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To: patron_anejo_por_favor who wrote (223069)	2/21/2003 2:34:44 AM
From: Spekulatius	Respond to of 436258

<< Only if HOUSING PRICES are also up 6%...otherwise foreclosures and defaults will drive you're equity down. So yeah, the real mortgage rate will be zero percent, but your equity will be, say, minus 5%. And God help you if you need to sell in a hurry.... >> Maybe maybe not. If the inflation would go up all of a sudden, the high interest rates that go with it would be a problem. If interest rates go up slowly, because the economy is coming back and prices go up because of excess liquidity there would not be a problem for housing, IMO. Yes I understand if borrowing becomes to expensive the value of houses might go down, because for most buyer RE becomes unaffordable. However as long as one can hold on to RE there still would be a windfall in terms of the diminished value of the mortgage debt after the high interest rate phase is over. It's extremely difficult to predict what will happen even when one is correct about a given interest rate scenario. Bonds are only good at current prices if we have deflation, anything but very short term bonds are very risky, if we will experience a reaccelleration of inflation so its important to keep at diversified mix of assets, IMO.

To: patron_anejo_por_favor who wrote (223069)	2/21/2003 7:57:41 AM
From: Oblomov	Read Replies (1) \| Respond to of 436258

Here in Indiana, we have the highest foreclosure rate in the US (something between 2 and 3 per cent, and on the order of 10 per cent for VA/FHA), and housing prices are flat or slightly up this year over last, at least in my neighborhood. My neighborhood is urban, and is about 10-15 years into the process of re-gentrification. A lot of the houses here are owned outright or are paid for in cash. I think that defaults and foreclosures influence prices on a block-by-block basis rather than statewide or nationwide. In any case, the RE market here does not have the spectacular peaks and valleys of the coastal urban markets.