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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: jimmg who wrote (71359)2/3/2007 3:47:15 PM
From: ChanceIsRead Replies (1) of 306849
 
>>>There is no possible way that mortgage credit has grown faster than nominal real estate values over the past 4 years.<<<

I would have to look at some numbers, but to be the devil's advocate, consider that every time a "zero down" is issued, the total debt (denominator) increases and the equity (numerator) doesn't change at all. Further consider that for the zero downs, the mortgage is growing at exactly the same pace as real estate values - since after all, the loan is for the total real estate value. Of course, those who put zero down and can hold will start having some owner's equity as soon as prices rise. When you have 0% to begin with, then even a $10K price increase won't increase the equity/debt ratio much.

So this all depends upon how much money was borrowed at what time in the housing cycle. I am far from having a data based answer.

However, it is my understanding that most of the bad loans - no docs, low docs, interest only, options ARM, etc, were made in the last few years.
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