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Strategies & Market Trends : 50% Gains Investing
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To: Cogito Ergo Sum who wrote (76297)4/13/2009 7:49:45 PM
From: Keith FeralRead Replies (1) of 118717
 
The biggest question out there is how to play the recovery. Inflation will take place on the back end of this recovery, not the beginning. I doubt that home prices will start to increase to unaffordable levels any time soon since there is a pretty big inventory of existing homes out there. Getting that inventory under control is finally showing some progress as new home buyers are actually getting a very good value for the homes they have scraped up in 2008 and 2009.

2 years down the road, the market will be focused on banks performance on the loans they made at the bottom of the economic cycle, which will look a helluva lot better than the mortgages from 2006 and 2007.

It would probably be even better if home prices did have an L shaped recovery so that people don't get hurt too bad over the next couple of years. You know the banks are going to keep a squeeze on the new home construction to avoid another free for all the developers.

So maybe this is the beginning of a new long term bull market, now that the system has adjusted to lower housing prices. You can't have home prices at $370,000 as a national average with any hopes of normal economic behavior. It shuts down household formation, as people can no longer afford to function.

It is much better to have good liqudity for affordable housing than no liquidity for unafffordable housing. People can blame whomever they want, the banks or the people that bought homes they couldn't afford. Really, both groups were at the mercy of McMansion developers that overbuilt everything they could get their hands on. The banks aren't going to make that mistake again.
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