[wagglebee]

Because it would ultimately be homeowner confidence that causes a collapse in real estate values, this is very positive news. With all of this talk about a "bubble," many seem to lose sight of the fact that real estate is very different than the stock market; if values drop, you still own something of value as opposed to worthless stock in some defunct dot.com start-up. People need places to live, and in most cases they will simply stay in their current homes if they are unable to sell it for what they need to.

[dirtboy]

Because it would ultimately be homeowner confidence that causes a collapse in real estate values, this is very positive news.

Well, there are also fundamentals that eventually come into play. Such as with the dot-com bubble, when people thought that companies that never made a profit were worth $180 a share and believed the share values would be at $300 a share six months later.

But, sooner or later, market reality trumps expectations. In the case of the housing market, sooner or later there will not be buyers at the price homeowners are wanting, because those buyers will not be able to afford to buy.

[Black Tooth]

All this crap don't matter. I ask X--Dont want to pay? No deal. I'd ratehr sit on it anyway.

[narses]

"...about 60 percent of homeowners expect the value of their homes to increase by at least 5 percent annually during the next several years,..."

What did they think their 401k's would do in 1999? 20%? 25%? 30%?

They was wrong, WRONG I tell you. Wrong!

[muir_redwoods]

"People need places to live, and in most cases they will simply stay in their current homes if they are unable to sell it for what they need to."

But if they've borrowed against equity that has evaporated, some loan contracts can become immediately due and payable. Mortgage companies that like to stay in business do not issue unsecured loans. If the equity has disappeared the loan can be called.

Can you say mass bankruptcy?

[montag813]

about 60 percent of homeowners expect the value of their homes to increase by at least 5 percent annually during the next several years

That really isn't very much.

[Polybius]

Because it would ultimately be homeowner confidence that causes a collapse in real estate values, this is very positive news. With all of this talk about a "bubble," many seem to lose sight of the fact that real estate is very different than the stock market; if values drop, you still own something of value as opposed to worthless stock in some defunct dot.com start-up.

However, for the close to 50% of new home buyers who have been able to afford these prices only with "interest only" mortgages, many of them will own it only as long as the "interest only" period lasts. After that, they will be faced with either a balloon payment, cramming the remaining principle PLUS interest in the remaining years or cramming the remaining principle PLUS interest in the remaining years PLUS a variable interest rate.

At that time, they will have to choose between having enough money for food or foreclosing.

Your analysis does apply to me because both of my houses, in southern California and in the Pacific Northwest, are paid for.

I have enough cash reserves to get into this real estate market big time but I have not touched it.

The only way I would profit is to find a greater fool and put him in a situation that will probably destroy his finances. If I fail to find a greater fool, I would lose losing a considerable sum myself.

It is not good value.

[sauropod]

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