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

To: SouthFloridaGuy who wrote (28977)	4/3/2005 8:44:14 PM
From: GraceZ	Read Replies (2) \| Respond to of 306849

I don't understand your point. If your argument is that most people will continue to live in their houses, then I think the whole board is in agreement My original post was in response to this: There is no doubt about it. Even a 5-10% decrease in values (and it will be much more than that) will financially ruin millions of people. I don't think this is true. My response was that those with little equity wouldn't lose anything since they had nothing invested to lose, it would be the banks which would lose (or those holding the notes). Others, the majority, who have lots of equity invested will continue to live in their homes and pay down their mortgages. They might save more in response to a drop in home prices but it would hardly result in a financial calamity for them. Also, from my previous experience being in such a situation that if you are young enough, your income will rise and bail you out of a big mortgage. No matter how ridiculous your mortgage payment seems when you buy, over time it shrinks in proportion to your other expenses unless you take on a heavy mortgage late in life when your income is leveling off or declining. Unless you want to make an argument for deflation, but even in Japan where there has been deflation for over ten years defaults on home mortgages did not rise significantly. I think you are also incorrect to think this RE bubble doesn't include younger buyers (who have future incomes that could be much higher). I work for a very large home builder and I can tell you that the primary market for their homes are people in their early to mid thirties buying their first home, not Boomers. Boomers drive the move up market and they may be primarily involved in speculation in the RE market, but RE is always fed from the bottom.