If the most bearish of our predictions is to occur, all potential debtors must be in the pool.
Scott: No argument. However the debt being created via down payment grants is not serviceable. Nothing but more bad debt that will need to be liquidated
Every last bit of demand for debt must be sopped up. That is what is occuring now.
The serviceability of the debt is not nearly as important as the creation of additional debt.
If Joe6P can't service his $1,800 mortgage, but someone else can come it at 0 down, interest only payments and take over that mortgage, or J6P can refinance, then that is all that matters.
If you stretch a 30 year fixed rate mortgage out to a 40 year, interest only mortgage, you have improved the serviceability and increased debt.
It's only a matter of time.
Government funded, 50 year adjustable rate mortages, 0 down and the first 3 years interest only payments. Skip up to 2 payments per year. After 3 years, receive a 50% tax credit on principal payments.