I would not count on housing to save us.
By Daniel at 29 June, 2009, 4:29 pm
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
On the contrary, housing prices (in general) if not going lower are capped because long term, interest rates will surely go up. If they go up from here over the long term which many probably agree with, how can prices move in lockstep UP?? That makes absolutely no sense. On the contrary, the PRICES of homes must continue to fall to allow the MONTHLY MORTGAGE PAYMENTS to be affordable to new buyers. This whole trend is opposite long term trend of last 25 years of high to low interest rates and increasing home prices!
Even now, with 5.5% rates payments for many are still unaffordable. I am not including UNEMPLOYMENT ISSUES. Declining wages over time now is another reversing trend not included in what I am saying. How should that be factored in?? First generation in a long time where standard of living may not be better than the one before.
Bottom line: the disgraceful Fed is praying that they can somehow manipulate the housing market here indefinitely via all their buybacks of mortgage backed securities. The markets of price and supply and demand run them, not the other way around.
What do you think will happen when rates simply go to 6.5% over the next 1-1.5 years, are prices going up or down then?? What about when rates are 8%, 10% etc…? What about higher property taxes also? (We got to fund the massive govt debt somehow!) What is the average person going to afford for home ownership then? More buyers will be locked out due to unaffordable financing, lack of jobs, higher rates and sellers will have to continue to lower prices to accomodate existing financing options for the fewer qualified borrowers who do exist. You see the trend now?
Saga
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
It’s amazing how many people still believe that the housing market is going to come back soon, this just proves that the property bubble has not finished bursting.