Don't their kids need to buy houses to in turn raise their kids in ? Or are they going to rent for the rest of their lives ? If it keeps them out of bankruptcy, why not rent?
If you can only afford the price of a house by stretching your budget to barely make "interest only" payments, you are FAR worse off than you would be renting. Renting at a reasonable price is not a disaster waiting to happen like buying at a price you can only afford with gimmick loans.
If you want to buy my San Diego, CA rental house at current Bubble prices and pay three times more in mortgage payments than you would pay me in rent, let's make deal!!
Once the prices come down to a more reasonable level, won't the following people start buying ?
True.
The problem is that you are advising people to buy those houses BEFORE they have come back down to the pre-Lending Bubble insanity prices. Those prices were prices that people could afford paying principal PLUS interest without going bankrupt.
You are advising people to catch a falling knife.
US bank ‘to fail within months’
The global financial crisis is set to get worse, with a large US bank likely to collapse in the next few months, a former IMF chief economist has warned.
Kenneth Rogoff’s comments came as shares in Fannie Mae and Freddie Mac sank on a report that the home lenders would, in effect, be nationalised.
Despite hopes that the US economy had turned the corner, Mr Rogoff claimed it was “not out of the woods”.
“I would even go further to say ‘the worst is to come’,” he said.
“We’re not just going to see mid-sized banks go under in the next few months,” said Mr Rogoff, who held the IMF role between 2001 and 2004.
“We’re going to see a whopper, we’re going to see a big one, one of the big investment banks or big banks.”
We have to see more consolidation in the financial sector before this is over
Kenneth Rogoff
Speaking at a conference in Singapore, Mr Rogoff, now an economics professor at Harvard, forecast that Fannie Mae and Freddie Mac would “probably” not exist in their present form in a few years.
“We have to see more consolidation in the financial sector before this is over.”
On Monday, shares of Fannie Mae fell more than 22%, or $1.76, to close at $6.15. Shares of Freddie Mac fell almost 25%, or $1.46, to $4.39.
‘Wrong move’
Shares in Freddie and Fannie first fell sharply last month on fears that they would run out of money to fund their business, forcing the US government to take radical steps to ease the panic.
snip.
As mortgage guarantors, they must pay out when homeowners default on their loans.
With the housing market across the US crumbling, their finances have come under severe stress.
Problems in the US housing sector prompted the Federal Reserve to slash interest rates to 2% earlier this year.
But Mr Rogoff said the Fed was wrong to cut interest rates as “dramatically” as it did.
snip
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/7569903.stm