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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Tradelite who wrote (22048)7/9/2004 7:52:10 PM
From: zebra4o1Read Replies (2) of 306849
 
Tradelite,

Good point about how it would have been much easier to make money betting with the housing boom. Don't fight the Fed as they say. Its ironic that all these bearish people (like me) that believe low interest rates stoked the housing boom, didn't cash in on the boom. It should have been so obvious. We should have seen it coming.

I guess my ideas about real estate are colored by living in San Francisco. The people I know buying houses are using ARMs and interest only mortgages. So they would be killed by rising interest rates. Around here, the price of a house is equal to the size of the ARM mortgage you can get with a $3000 to $4000 a month payment.

I've heard that argument that real estate did fine in the past with higher interest rates. Saw this counter argument by a poster 'deriv1' who is active on Yahoo CFC board.

“Third, home buying as a function of interest rates is path-dependent. Your argument is that if mortgage rates go back up to 7%, big deal, that's historically a decent level anyway. But the path dependency - which is a proven academic fact used to price mortgage backed securities - means that there will be no demand left at 7%, because almost everybody who needs to refinance or buy a house ALREADY HAS!!!”
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