"My anecdotal experience has been that the debt market is much better at assessing bankruptcy risk than the stock market, so a debt yield of 40% to maturity is not promising."
I would have agreed with this statement up to this year. And then came CDOs and subprime mortgages. If debt market was blind on the upside (as was stock market numerous times), why can't it be blind on the downside (as was stock market numerous times)?
"i see lots of houses for sale here but not that many bargains."
I wonder what is a bargain in your book? If you compare USA to Europe, the prices are really cheap here against comparable incomes. Even if you compare 2nd tier markets against second tier markets. People right now claim that there was a huge housing bubble, but pricewise I am not so sure it was a huge bubble. E.g. Silicon Valley is hugely overpriced even now, but it is not crashing. What is crashing is inland properties 2-3 hours from LA or SF or whatever... And how much are those worth? I guess they may be worth 100K or 150K depending on whether there are buyers. If there are no buyers, they are not worth anything... And the problem is not that they are not affordable, the problem is that no one really wants to live there. Unless they are forced or they want to invest in a house, but cannot buy LA. :)
Sure LA, SD, Orange county and others will decline too. But not as much as the inland junk. :) If they decline to a level where they are at least somewhat affordable, people will buy there.
I guess what I wrote is bad for some homies though. If they own land/houses inland they may not be able to get rid of them at any price... :(
I don't really know Florida though. |
