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Non-Tech : Bill Wexler's Trading Cabana -- Ignore unavailable to you. Want to Upgrade?

To: Hank who wrote (327)	4/2/2004 5:30:53 PM
From: Carl Worth	Read Replies (1) \| Respond to of 6370

what you say is true to some extent, but i doubt that home values will fall 20% in one fell swoop and across the board...there were cases where values fell that much in the 80s, but that was largely due to the number of defaults in a certain area, and the oversupply of houses for sale, compounded by the fact that people who were suddenly upside down in their houses just walked away from them instead of continuing to make the payments, even when they could afford them in many cases if a person's house has appreciated in value enough that the higher value plus whatever principal they have paid has gotten them to a 20% equity position, even if the house did then drop 20% in value, there is less likelihood that they would just walk away from it, unless they had a severe financial problem, in which case the bank would end up owning the house no matter what equity was in place, but this would not be a widespread occurrence finally, these loans as described in the article are being made to people who can make the payments, but don't have the money for the down payment, and while they are relaxing the standards for the down payment, they don't seem to be relaxing the standards for the amount of income necessary to borrow a specific amount of money....the main problem in the 80's was that the banks and S&L's were loaning money to home buyers who really didn't even have the income to afford those payments...the ratios were ridiculous, i remember seeing a sheet that said based on my wife's and my income at the time, we would "qualify" for a 125K mortgage, when in reality we had just gotten an 80K mortgage and while we weren't strapped for making our payment, we certainly would have been at least cutting it very close with another 50% higher payment in any event, i agree that PMI is not a cure-all, but i think that along with more stringent income requirements, it provides a safety net which should keep a situation like the 80s from occurring again...housing will go through cycles like it always has, but i don't think there will be a huge downturn (bursting bubble as it were) carl