Question... Ok, so, I should just wait this out and have a new house built when construction costs are lower in about 12-18 months??
Just reading this with interest. The prices in the US dont seem too bad. Here in Northern Ireland there is a building site just opposite my house. This is a site for one house,quarter of an acre approx. The price: nearly $400,000, this is for the site. Then you have to build the house. Many of the houses arounf where I live are over a million dollars now, and many oover 2 million. people here are bemused by it all. Many people think it will go tits up here. Many people are living a way beyond their means. The prices have increased by 200% in the last 5 years. Btw, did you see the Penthouses in London that are being sold for 2 hundred million dollars, yes 2 hundred million. The first one was bought by a guy from Qatar. Something i feel is not quite right in the western world with asset prices and the way we spend. Its simple logic. You can quote all the figures you like, but at the end of the day, when the working class start buying $350 000 houses and new cars on credit( as they are doing here) something is not right.
Indeed, something is not right. There's so much talk about the housing bubble in the US, but very little about a much worse bubble elsewhere. At least in the UK prices seem to be even crazier, probably in many other western European countries as well. Anyone find any data/discussion about the UK bubble? I haven't found anything useful. Or any data on the credit quality of banks? Are they just black boxes we know nothing about?
Completely wrong. Your money on the bank stays what it is, all you get is intrest; houses have doubled (or even more) in the recent years. So the total profit for the "fool" is probably much higher than the return on the bank. total return is: yearly income plus increased (or minus decreased) value of the investment.
You should look at the way how the house was financed. Very expensive houses that were paid in cash are no problem. Houses paid for 100% with borrowed money and unsufficient income to pay the mortgage are the problem. Crashes only happen when people are forced to sell. The wealth in the US was based the last years on the appreciation of real estate. The higher the prices went the more people started borrowing because there was more underlying value. People had the impression of being richer than before. If prices go down there will be less underlying value and what happened in Japan will happen in the US. In Japan prices dropped hugely, the Governement had to backup financially lots of banks (loans without intrest), the Nikkei went down also and it took almost 10 years before real estate started to rise again. Just look at the charts what the Nikkei did, that will happen in the US also. I think Europe is a different situation because europeans don't live that much on plastic money (that they in fact don't have but borrow). I think the debt rate in the US is much higher than in Europe. This year apparently already 40 financial groups in the US went broke on the way they lended money. We are talking about 20% of the mortgage market. the debt of the americans rose the last 10 years by 130%. With rising intrest rates more and more americans get in difficulty to pay back their loans.
I've read that since 2001 carbuilders started to give away their cars. The payback of the loans started apparently only after several years and can last till 15 years. In europe people buy houses with such a loans. If what i read is true than there is only one word for this: insanity.
Bob, do you know what the mortgage brokers did with those loans? Bingo, they sold them to banks and funds....look at any lender...look at Countrywide, they did 1.2 trillion dollars in loans last year and they retain only about $145B in then...where do you think they went?
traderdragon, he was making that up I'm sure to make his point...or his friend really is a moron. Or he's "renting" a hotel room!
In the March edition of The Economist, they talk of a correction already beginning in Ireland, Spain and Australia, and claim their projections show the U.K. correction will be soon underway. It's their call, but I respect their hard data. You should read that article.
Uh...there's a lot more long-time value in owning an asset like a house that can be rented than planting money in the bank...were you joking?