[quote=AN][quote=CA renter]
Though some of us think flipping is a big part of the problem, it doesn’t mean we’re not informed.[/quote]
Seriously? You think flipping is the big part of the problem? Not the loose lending or the extremely low rates or the uninformed masses who are more than will to over pay?[/quote]
ALL of it is behind the bubble, no question about it. The availability of cheap money, no accountability, high leverage, and foolish buyers who trusted RE agents who told them to overpay are what encouraged all the speculation. It’s a vicious circle of loose lending and speculation.
Believe me, if people were only able to obtain prudent loans with minimum 20% down payments with 28/33% DTI ratios on fully documented income, there would be far less speculation.
Speculators remove inventory from the market, and the time they take (collectively) while they fix them up, rent them out, hold onto them, and/or market them can keep this inventory off the market for a long, long time. In an inventory-constrained market, they can indeed make prices rise rather viciously as more people are drawn into speculating on RE because “real estate only goes up!” How many people do you know who left decent jobs to go into real estate? I’ve known far too many who left productive jobs so they could speculate in real estate.
If the only people who bought were organic buyers (people looking for a primary residence), what do you think would have happened to prices, even IF lending were loose? I can guarantee you, prices would have been far, far lower, and there would be far fewer foreclosures right now.
It is all about supply and demand, but we have to understand the factors that influence supply and demand.
With speculation, demand is artificially increased, and supply is artificially decreased. Add loose lending to the mix (increased leverage with lower costs — adding rocket fuel to the demand), and it’s deadly.
Apparently, I’m not the only “uninformed” person who understands how speculation can affect a market with limited supply. The CFTC seems to agree:
“The CFTC must set the limits at a level that does not allow excessively high speculative positions that ultimately harm energy consumers,” her spokesman said.
The proposed regulations would still allow a trader to amass a 98 million-barrel position in crude oil, equal to more than a day’s global consumption and five times the New York Mercantile Exchange’s loosely enforced cap.
