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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: gpowell who wrote (24635)10/19/2004 12:47:18 AM
From: Mike JohnstonRead Replies (2) of 306849
 
Further, savers and retirees invested in fixed rate assets, such as bonds (and to some extent real estate), had their wealth increase as the market interest rate dropped.

Actually bond investors have made some money off the coupon and bond appreciation, but they lost much more than that, because they have suffered close to a 50% loss in the purchasing power of the dollar during the last 5 years no matter whether you want to measure it against real estate, the euro, food, gasoline, college tuition or health care. Therefore bond investors have lost wealth. Investors that had their money in CD's have really been slaughtered by a double whammy of interest income slashed around 80% while suffering from loss of purchasing power as well.

As for first time homebuyers, it is difficult to make a case that they have been hurt by a lower cost of borrowing.

If i am a first time homebuyer i would rather pay 200 K for a house at 8% interest rate with 40 K downpayment than pay 500 K for the same house with 100 K downpayment and 5% rate.
Thus it is not a homebuyer that benefits from low interest rates, it is the seller who is getting an extra 300 K. Also i would rather buy at my leisure, than compete with dozens of desperados or flippers who buy without inspection.
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