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

To: SouthFloridaGuy who wrote (28895)	3/30/2005 10:40:50 AM
From: GraceZ	Read Replies (2) \| Respond to of 306849

Too many contradictory points. Life is complex. Not enough skilled workers (homebuyers) My point wasn't that they would continue buying up but that the incomes of the younger homeowners, who are now maxed out in their mortgages, would rise due to the fact that their skills would be more in demand. This would make that mortgage payment smaller as a percentage of their income....but then maybe this time it's different. too many low-skilled workers (non-homebuyers). This has been going on for a very long time, workers with low productivity, low skill jobs fall further behind those with high productivity, high skill jobs. Those low skilled workers don't constitute the majority of the workforce or the homeowning population but they do out number the number of low skill jobs available driving down their wages. So who do the baby-boomers (retiring) sell to? You assume they need to sell. The normal thing for homeowners to do in a period of flat to falling home prices is to stay put and pay down. A lot of Boomers will retire around the same time they pay off their mortgage. The cheapest place for them to live will be in that paid off house. If they retire at 65, they could live a good 30-35 more years so they need to limit their exposure to inflation risks. My in-laws lived for 50 years in their paid off house and 30 of those years were in retirement. A lot of 50 year olds are 2 years into a 15 year, their houses will be paid off before normal retirement age. Meanwhile interest rates fall to 3% because everything is great? It's the real rate that matters. In an environment of very low inflation the real rate at 3% may be higher than it is now. Just ask the Japanese how this might work. Although due to the actions of the Fed it seems unlikely we'd follow that route it is still a possibility. We had mortgage rates that low in the 1950s and it was a fairly robust economy.