When the real estate forclosures start and then mushroom into gigantic numbers, which I believe to be in the near future, the entire economic system will crumble and make the last depression look like childs play.
Yup.
For example...
A $2K/mo PITI payment will get you a $350K house, with 10% down, @ 4.5% ($315K mortgage). When that interest rate creeps up to 7% (like late '00), the same $2k/mo gets you a $274K house with 10% down. That means, for all of you who care, that when Jose and Maria buy their home, and interest rates go up, several buyers will be knocked out of the market. If the job market remains as strong as it was when Joe and Mary bought their home, they will have to sell their home at a discount, to compensate for the additional costs of borrowing.
They will be down $76 grand. That's all of the $35K they put down, $41K in additional lost money, plus another $17K in RE fees on top of the $76K, for a grand total of...
$93,000 down the crapper, just to compensate for the interest rates.
Now, if the local job market starts to suck...
So, if Joe loses his job at the local glass box, or Mary loses her commissions selling real estate, they will still have to make that $2K/mo payment, unless they got a variable, in which case, the payment may likely go up. If they are forced to sell, they would likely go to foreclosure, as it would be cheaper than losing almost $100 grand. Their home will be sold against all of the other forclosures.
Glad the FED will cut. That will solve all our problems. Wait a minute...that caused all our problems.
Oh, well, one way to avoid a hangover is to keep drinking.
Debt, DEBT, Debt, Debt, Debt!!!
I don't know if I would want to win tomorrow's election.