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Greenspan and the Housing Bubble

  1. I guess if your looking for a house, your up sh1t creek.

    If you already own one, yawn, who cares.

    Stock market bubble and housing are two entirely different things. Equity bubbles are fabricated events (ie. the infamous pro-forma #'s). Housing does play along the lines of supply and demand and at times may be stretched there is no history of crashes in this area, not even Japan nor Hong Kong (jeez, prices are still sky high in HK).
  2. i've seen commercial properties take a big hit in the late eighties due to a tax law change. i think the author is right on the money, except that greenspan gunned the economy in fall of 98 when he bailed out ltcm with a surprise rate cut. he is doing the same thing with keeping rates so low now in the face of a rapidly declining dollar. when he finally does raise rates there will be a little hell to pay. i don't think current home owners are going to exactly "yawn," especially those that over leveraged and owe more than the value of their homes. don't worry, if they are IT professionals, i hear there are plenty of jobs in india.
  3. No mention of the fact that with lower interest rates home ownership is increasing, and many times there are similar monthly payments to own vs. rent.

    Granted you do need some kind of down payment.

    Many people with good credit and enough income can put down 3-5% and have a similar payment (especially when the tax benefits of home ownership are considered.
  4. Here in the bay area the market is deffinately moving up. I'm considering acquiring my first real property. I like the idea of no money down and pay only the interest on a 45 year loan. One doesn't need to make nay down payment as long as the creadit is there and he/ she acuqires payment insuranc, among other things.

    I've just compelted an appraiser license course and am to begin a real estate sales course in the next week.

    If anyone has opinions or recomendations about buying properties, renovating them, and then selling.

    What are the best resources available, and for TA?

    For the period of 2001 to Feb. 2003 SF real prices overall increased. And when prices momentarily went down, it wasn't much.
  5. You are a little late to the party. Most everyone has quit their Starbucks jobs for the free real estate course already.

    What was wrong with buying the bay area 10 years ago?
  6. He was in Junior High back then.

  7. Thanks for the info guys, you are great! No wonder being as old as you are you communicate worthless remarks via interenet.

    The both of you must be lousy investors or socially pathetic.

    I'm well aware of what the bay area real estate market went through during the past thirty years.
  8. There is no doubt that the attractive "monthly payment" has been the additional "carrot" IMO Greenspan has dangled in front of consumers to get them to take additional debt load. Greenspan has to place this debt somewhere to inflate a sluggish economy, and right now Joe Average is it with real estate being the vehicle. Every asset class has its day, all the other asset classes are exhausted. Real estate has been "tapped" to be the savior to get the president re-elected, and to give an old Federal Reserve chief his legacy.

    Monthly payment is great, but what about the note amount? If one pays 450k for a home, that means that amount has to be repaid. Due to the big runup, that 450k home might have been worth 300k 6 years ago. What really cracks me up is that 6 years ago the "for sale" signs stayed up for 3-6 months before the house was sold. Now people trip over their d!@ks and buy it the minute the sign is planted in the yard. Bubble mania perhaps?

    Since real estate has been two steps forward, one step back for generations, what happens if real estate has a correction here and the house is worth only 385k in a few years? Many people who have to sell....illness, divorce, tax liens, transfer...will be screwed. The rest will have to wait 10 years for the next "bubble" to be made whole again.
  9. With a second reading I see that I was wrong. I think buying that 1 bedroom, 1 bath fixer upper in S.F. for 700k with an interest only 45 year loan and no money down is a fantastic idea!

    Please check back with us (or let us know which Yahoo! board you are on) and let us know how the real estate exam went, how your fixer upper is coming along, and the NUVO investment is going.
  10. Back a couple of years ago I was shown a 1300 sq ft 1955 bungalow on a postage stamp size lot that needed major renovation on a busy major street in Palo Alto for 1.25 Milliion dollars. The agent made abig deal about the new aplliances - worth about 1000.00 dollars that the seller was throwing into the deal.

    I think that manias are readily identifiable: When buyers are scrambling to buy these types of properties without regard for the underlying local economy or demographics that might affect their investment then it is perfectly acceptable to call the situation as it appears ... another indicator - everybody and their brother and sister thinks they are a real estate investor and even poor Carleton Sheets has 10 other competitors to his "no money down" course. A mania - in certain markets - if ever there was one ......
  11. thank you for the post high-school repsonses this time round. There is nothing as frustrating as trying to retort to a retort that is so stupid that one simply cannot touche'. My appraiser exams are finished. I am beginning my sales agent exams on friday.

    NUVO, my stock pick, is fine; I just took her out for tea and coffee with lots of sugar. She seems to have about 44 million shares, which are being manipulated by a few worthy gentlemen. These gents are going to dramatize sweet little non-profit-pure-speculation NUVO until her tits burst and they all go tumbling down. You see, she's expecting.

    45 year loan, fixer upper, interest only payments, stable neighborhoods, what else? Rookie or not, all markets are infalted, that's what PE ratios are for. Sounding the alarm about an inflated real estate market has been going on since I was born. The theory of FA is somewhat illogical, though I know that we must find some sort of value to rave about, I would. And I know many of you pick stocks accordingly, I've and will.

    I calulated my risks and have concluded that I will make my money in real esate if I am to make it at all.

    You sould acknowlegde London's real property inflation situation.
  12. in the US "if" the RE bubble bursts it will be nothing compared to the carnage in the rest of the world, UK in particular. At least in the US most home owners have taken advantage of the long term fixed rates (I think I read that something like 90% of US mortgages are fixed rate) so even if prices slump for a decade and rates jump few will feel any pain. In the UK it is the reverse, as there is no equivalent of Fannie Mae or Freddie mac fixed rate long term mortgages are very expensive realtive to short term arms and there fore the majority (over 75%) are on short term arm mort.s Even worse people are doing interest only or (I forget the technical term) back loaded interest only mortgages (where you don't even pay full interest only per month up front but rather partial interest with the rest being added to the principle to be repaid later on in the mortgage.

    There is a similar crisis looming in NZ.

  13. thank you for clarifying. What is your perception of interest only payments here in the US? Why pay that extra amount.

    A down payment and paying off a loan is a waste of money and 10 or 20% down won't really help a person against a bubble burst.

    It seems that the best method would be:

    acquire an investment residential property in a steady growth stage,
    a property in area known for easliy liquidated
    a property with a good break even ratio,
    make improvements so that the price intially substantially increases,
    no money down,
    interest payments only,
    complete insurance.