Winning The Hearts and Minds…of the Wildebeest…
259 replies to this topic
Posted 06 December 2004 - 02:00 AM
The owner's other assets are protected if it a purchase (as opposed to a refinance) loan for a home you live in at the time you get the loan (even if you subsequently convert it to a rental):
FORECLOSURE/SHORT SALE BROCHURE
Posted 06 December 2004 - 02:06 AM
I would never want to fade K-Wave, nor Brian (which makes it hard when they disagree on something, like the dollah!)
What if there really is Weimar inflation? Just as K-Wave says, we better be long the stock market if that's the case -- and don't we also want to own real estate in that scenario? Imagine selling your house for $57K in the seventies, and seeing it now be worth nearly TWO MILLION -- won't we see the same thing only happening lots faster if it's Weimar II comin' right up?
I also wonder if normal lower-middle-class/middle-class houses will be as affected as McMansions in a real estate bubble pop.
Of course I'm caustic!
Posted 06 December 2004 - 03:57 AM
It has not.
Not for most home owners.
BECAUSE THEY HAVE NOT SOLD.
The ones that have sold, yes, they have made profits. The ones left holding the bags are gonna get raped, and raped badly.
And all the way down they will continue to bluster and spew nonsense and pop mythology, all the time ignoring simple arithmetic.
It doesn't bother me that speculators will lose money, because they trade, they know the risks, they win some and lose some, and they're playing with extra money they don't need.
What bothers me is to see the vast majority of ignorant common schmucks thinking they have so much equity, cashing it out, spending it on crap to keep up with neighbors, not knowing there will be no more cashouts for next ten years as prices drop then flatten. And they will be trapped in debt, underwater, and over their heads in mortgage and other bills.
Because they got sucked in by real estate borkers and other shysters and yes their own greed, but they were coerced into it by all the B.S.
Posted 06 December 2004 - 09:33 AM
A real estate value decline of 20% may not mean much if you still have your job, can still make the payments, and if prices recover in 10 years. At least you have a roof over your head.
The coming "adjustment" is going to be different. First of all, for many, their jobs will be in China and India. Second, the bubble today was driven by a credit bubble subsidized by super low interest rates, courtesy of foreign central banks, a situation that will not persist indefinitely. Third, millions of mortgages were adjustables entered at the bottom of the rate cycle. A tidal wave of foreclosures will balloon supply, and demand will simultaneously collapse. In terms of the national average, I suspect that the "adjustment" will be significantly more than 20-30%.
Holding stocks in a Weimar style inflation may or may not make sense. Depends on interest rates, i.e opportunity cost, and whether the real rate of return is positive or negative. Stocks may go up or they may not, and even if they do, you may still lose ground. The best investment in the last inflation was that 16%, 30 year bond, which you would still be holding today.
More at http://www.realestatebubblewatch.com
If your portfolio has you feeling irregular, for fast, long lasting relief, take a subscribatory. And support your local Stool!
The Daily Stool - Stock Market Message Board