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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Ramsey Su who wrote (18324)	9/2/2004 4:28:55 PM
From: CalculatedRisk	Respond to of 110194

Mortgage rates fall: #reply-20479936 The slowdown is happening faster than I predicted. Maybe falling rates will cushion the housing crash. I've tried to estimate the impact on the general economy of a housing slowdown, but it is difficult to predict. Obviously it will lead to slower GDP growth, but I think it might take the economy into recession. Entering a recession with interest rates at emergency levels and record deficits is not a pleasant prospect.

To: Ramsey Su who wrote (18324)	9/2/2004 5:05:32 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 110194

This huge increase in the inventory of homes for sale is what I recall from the real estate bust in 1990 in Los Angeles. Psychology changes within a week or two. Suddenly people believe the rising prices have given way to falling prices, so they put their home on the market. This panics more people who also put their homes on the market. Buyers sense the market change at the same time and become reluctant to buy. Homes which do attract offers, frequently fall out of escrow as even the smallest thing is now a reason to back off and look for a better deal. In Summer 1990 über-broker Fred Sands, owner of his euphonious number one brokerage firm (which he later sold to Coldwell Banker), told the Los Angeles Times, "This temporary "summer slow-down" is a great opportunity to buy a home at a discount before home priced resumed their rapid climb by year-end." By year-end, rather than resume their appreciating ways, home prices declined even faster. The most sought-after homes declined 50% or more in value.