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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: patron_anejo_por_favor who started this subject9/18/2002 8:02:27 AM
From: zonderRead Replies (3) of 306849
 
In my humble opinion, we will see a significant decline in the real estate market over the course of the coming 12 months. Mortgage delinquency rates are already on the rise, as reported by MGIC among others. The data below, among others, rings alarm bells:

- Debt service as a percentage of disposable income stands at 14%, slightly below the all-time high of 14.3% (Int. Herald Tribune, 22 July 2002)

- Household debt as percentage of disposable income has risen to 90% - no mistake.... the figure is correct. (http://www.thestreet.com/markets/aarontaskfree/10039401.html)

- Private mortgage insurance companies decided mid-August to raise the mortgage premiums of A-minus borrowers(slightly less than perfect credit record), saying the risk was higher than previously thought. (The Washington Post - 16 August 2002)

So the question seems to be "For how long can the real-estate market walk this fine line?". Not for long, I would say, because:

- The economy does not seem to be recovering in the second half of this year (did anyone really believe it would?) and lay-offs continue. Homeowners who find themselves without a job might find it a little difficult to pay the mortgage.

- Interest rates cannot stay this low forever. Especially when the US seems determined to wage war on half of the world at a time when they are in a prolonged economic depression AND when their budget deficit is soaring.

So I am looking for stuff with real-estate exposure to short. First on the list are highly leveraged real-estate lenders.

Any ideas on the above?
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