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

To: Tradelite who wrote (63499)	10/8/2006 1:48:08 PM
From: XoFruitCake	Read Replies (1) \| Respond to of 306849

I mentioned to the post in Lizzie that I expect at least 8 years before we go back to today price and then you have to figure out additional few years for appreciation to make up for the negative cash flow in the first 8 years. If it were HB overbuilding or interest hike driven bubble for the last 3 years, I would have been more optimistic. The problem we are facing with is easy credit driven bubble. And easy credit will not come back until our society absorb all the pains (read foreclosure, lawsuit, government bail out of the institution/homeowner, and all the grand standing our politician will do to the bank/mortgage broker/RE agent/appraiser for letting the f'd homeowner hang themselves with all the exotic loans etc.). It will take at least 3-4 years before our government sort out all new regulation for mortgage, who is responsible for the mess, and make sure that the financial systems is sound. And the secondary market will need to figure out how to price the exotic loan correctly (e.g. if they cannot trust the appraisal, what can they do to make sure their loan is adequately protected?). In the last few years, these exotic loan has basically no risk premium priced in at all. And that is the reason why mortgage broker/bank etc. are making bundle in selling those loan. Now as the holder is feeling the pain of foreclosure, fraud etc, they will act to make the loan very restrictive first. Then slow relax it and price them very high to protect themselves. Every time we hear about a large scale mortgage fraud, the holder of the mortgage is hurt and the mortgage market will demand higher premium for the exotic loan. The rising market hide a lot of the problem and now we are hearing more of them and the ball will start to roll downhill from here. I think the liar loan will be hit first with high down payment requirement, higher interest rate, and tight appraisal to protect the lender. Can anyone imagine that housing market can stay at current price level if mortgage standard is tightened up?

To: Tradelite who wrote (63499)	10/8/2006 2:51:08 PM
From: John Vosilla	Respond to of 306849

The number just don't work in most situations in a rent versus buy when you are talking about our coastal bubble markets. I did talk to a banker down here last week and she actually had a younger professional single buy a 2/2 modest older condo for $165k (probably worth $225k at the top and $70k back in 2000) that his landlord was going to be jacking the rent up to $1250 a month when he was paying $900 just two years ago. He was tired of 'throwing his money down the drain'. So there are two sides to this story as usual but the game will be very hard in coming years for both renters and late to the party buyers/investors.