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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Paul Senior who wrote (4728)8/27/2002 4:39:43 PM
From: larryRead Replies (2) of 306849
 
Well, what if one of the couple loses his/her job? What if they need to relocate within a year or two after they purchase the house?

I know that the majority of the Joes are very forward looking: tomorrow will be much better than today and my house price will only go up in the long run. Well, when 90% of the housing prices are mortgaged, it will be a disaster when the average housing price plunge a mere 15-20%. And although lots of people believed that the REIT in Tokyo was in a bubble in 89, people kept buying them. It was not until 92 that the bubble finally burst and the average unit price of apartments in Tokyo is still down 75% from its peak as we speak right now.

The trouble is, a consensus bubble is only confirmed after it breaks. Greenspan did not think that the internet stock was in a bubble state back in late 99. Well, we all know what happened after that.

Now back to REIT. I live in Boston area and have talked to 3-4 brokers in the last week. A common observation among them is that more and more buyers are averaging less than 5% downpayment. And from the new home sale stats published yesterday, the median home price dropped by 11%. It's interesting to see how the housing dream plays out down the road. I only wish that it won't be half as bad as the US stock market dream turns out.

larry
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