Welcome to the board and ignore childish name calling as I believe we are mature enough for that kind of stuff. Your comments are most appreciated.
I disagree with your comment that stats supporting housing collapse are taken out of “thin air”. I think you need to understand the concept of economic models, how cyclical assets work and how many times economists have been able to predict with high accuracy about asset bubbles without knowing about specifics of each individual but by working with the average/median stats.
I agree with you that we don’t know about the personal finances of each and every individual in SD but this is not how economists model and predict future recessions/booms. To build any model they have to play with median/average since both tend to be good measures of whole population sample. Now, take a look at the median income to median home prices ratio for SD for last few years that Rich posted and compare that to the historical average. Also check the rent to housing price ratios. These numbers don’t tell me that in general an average SanDiegan is much more leveraged than before to live in his American Dream house.
Now to foreclosures. For Fed, the rate hikes are tied to slower economic growth as Bernanke said last time. Unfortunately, this time the easy credit supply forwarded to US consumer was funded by huge foreign investments which is going to cool off and so low mortgage rates of past are very unlikely. Also, odds are 8/10 that Fed will push economy into recession as they raise rates too high. Recession will also strike because US consumer can no longer trust on the increase on housing equity to keep drawing money from it. With a looming recession and no let up in interest rates, combined with income to housing prices ratios that show how extremely leveraged an averge SanDiegan is, I am going to bet on high foreclosure rates next year.
Investing is all about educating yourself and putting your money with the odds and the odds are stacked in favour of a housing down turn. To me, paying current inflated prices for SD homes with huge risk potential is simply not wise.
The long term view on housing is equally strange to me. In the long term even though your 150K house is worth helluva lot more now, it still doesn’t change the fact that you paid helluva lot more than what you could have. Since housing moves in cycles, all that matters is when you enter (buy first home) and exit the market.
