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

To: JF Quinnelly who wrote (17520)	2/18/2004 10:00:12 PM
From: Elroy Jetson	Read Replies (2) \| Respond to of 306849

The Fed can still lower interest rates by 1% to zero. More to the point 30 year fixed mortgage rates are currently 5.58%. Japan pioneered a welfare program for home buyers which makes 30 year fixed mortgages at rates as low as 2% by bypassing the banking system and making the loans directly from the government Home Lending Corporation. So even though incomes in America are declining, home prices can be made to rise by bringing mortgage rates down from the current 5.58% to 2% by emulating Japan's massive welfare program. I fully expect this to happen. Asset Inflation is providing the only major support for consumer spending in America and the Fed cannot allow this to end without triggering economic depression like conditions. A Japanese style welfare program is also culturally consistent with America's free market subsidy economy. Being unwilling to accept economic down-turns, the government increasing subsidizes free market activities. The list begins with farming, real estate, and pharmaceuticals, and ends with a roll call of most business in America. The end result will be decades of stagnation.

To: JF Quinnelly who wrote (17520)	2/19/2004 9:38:24 AM
From: Tommaso	Read Replies (2) \| Respond to of 306849

Yesterday I took a three-mile walk through streets near my house, carrying a printout I got from some Yahoo site of all homes sales for the last two years. I do not live in a particularly upscale city and live in a solidly middle to upper-middle class neighborhood. It is true that it is very good for the school districts and a lot of families with children want to live here for that reason. The prices paid seemed quite insane to me for what people were getting. The most remarkable was $305,000 for a modest brick bungalow. Perhaps it had more space inside than it appeared to have. But only a year earlier a really good-looking stucco house on a beautiful lot overlooking a park (tile roof, many special features) sold for $270,000. People are willing to pay $200,000 for about 1800 square feet, three bedrooms, one and a half baths--and banks are lending them the money. Now I know that the same house in a good location in California might have been going for three times that amount. But for where I live, it seems preposterous. A 3% increase in interest rates on $180,000 means an additional $450 a month in housing costs. That is enough to break the budget of many families with two children. Or if they are wise enough to have a fixed-rate 30-year mortgage, the institution that lent them the money could well go broke if it borrowed too much short to lend long. This all the doing of the "Dr. Feelgood" policies of Greenspan's Fed.