Posted on 10/14/2006 9:48:44 AM PDT by GodGunsGuts
What makes you think a goldshilling "prudent bear" would have a chart like that?
Yeah, but while mortgage debt has been increasing, mortgage interest rates have been steadily declining and so total mortgage interest payments haven't risen much as a % of GDP. It's the intereste payments that affect people financially more than the total amount of their mortgage.
Your analogy breaks down when you consider REAL housing crashes. They're not making any more land in Japan or Argentina either.
And that is what will be the final pin in the real estate bubble...when interest rates rise again.
GDP will increase (even/especially after a recession). Inflation will increase. Even without those considerations, drops are not inevitable, stagnation is just as likely an alternative as sellers refuse to sell and lenders refuse to foreclose. Also a lot of lien holders are also interested in real estate, not just payments. There's a fair number of them ready to snap up any desirable properties they can get their hands on. They will then hold them until the next bubble.
Huh? Are you saying free people in a free market system did not cause the price of housing to increase through their investment decisions?
Just got a sales flyer on the door about a house just down the street fom me. Great house asking $50,00 below appraisal. (Phoenix, Az)
Well what happened in Japan, as far as I know, was a true speculative frenzy driven by very limited supplies of real estate in Japan and a strong economy generating lots of savings. People went crazy in Japan, but we haven't seen anything like the kind of price increases that happened in Japan. That was a classic vertical price move to a buying climax that leaves a vacume of buyers afterwards and a big price decline. But we haven't had nearly that kind of speculation in the US housing market. There has been some rampant speculation in a few areas, as always, but generally our housing market is much too big to get seriously overheated like Japan's market.
No, I'm saying that their investment decisions were artificially induced by insanely low interest rates brought on by the FED and foreign purchasers of US debt instruments.
No need for any wrist slashing.
Depends on if your in debt up to your eye-teeth with ARM's and such or debt free.
That tells me the appraisal is probably too high. Last I heard, the median price is up 7% in the Phoenix area in the last 12 months. I'm hoping for a dip from that increase to buy a bigger house early next year.
My food just got here. We'll continue this later. And no, I'm not avoiding you. At least you are able to argue your position (as opposed to resorting to insults)! More later, if you're up to it. All the best--GGG
People borrow more when rates are low?
When interest rates rise...watch out below!
Why? My rate is fixed.
We just put a house on the market in the Pinetop area great house on a lake. It is not the best timing, should have put it up in summer.
Well the 10-year treasury bond reached a yield of about 3.5% during the lows in interest rates in 2002-2003. Today the yield is about 4.8%. Most mortgages are based on this rate, so that would imply that a 15 year mortgage, which is around 5.7% today, would have been 4.4% at the low point. I don't think 4.4% was an "insanely low" rate, and it only lasted at that level for about 10 months, and then bounced up to 4.8%. You have to keep in mind the long-term decline in inflation, which stopped this year because of oil price increases, but I think will resume again in the current quarter of this year. There have been major improvements in oil drilling/exploration/production technology which is increasing oil production rapidly. The Peak Oil crowd is going to go bonkers as prices stabilize around $60 for the next several years.
LOL!!!
Buy one of Bill Bonners "newsletters" today! He must have a 100 under different names/clubs/associations....
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