Money has been too cheap to justify saving over the last few years. Why would a 20 something save for 3 plus years (2000K a month and about 70k down payment) to come up with a 20% down payment if they can walk out and get a 103% CLTV that will cover closing costs as well? After all saving takes sacrifice and discipline.
“Don’t panic” life has many cycles. Many problems tend to fix themselves, even without government intervention. 😉 Lenders will get tighter with their loans not because they want to. After all most get paid a percentage of the total loan so it is in their interest to qualify you for as much home as possible. They will tighten their practices because their financial liability is no longer being covered by skyrocketing price increases. I doubt that you will see 103% loans being offered in a declining market. Also as people realize that the SD RE market is no longer increasing and may possibly be decreasing, people are going to be less likely to leverage themselves so far out if they may loose 10% of the purchase price. At 360K on an entry level home that 10% is 36K which is one hell of a Vegas trip in a 20 something world.
As far as myself goes, I am a 20 something and am in the process of straighten out my finances. Now is a great time to start saving up money and if there is a down turn don’t worry about the people that may get trapped in a bad situation (unless the gov. uses your taxes to bail them out) The people whose credit gets flushed in the next few years will just take that much more purchasing power out of the market, especially in the entry level market. Even if there isn’t a crash and prices level you still won’t loose money and may even come out ahead if you invest your saved money into something that is appreciating say shorting bio-techs. Worst case scenario I’m going to rent a place near Swami’s, buy a long board and not have a 2-3k a month house payment to stress over… DAMN!
