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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (68909)	4/29/2008 2:37:54 PM
From: Elroy Jetson	Read Replies (2) \| Respond to of 74559

No, real estate prices merely come back into line with incomes. The equation in California, London and many other areas simply don't make sense. These prices only existed through the means of bizarrely liberal credit which is unsustainable. People who can afford $2k per month rent purchased $1.2 million flats because the loan allowed them to pay only 1/3 of the interest and none of the principle for 36 months. The lender was essentially selling them a Call Option on a house they had no hope of affording unless the price continued to rise. Normalize the financing and the same person with $2k per month for rent now purchases the same $1.2 million flat for $300k, a 75% decline. But all markets over-shoot on the down-side as well as up. So a 90% decline is not out of the question. In 2003 Templeton thought a 90% decline would represent good value. .