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

To: KeepItSimple who wrote (59787)	8/12/2006 2:53:49 AM
From: John Vosilla	Read Replies (1) \| Respond to of 306849

'How can we reconcile the phenomenon of home price inflation with the obvious stagnation to decline in incomes?' Lax lending + toxic option ARM's + record low interest rates + sheep mentality of the public = asset values expanded to record multiples to operating cash flows You take some new age RE mogul extrapolating 20% appreciation in perpetuity and 1% pay rates on his option ARM in the near term and he is very happy to pay 50 times operating cash flow or 2% yield. This was unheard of in the good old days. I'm sure Elroy and any other long term folks in the industry remember many people getting their head handed to them with expectations of 9% yields after the last collapse less than a generation ago.