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

To: Tradelite who wrote (11814)	7/28/2003 1:25:33 PM
From: Amy J	Respond to of 306849

Hi Tradelite, RE: "What if the U.S. actually does see a surge in economic growth over the next few or several years, and this creates more and better-paying jobs for all those young people entering or already in the workforce who haven't yet bought homes but plan to in the future?" If the economy heats up and AG raises interest rates, this would mean monthly mortgage payments increase for the same house because the loan just got bigger. Translated, people are forced to by less house for the same monthly mortgage payments (due to rising interest rates). That in turn reduces the number of buyers at each incremental step of a mortgage payment ladder. This creates less buyers, and translates into lower prices. Supply / demand. So, I think housing prices will reduce in your scenario. Regards, Amy J PS A 5% increase in interest rates hugely increases the loan amount significantly more than the downward pressure due to a small 5% salary increase, I suspect, making housing less affordable for first-time buyers (until the real estate price imbalanced is corrected by say staying flat for 10 years while other asset classes increase - I doubt the stock market will stay flat for 10 years, but I bet housing will stay flat for ten years. Imagine if the stock market doubled after ten years while housing didn't, ouch. If that happened, that would be a subtle/gentle (and not so obvious) haircut by a half (in comparison) for the real estate buyer. But given where the stock market has been, I wouldn't necessarily cheer if stock is a better investment than real estate moving forward. But I sure wouldn't want to move money from one bubble (the stock market) to another (real estate.) I'd rather leave a large % in the stock market and wait ten years before increasing holdings in real estate.

To: Tradelite who wrote (11814)	7/28/2003 1:52:28 PM
From: J. P.	Respond to of 306849

Tradelite, I personally don't believe these are normal times for real estate. I believe these are extraordinary times driven by extraordinary circumstances. I was caught up in the IT drop, then the stock market drop, don't want to make it a trifecta with real estate. I know what it looks like at the top, and it looks like it will never end.

To: Tradelite who wrote (11814)	7/28/2003 1:56:39 PM
From: Amy J	Read Replies (2) \| Respond to of 306849

Hi Tradelite, RE: "If you are willing to pay a higher interest rate, don't you think all the other buyers will be willing to do the same thing? (Of course they will....." Based upon the debt levels of young Americans, I doubt it. JP doesn't sound like the statistical average American - he sounds more like a low-debt kind of person. RE: "I never saw anyone decide not to buy a home they wanted just because of interest rates" More likely than not, they probably just say, "we can't afford it", without understanding the underlying cause. I bet housing will stay flat for ten years. Imagine if the stock market doubled after ten years while housing didn't, ouch. If that happened, that would be a subtle/gentle (and not so obvious) haircut by a half (in comparison) for the real estate buyer. Consider this: Housing stayed flat for 40 years after the boom of the twenties: ====================================== In 1922, a new house cost $7k, but then (reportedly) it took 40 years before housing doubled in price. (Don't remember what the report said about housing between 1962-1972) Fast forward to 1972, where it (reportedly) took only 5 years for housing to double in price. And then (reportedly) it took only 10 years for another double (1977 to 1987). You know the rest of the story. In 1997, there was a house in Silicon Valley worth $750k, back before million dollar homes became the norm. The house next door to this one, is a bit smaller in both lot size & house size, but recently this neighbor house sold for $3M. Remember when Hollywood homes were essentially the only homes selling for $3M? There is absolutely no real estate bubble according to the Iraqi Information Minister. ================================= Message 19056254 Regards, Amy J