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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Oblomov who wrote (1094)	12/1/2001 10:57:37 AM
From: Allan Corrado	Respond to of 306849

Easy Credit and Excessive Appraisal Values = A haircut in home prices when and if your double barrel scenario develops. IMO, we see this beginning sometime in the middle of next year. Look for signs that the 'home buying season' is muted. Forget the new home sales number and look at existing home sales. I have always believed a large part of home prices are a function of easy credit, or lack thereof. Today the availability of cheap, easy credit is mainly based on the growth in appraisal values over the last three years. The result: prices that nobody actually paid created on paper to facilitate a larger loan. This could leave folks holding the bag like they did in the late 80s. It took ten years to come out of that funk and the result was the S&L debacle and subsequent mutli-billion dollar bailout. That time home home prices were driven more by demographics than cheap credit. The banks were loose with builders, not as much with regular folk. In reality, the Baby Boomers finally got done buying homes at the same time the recession hit. We don't have the same demographic today and the law was changed to keep banks from chasing builders. This time cheap, easy credit was the main driver. Another cycle appears to be ending and the result will be the same. This one will be complicated, as you say, by the expense of credit that nobody wants. Home prices will drop, but we just don't know how far...