Current Events — HabitableZone

Current Events » in reply to I agree with REB

re: I agree with REB
azstrummer — (archived)

Scott, from my take a great many of the people working today aren't going to be when the housing bubble bursts. Think of what's fueled our economy in the past decade - low interest rates and more people than houses. What I see in my neck of the woods is that formula quickly reversing itself. There's this natural human tendency to overbuild when times are good and for people to overextend themselves when credit's available cheap. A whole lot of people that are buying these new houses have as the breadwinner someone that works in the construction industry or in an industry that owes its present success to housing and building growth. The loan they got is interest only or variable rate or their lousy credit history would've precluded them from getting in a home in the first place.

The preponderance of new homes I see being built are first-time homes, low in quality, postage stamp lots but now with something very unique - huge price tags made only affordable by these creative financing options. My contention is that these people are counting on their overpriced homes to continue to grow in value so that when their balloon payment comes due they can refinance and cash in on their equity. Problem with that is there will be no equity unless these tremendous gains in real estate prices continue. I simply don't see it. At some time the housing boom comes to an end simply because of the overbuilding and/or interest rate adjustments. All these people that have jumped into the construction industry or count on construction material profits to make a living start defaulting on their mortgages. Of course they can't hold on to their homes because of the new bankruptsy legislation so the banks start getting back tons of property. What does that do to prices? They either stagnate or start to plunge so the banks can unload all that property. If prices fall, I'd hate to be holding onto an interest only mortgage wouldn't you? Well lots of America bought into them.

The castle walls are crumbling Scott. I'm saving my money for the upcoming bargains.

Art

Log in or register to post.

The whole thread (82 posts)