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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Andrew G. who wrote (59129)1/18/2001 9:36:24 AM
From: rolatzi  Read Replies (2) of 436258
 
And don't forget that as the economy weakens, so do interest rates. As interest rates decline it becomes more favorable to refinance your mortgage, to borrow more money and actually pay a smaller monthly payment. This has already happened and will continue. This is a major reason why real estate has not come down with the stock market and why housing starts have remained strong. I suppose that once interest rates reach zero that this might stop. I'm not sure what happened in Japan but the inflation in real estate there in the 80's was far greater than anything we've seen in the US. Also, I believe that people don't use home mortgages in Japan very much and their substantial savings were in the banks, creating a real negative wealth effect as interest rates declined. Since Americans don't save money that isn't a problem here. Also, Fannie and Freddie will make sure that loan money doesn't dry up with the US government the lender of last resort.

rolatzi
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