Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: regli who wrote (37326)	9/15/2005 8:55:20 PM
From: mishedlo	Read Replies (1) of 116555

from limoring on the FOOL - new poster on my board I am a Realtor and have been selling Real Estate for 23 years now...and have genuine concerns about the market and the so called bubble bursting. Here are the 2 big problems I see: 1) With rates having been so good I am seeing people buy homes like the auto industry sells cars...What payment would you be comfortable with ?Of course you cannot afford a $400 car payment but if they can get your payment to $199 a month will you do it ... now you are excited ...the problem is they finance you over 6 years and you are upside down and owe more than the car is worth before you leave the lot. Try to sell or trade the car in a year and youre financially crucified. I see people everyday buying a house because there is 100% financing and the payment fits just what they want...problem is ... THEY AREN'T LOOKING AT WHETHER THE HOUSE IS TRULY WORTH WHAT THEY ARE PAYING FOR IT...AND I AM SEEING HOUSES SELLING EVERYDAY AT PRICES THAT MAKE NO SENSE WHATSOEVER. As soon as rates go up just a little you are going to see the value of property dropping and folks that have to sell in a short time period not be able to sell their home for what they paid for it. 2) With all the special 100% financing programs and getting a home with practically no money at all ... buyers have very little invested in their home as far as risk goes. it's nice they were able to do this HOWEVER, by the same token when things get a little tight ,maybe they are out of work and it gets tough making the payment...its easy to walk away and let it all go because you have nothing invested to lose or fight for. Additionlly..the easy money 110% and 115% homeequity loans are going to destroy the maker and some lenders. I had a homeowner call me last week about selling their home...a very nice middle class couple with a kid in college. They had done a 115% equity refinance to pay for tuition and a new car and consolidate some bills. Things were getting a little tight. It was an easy house to price, there were 9 homes just like it that had sold for $220,00 to $225,000 over the last 6 months...the only problem they now owed $247,800 on their house !!! Should have seen their faces when they saw this. Their best move is to turn in the keys and walk away.! You would not believe how many situations there are just like this right now. I am truly very nervous about the future of housing...property is tremendously overvalued right now...slight increases in rates are going to start taking buyers out of the market...values are already starting to come down in many areas. There is no way I would purchase a home now at some of the prices I am seeing. ON A POSITIVE NOTE..If you have a lot of cash and liquid assets around...hang around...you are going to get some damn good buys and pick up some nice real estate over the next few years with foreclosures and mortgage companies paying the piper for the bad loans they have created with their "we want to help you" financing programs.

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