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

To: J. P. who wrote (10901)	6/2/2003 8:56:34 AM
From: STEVE	Read Replies (5) \| Respond to of 306849

So when is this bubble gonna pop???? The problem in Bergen County NJ is that you have too many people chasing too few homes. The Average income/cost of house ratio is totally absurd but everyone wants to live in a good school district and to do that in a 3 bedroom with any kind of lot is 700k.....and that is a relatively modest home. It's very depressing but I'm no longer sure it's gonna end anytime soon.

To: J. P. who wrote (10901)	6/2/2003 4:29:02 PM
From: Wyätt Gwyön	Respond to of 306849

But wait until people who are leveraged 10:1 or worse on a house find out how it works on the downside. the housing propaganda is such that people don't realize that mortgages are in fact leverage. people buy their houses on margin. normally this is not a problem because inflation lowers the real value of the debt and peoples' real wages increase. and they think of mortgage payments as rent substitution. but in a deflationary situation, the real value of the nominal debt increases and peoples' real and nominal incomes fall. at the same time, the nominal value of their assets (houses) fall. the result is a debt-induced death spiral. compounded, of course, by the fact that almost everybody buys their house on margin. by contrast, the renter enjoys the downward adjustment in rent prices due to deflation and the decrease in rental demand from the housing bubble. he can rent while rents are cheap, and then buy when the bubble ends and all the housing lemmings, strung out in 500K starter homes with declining income and negative equity, have to start renting again. this is what keeps Greenspan up at night when he's sitting on the Crapper. he's so afraid of the housing bubble ending that he'd rather sacrifice the dollar and cause a gold bull market. i consider Greenspan to be the gold investor's best friend, because who needs gold if money is sound, and the one thing Greenspan doesn't want in this world is a sound dollar.