all the time. I Am not as bad as I use to be.. but I would have to live off no money at all if I didn't have educational loans..(I would eat Raman, never go out, etc... )

I would rather ahve fun now, and pay later, than have no fun now.. and haev more money than I need later

JM