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Look at my prediction about the US economy that I posted in 4/16/2007
When I posted this the dow was at: 13,000
Today: 8,500 give or take
When I posted OC real estate (where I live): median price = $649,920
Today: $469,000
Quote:
The housing prices are way out of whack. This is one of the largest housing bubbles in US history! It is not going to be a soft landing. Housing prices are stagnant right now because it takes a while for the housing market to deflate. This crash is going to last 5 years+ at least. The sub prime fallout is just the start of this mess. 1 in 5 homes was purchased with a sub prime loan which means that 20% of potential home buyers are completely out of home purchasing power (how can they buy home if no one gives them the money?). It is going to be very difficult for people to get mortgages. They are going to have to fully document their income and 20%+ down payment. If it is very difficult to get a loan then very few people can buy and those that can buy are going to be very limited to what they buy because they are going to have to borrow within their means.
To further elaborate on the problems there is approximately 1 million people who are in risk of foreclosing on their homes in the next 6 years. These homes will add to ever increasing inventory.
That is just considering the housing market when you factor in the effect of the housing collapse on the stock market we are looking at a serious recession ahead of us. For the past 10 years home owners have been betting on appreciation to bail them out their financial problems. They have been using HELOC to use their credit to purchase home improvements and mostly consumer spending. 70% of the US economy is based on consumer spending! Just look at all the US jobs that were created in friday's jobs report. Mostly service sector jobs. Guess what happens when consumers can't get access to their home equity and stop spending? The economy tanks and we fall into a recession. Many people will loose their jobs.
The only way we can get out of this mess is if we prolong it by the fed lowering interest rates. However this appreciation cannot continue forever and eventually we are going to fall into a housing collapse and ultimately a recession that will soon follow.
Just look at the Japan RE bubble. We have all the same characteristics and that Japan bubble took 15 years to correct itself.
Anyone who denies these claims is not looking at the facts the way they are and is simply in denial. This RE bubble is going to deflate and it is not going to be a soft landing like we had with the dot-com crash. It will be much worse. Get your money out of RE before it is too late.
For a long time, many people sensed things weren't right.
I can remember being in Los Angeles and looking around at all the new cars, all the shopping, and the house flippers. In 2005, it was especially unsettling. I kept thinking, where is all this money coming from? How long can this go on for?
By that time there were alot of articles that had been published about the housing market fallout from the bubble and houses had already started falling. The thread tile siad it all really and hte post before yours. The DOW might have been at 13000 but housiong had already started in most places.
Everything in America is on credit. That is the problem. People spend more than they make. It is both peoples fault and the stores fault for prices. Ive lived in a few cities, miami, NY, DC, philly, ATL and I was amazed at how many people have such nice cars while so young. BMWs Benzes while 20s or younger. It just amazed me, I kept wondering where is all this money coming from and I thought they must have really good credit or something.
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