Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: John Vosilla who wrote (59812)	8/12/2006 11:21:23 AM
From: Dan3	Read Replies (1) \| Respond to of 306849

Re: 'How can we reconcile the phenomenon of home price inflation with the obvious stagnation to decline in incomes?' Some of it actually makes a great deal of sense. If you borrow 300,000 at 4.5% (the low of recent 30 year rates) you pay $1,520 per month for 30 years - $547,200. If you borrow it at the 9% rates prevelant a few years earlier, you pay $2,414 per month - $869,040. The reverse, is that when rates were at 9%, your $1,520 "bought" you about $189,000 in a loan, while, when rates were lowest, that same income and payment covered a $300,000 loan. The initial drivers of the big increase in what buyers were willing to pay for homes was the very real drop in the cost of money.