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In my opinion home prices are only just now beginning to go down. Loan appraisal procedures are being tightened, to what they should have been in the first place. This will eliminate many potential buyers without proper income.
Notice that prime lending rates were dropped by 0.5%, and will probably be dropped another 0.25% or 0.5% at the next fed meeting. I thing this is a way for the fed to provide the banks a window of opportunity to recoup some money that they lost in hedge funds. The sudden spurt in the stock market is likely to cool off after the holiday season. Several banks would've gone under had it not been for the interest rate cuts.
The era of the free-money for home buyers is over for now. The housing market, especially in the bay area will likely have all the time in the world to cool off in the next few years.
One of the elements of surprise is - a likely war in the middle east. That will provide a breather at least for the falling US dollar, and also bring down the Euro, and restore back the Greenback as the most favorable currency.
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One reason the housing debate gets so emotional is that many people cannot distinguish between where they live and who they are. Their home feels like their self. And how can you put a price on your self? Realtors and lenders exploit this emotion for personal profit, destroying the financial lives of millions.
Others take a more practical view, and are willing to separate their sense of self from where they live. They can and have saved huge amounts of money by renting or owning a house well within their means, and can watch the housing bubble implode with equanimity.
What is it that separates these two kinds of people?
Patrick
#housing