Hardknock

Now I'm no economics major or anything, but after reading on various economic sites about a potential continuation of the decrease of the dollar could lead to interest rates in the double digits causing the hot markets to pop, burst, whatever. Here's a recent article:

Article

Discuss.

flstf

I'm far from an expert on the markets, but my experience in the past is that whenever the pundits on the market segments of the main news shows get bullish it is close to time to sell. Many of them seem to be bullish now. I believe that when so many are bullish they and their clients are already invested and the market needs new buyers to go up. Just a pet theory of mine.

I don't know what to think about real estate. I'm amazed it has continued to rise for so long. I guess low interest rates and creative low payment type mortgages have been keeping it going. I would guess we are getting close to the top.

Dilbert1234567

The house I am renting right now just went on the market for 475,000. It is a 3 bedroom 2 bath houses, its not in great condition, the pluming sucks, the doors are terrible and it is a block away from the bad part of town. Still it is nearly half a million dollars. We have a hole in one of our carpets that goes straight to the foundation.

$470,000

There is a bubble, it is in my house.

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flstf

I know what you mean. A year and a half ago we sold our house that we bought in 1988 for $128,000 for $545,000. The first day it was on the market a guy showed up 30 min before the opening and paid cash with no contingencies. After checking with the prices in that area today (Seattle) I think it is evaluated $50K to $100K above that now. It was one of the lower priced houses in that neighborhood. You have to wonder how working people can continue to pay so much for typical middle class housing.

I worked as an engineer and my wife as a designer and there is no way we could afford to spend so much. The taxes alone were almost $6,000 a year. I have to believe that these prices are getting out of hand. Not everyone has a couple hundred thousand for a down payment. When the prices get higher than two middle class workers can afford you know they are getting out of hand. Even if they are willing to use half their income for payments.

We moved to a different state and bought a better house with land out in the country and paid cash with the profit and still had $150K left over. So location has a great deal to do with it.

Yakk

US has hugely high debt:income ratios
US has slow growth in rental income growth (no shortage of rental supply)
US has interest rates that are near zero
US is borrowing lots of money from overseas.

Interest rates can't go down. Income from owning a house doesn't look like it is going up. If interest rates every go up, in order to, say, encourage overseas investing in US debt, the cost of all those morgages is going to go up.

Which will drive people to sell. Which will drive down prices. Which will make banks demand repayment of unsecured morgage debt (possibly when refinancing happens). Which will drive people to sell. Which will drive down prices.

I have seen only one attempt to rationalize the current housing bubble -- because real estate is an investment not correlated with stocks, it gives it a premium on it's non-capital rate of return. This fact was discovered recently, which justifies higher prices than would be historically justified.

The thing is, this seems a hell of alot like the justification behind the hugely high stock market prices in the 90s. And this justification was used a few years back, and housing prices are way way over that level now.

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Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.

jorgelito

So it's a question of when, not if....?