CNBC real estate bubble

Discussion in 'Trading' started by taodr, Sep 5, 2002.

  1. taodr


    CNBC is really pushing the real estate bubble. Maybe they figure if they can cause real estate negativity people will sell real estate or not buy it. Next they'll have people on pushing their GE stock. Try to push it up so can all sell.
  2. Many many people who can barely afford homes are being qualified for loans. And mostly with 1-2 year ARM's.

    These are the same people who are going to be laid off next. There is another big round of layoffs coming. That means massive defaults in an already bad loan and credit scenario.

    The worst is yet to come.

  3. ElCubano


    IMO...appraisels are coming in a bit to high....this gives homeowners just enough rope to hang themselves with...The homewoner figures "hey I have 80k equity (bling -bling), Let me cash some out and buy something I've always wanted"....Only to find themselves upside down when the rug gets pulled from under them...
  4. Agree with the previous post,, people no longer are having there stock market gains so are refinancing and taking the cash and purchasing items they might other wise not be able to afford. Short term gain but long term pain, but they are keeping the USA economy humming along.
  5. the more i read, the more I think that the average person is drowning in debt. There are a lot of people that are upper middle class in nice new houses with nice new cars that are flirting with bankruptcy.
  6. taodr


    Yes. I read about this guy in small town usa. He went to see bank manager about refinancing. He had bought the house in 1997 for $330,000. The bank manager banged away at his calculater and told the guy his house was "now worth $550,000. And if the homeowner was smart he'd sign refinance form and receive a fat cheque for the difference($220,000) Anyways in a week guy had bought a $100'000 boat and the rest on two mercedes. He now has a bigger mortage. The funny thing was this guy was working for..., get this.... a telephone company.

    The first section of this article 'Home as a Financial Asset' explains why capital gains in housing is not the same thing as capital gains in stocks or in rental properties.

    Bascially, in order to access your home's capital gains, you have to take out a loan. The wealth effect in housing is much more illusory than in stocks. With stocks you can sell the stock and book your gains. You can't do that with the house you live in.
  8. I have heard all this before. As far as I know, there is no real evidence to support any of it. The facts are that employment remains strong, we are close to coming out of a slowdown, most economists now believe there will not be a double-dip, inflation is low and there is zero chance rates will be raised materially anytime soon. With any leveraged asset, it doesn't take much of a drop in value to cause real pain, but to date we really haven't seen any drop. Rather than trying to call a top in the real estate market and end up looking like Alan "Wrong way" Abelson, you're better off buying the biggest house you can afford in a strong market before you are priced out of it entirely.
  9. I don't think that employment is strong, and I don't think it is getting better this year. That combined with high debt loads spells eventual trouble. Buying expensive houses for fear of their getting even more expensive, combined with easy lending has created the bubble. It can't go on forever, its just a matter of when it will pop.
  10. since the banks and loan companys dont hold the loans they have nothing to fear from a bubble.they just resell the loans to the FNMs of the world which is backed by the government so the risk of a bubble bursting is transfered to the government.nice move greenspan.
    #10     Sep 5, 2002