“I would like to ammend my statement to say, “I believe that the buyers will be forced into foreclosure in 5 years, unless interest rates are back to 5% AND they can qualify for that $780K loan for a house which will at that time probably be valued at $480K. So in all likelihood, they will be forced into foreclosure”. Does this satisfy you?”
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It doesn’t – and here is why: almost the entire hypothesis is based on numbers that are simply being pulled out of thin air. In addition, there is simply no way to know what the personal financial situation of each homeowner is going to be. Every gloom and doom prediction is fatally flawed by these problems. The variety of scenarios that may play out in each individual household over the next five years is immense. I won’t even waste my time to hazard guesses as to these unknowns.
As for the earlier post, the class act who calls me a “fool” and makes this discussion personal, that is just indicative of someone who does not want to listen to opposing opinions. Now I did indeed feel like a fool in ’89, when I bought a property for $155,000 at the apex of the housing run-up, only to watch the market tank over the next 5 years. My timing could not have been worse. Understanding from family experience that all investments are best measured over the long haul, I held on and am now sitting on a property worth – well, let’s just say a whole helluva lot more than $155K.
I am certainly not saying all is well in real estate. Inventory is dramatically higher, buyers are on the sidelines, sellers are reducing prices and there seems to be a general feeling of waiting for the other shoe to drop. I think sale prices are going to end up down 15-20%, depending on the micro-area, where there will be support from the buyers on the sidelines. So long as there is no significant spike in mortgage rates and the SD economy does not tank, there is no reason to believe there will be a massive implosion in values. Mortgage rates are up, but in my mind relatively insignificantly when considering 17 straight upward modifications by the FED. The FED has already indicated that they are at or nearing the end of their anticipated increases. So if mortgage rates have increased minimally in relation to the ongoing Fed raises, I am guessing that when the Fed lays off the mortgage rates will stabilize, not skyrocket as some on this forum have assured me. And again, the critical component is each homeowner’s personal financial situation, which is impossible to know or predict.
All I’m doing here on this forum is responding to what I believe to be a “sky is falling” mentality and trying to create some balance by interjecting my 2 cents. If opinions that do not fall in line with “the sky is falling” are not welcome, I (The Fool) will happily spend my time elsewhere.
