Think about it.....you have these vulture's (speculators) that were scouring to buy a property thinking they could turn around and "flip" it for a profit onto someone that wanted to live in the house. What do these people think money grows on trees and thier intitled to a profit cause "REAL ESTATE IS THE SURE INVESTMENT and IT CAN NEVER GO DOWN IN VALUE"? And now these greedy people are getting burned and most suffer the consequences and eat the lost.
I rented a house here in Carlsbad from a policeman. Get this, this guy owned 10 newly bought houses(in last couple years) and was renting them. He was all ear to ear smiles as he was telling me his secret. He simply bought dirt in new phases and after the house was built he already had a profit. He told me I should look into doing it. I told him in May 2004 that he better sell all he had. He looked at me like I was crazy. Here is a guy who make maybe $80k a year with 10 mortgages. There must be hundreds of people who control thousands of houses here in SoCal. Thanks for your comments John
Well my concern is for the young population that are first time homebuyers that are assuming these inflated (speculative buying fueled) home mortages, I mean housing is a necessity and im just concerned that it's making it very hard for young ones just starting out and having to worry about paying a huge mortage payment when wages have not increased enough to keep up with rising home prices
It will Be ok. As a matter of fact, it will probably make housing cheaper then it has been in 20 years on a relative basis. It always ends up overshooting. Buyers just have to be patient. It will take 3-5 years to shake out. John
What is not Greenspan's fault: 1% interest rates. There were significant deflationary forces, and low rates (short term) were a good idea. China's peg of USD to the Yuan and Japan's soft peg (to compete) resulting in massive dollar reserve increases and economically irrational low long-term rates, resulting in housing bubble. What was Greenspan's fault: Failing to use more specific tools to prick outrageous asset bubbles than basic interest rates. The Fed ought to be more than just the short-term rate-setting FOMC. Specifically: failure to seriously increase the margin requirement on stocks during the bubble. The argument that hedgies etc had other means of borrowing doesn't stand up---the increase in margin would ripple through the whole banking and financing. The second one is the Fed's failure to crack down on underwriting standards for mortgage loans recently, especially in bubble areas. If everything had been 20% down 30 year fixed with sane debt to income ratios there wouldn't be a bubble and the upcoming recession/depression. The world and finance industry is not only about interest rates and it will really suck when normal people who didn't do anything foolish get screwed and lose their jobs in the upcoming big recession.
It's not Greenspan's fault, it's the way the banking system is set up...Fractional Reserve Banking creates an endless supply of money out of thin air. It all made sense to me after I read "CrashMaker."
That sounds good until you realize that Greenspan knew what he was doing and if deflation was a risk before the bubble, imagine the deflation risk after it pops. John
It sure is 100% Greenspan's fault. He is the one that pumped buying adjustable rate and other high risk mortgages in his Fed speeches..
He really did push ARMs citing Fed research about 1 year ago. There was a thread on it here, with links etc.