Housing boom will not end in a crash, says Harvard --------- The Harvard study also argues that there are fewer points of vulnerability than during previous housing market downturns. The macroeconomic outlook for the US is uncertain but no mainstream economists are predicting the kind of surge in unemployment or leap in interest rates that would prick the housing bubble. In spite of the shift towards flexible rate mortgages, 75 per cent of mortgage holders have 30-year fixed rate loans and are therefore largely invulnerable to rising rates. A third of households own their homes outright. Nor are manylikely to suffer from negative equity should rising interest rates or unemployment drive up defaults â about 94 per cent of home-owners have equity of more than 10 per cent. Over-development has also been less of a problem than in the past, the study says. Price declines associated with episodes of big job losses alone average 4.5 per cent, while those occurring around periods of over-building alone average 8.3 per cent, it says. ---------- The guy was on CNBC this morning saying not to expect a crash nor is the use of the word "bubble" a definitive way to describe the the current market. Basically expect a period of flatness to slight depreciation in the short term unless the economy really hits trouble, then we're doomed.
The more then talk about no housing bust then you know that it makes it more likely. Why?? Well I don't think we had ever had 1% interest only loans in the past. I don't think we ever had a time in history when so many people wish they could sell their house. Not sure we have ever had experience with panic selling in certain markets due to mortgage payments going up. What I mean is, Bernanke doesn't think %8 30 fixed is that big of a deal. So they will keep rasing rates. John
Attached is the file I get from marketwatch. It says 40% of housing market is overvalued. What could happen to the undervalued markets in the new few years?
Attached is the file I get from marketwatch. It says 40% of housing markets are overvalued. What could happen to the undervalued markets in the next few years?
How to Profit From a Cooling Real Estate Market by Robert Kiyosaki Utility Links Printable ViewEmail this PageTuesday, June 13, 2006 All over the U.S. there are stories of a rise in real estate foreclosures. Many people who took those exotic mortgages -- borrowing 125% of home value or choosing adjustable-rate mortgages -- are struggling to make their payments, and some aren't making it. Also, a glut of new property supply, especially condominiums, is coming on line. A friend of mine, a very seasoned real estate investor, says in San Diego County, once one of the hottest real estate markets in the country, thousands of new condominiums are getting ready to come to market -- just as the market softens. He estimates that over 12,000 new units are coming on line, and the market, at the best of times, can only absorb about 1,000 condominiums a year. If he's correct, that means 12 years of supply will be ready for market in the next year. As interest rates rise and the number of eager new buyers begins to diminish, adding supply to an already bad real estate market for sellers may mean a very good market for buyers and for property investors. Hungry Alligators The people who are in the most trouble are flippers -- people who aim to buy low and sell high within a short space of time. Many were buying condominiums off the plans, which means the projects were yet to be built, in the hopes that when the homes were completed, they would sell for a tidy profit. The trouble is many of these flippers, lured into the market by stories of people making a huge killing earlier with a similar strategy, are now the ones to be slaughtered. Now, they either lose their deposit or have to cough up the money for the purchase in the hopes there's a greater fool than they were somewhere out there real estate. If you recall, the same thing happened around the year 2000 as amateurs jumped into the stock market, buying up tech stocks or any IPO with a dot-com after the company name. In the coming months, I predict we'll see an increase in people dumping real estate they can't afford. They'll be forced to sell because they'll be eaten alive by a phenomenon known as negative cash flow. Investment properties that you have to feed money to every month are fondly known as alligators -- if you can't afford to feed the property every month, it eats you. I know of one so-called real estate investor (and I prefer to call people like him speculators rather than investors) who has three homes he thought he could flip for a profit -- but he priced them too high. Now, $7,500 comes out of his pocket every month to feed the negative-cash-flow alligators. The problem is, he and his wife don't earn that much a month. Their three alligators are literally eating them out of house and home, consuming the profits they made from other flips -- and their savings. To add more pain to the misery, they still have to pay the capital-gain taxes they made from their previous successful flips. They're toast. The alligators are eating them alive. They can't afford to feed them, and they can't afford to sell them because the prices they paid for these alligators are more than they're worth today. And this is only one story -- out of who knows how many. Over the next couple of years, keep your eyes open for some great bargains. It's Time for the Pros Some people say we're now entering a bad real estate market. I disagree. I think we're entering a great market. A bad one is when amateur investors become real estate experts and they bid up prices. They make housing expensive for homeowners, often adding little to no value to the property. They simply muddy the waters and make a valuable investment, a home, expensive. Now, I must admit, I sometimes do buy to flip, so I can't be too critical. Yet it's the amateurs who come late to the party -- and who eventually donate their money back to the professionals. What I'm saying is: Now is the time to turn pro. Now is not the time to be an amateur. It's the amateurs who jump in when the market is hot. It's the professional who comes in when it's cooling down. Get the message? When the red-hot bull market of real estate was beginning to overheat, you didn't have time to make considered decisions. Sellers were receiving multiple, over-asking-price offers. In a bull market, you had to be quick, have money, and be a little foolish. Now that the market is cooling down, sellers are a little bit more humble. You have more time and can do your due diligence carefully. You can negotiate better terms and make a better deal, especially if the seller has his leg inside an alligator's jaws. Bad News That's Good But don't be in too much of a hurry. I think we still have some bad news yet to come -- and I believe it may come from the bond market. I suspect that many of our foreign investors who have been buying our debt may be becoming more cautious about investing in American assets, especially U.S. bonds. Many foreign bankers may be having doubts about the U.S. government paying the interest on our debt. In other words, many investors will be moving increasingly out of their cash into tangible assets such as gold, silver, and other metals. Again, this is only a suspicion. We should know more by September of this year. If investors stop buying U.S. government debt, who knows what might happen? The U.S. may need to raise interest rates even higher, which will drive home values down even further. So be patient, keep looking at real estate, but keep your hand on your wallet (unless of course you find a seller with a really mean alligator eating him alive). A year ago, I sent out a warning to investors, especially flippers, to cash out quickly. I received a lot of irate e-mails from people who thought I was turning on them. They thought I was spreading bad news. Little did they know that by forecasting a real estate downturn, I was spreading good news -- good news for real investors and bad news for amateur alligator wrestlers. Pagination < Prev12Next > The columns, articles, message board posts and any other features provided on Yahoo! Finance are provided for personal finance and investment information and are not to be construed as investment advice. Under no circumstances does the information in this content represent a recommendation to buy, sell or hold any security. 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So the bubble won't burst because "no mainstream economists are predicting the kind of surge in unemployment or leap in interest rates that would prick the housing bubble." HAH! Since when have mainstream economists been able to predict anything correctly? Guess what. The bubble will burst on its own. No need for excuses such as higher interest rates or surge in unemployment. Though the latter will surely follow.
Interesting that this very official sounding "Joint Center for Housing Studies at Harvard" mentioned again and again in this "study" turns out owes it's soul to the housing industry! When you dig a little deeper you can see the list of contributors to this "Joint Center". This "Nicolas Retsinas" spokesman is just a paid whore...plain and simple. OWP Check this out... http://www.jchs.harvard.edu/people/pabmemberlist.html Policy Advisory Board- Member Companies Andersen Windows Armstrong Holdings, Inc. Beazer Homes USA Black & Decker Boral Industries The Bozzuto Group Bradco Supply Corporation Builders FirstSource Building Materials Holding Corporation Canfor Corporation Cendant Corporation Centex Corporation CertainTeed Corporation Champion Enterprises Countrywide Financial Corporation Crosswinds Communities Fannie Mae Fannie Mae Foundation Federal Home Loan Bank of Boston Fortune Brands - Home and Hardware Freddie Mac GAF Materials Corporation Georgia-Pacific Corporation Hanley Wood, LLC Hearthstone Home Depot HomeStore, Inc Hovnanian Enterprises Huttig Building Products James Hardie Industries NV Jeld-Wen Johns Manville Corporation KB Home Kimball Hill Homes Kohler Company Lafarge North America Lanoga Corporation Lennar Corporation Louisiana-Pacific Corporation Marvin Windows and Doors Masco Corporation Masonite International Corporation McGraw-Hill Construction MI Windows and Doors, Inc. National Gypsum Company Oldcastle Building Products, Inc. Owens Corning Pacific Coast Building Products Pella Corporation Pulte Homes Reed Business Information Rinker Materials The Ryland Group S&B Industrial Materials S.A. The Sherwin-Williams Company Stock Building Supply The Strober Organization Temple-Inland UBS Investment Bank Weyerhaeuser Whirlpool Corporation
Yep, Milk does a body good... blah, blah blah. brought to you by the Calif. Dairy Farmers Same thing. Nothing like a bit of unbiased research.
Does Havard know a lot about the real world ? There was a time when interest rate was like 12 percent, is that correct ?