WHAT HOUSING MONEY? The equity is all being drained away through refi's and more refi's to buy all kinds of crap and is ending up in China!
Money has gotten trapped in real estate. Only the ones who have tried to sell recently know it. Bond, note charts look ripe for sell off. Money will flee the bonds and plow into stocks. Next "bubble" will be in stock market. After bonds hit 10% the stocks will crash. Then we will have the disaster that everyone has been waiting for. John
Asset allocation boxes signal to go long the bond/equity spread when rates rise. Otherwise some good points.
Bingo. I work for a mortgage company (I'm a uni business student), and you wouldn't belive the things that I hear. People with piles of equity that could probably retire early if they sold out now. The same people coming back to try and refinance as much as they can of that equity. People consolidating credit card debts into their mortgage, then coming back a year or two later to do the exact same thing. Apparently one of the big Canadian banks did a survey a couple months back, and roughly 60-70% of those surveyed felt that their property values would never decrease!! I read an article a couple of days ago quoting a source from TD Bank's economic's division stating that Canada's property markets aren't overheating, and that values have only gone up about 8% year over year. I would really like to see how they sourced those stats, because we have a few areas in Canada where property values have been rocketing upwards lately (such as Vancouver, BC for example). And finally, I was watching a really amusing infomercial last weekend about (you guessed it) real estate investing. One of the people on the infomercial was saying that he preferred to be known as an "equity farmer", he would invest in a good property, then go back to the bank every couple of years to pull out equity (also known as taking on even more debt). So his net worth is allegedly $2 mill now, what happens when the bubble bursts and he is still on the hook for mortgages totalling $1.99 million?
I guess the equity farmer plans on walking away from his fields once he's exhausted them. Anyone planning to do likewise should investigate how the bankruptcy laws in the US have magically changed to almost eliminate Chapter 7 (the fresh start). You can tap into your capital gains by selling some stock. You can't tap into your home equity unless you take on another loan which instantly has a new monthly payment you have to make.
Exactly. There was (is?) obviously money to be made in real estate, but it amazes me sometimes how people think. Personally if I was living in a property worth, say, $700K, with a $250K or so mortgage, I would probably be either inclined to sit tight (if I actually want to live there for the long term), or would sell the property. I wouldn't be inclined to go to my bank and ask them how much they are willing to lend me on the current market value of the property. The only exception to this is that consolidation of high interest rate debts makes a lot of sense from a financial planning perspective, assuming you aren't stupid enough to run up your credit cards again...