Interesting comments, I hope this makes sense in the context of some of these arguments…
Prices went up on houses because of a bubble. That is the main reason. There was a bubble because anyone could qualify for any loan, and the loans were unrealistically priced with ARM’s both subprime, up to super-jumbos for good credit scores. Some people got 30 years, or refinanced as the rates went up…
Now what?
It looks like there will be inflation. The way to curb inflation is there will have to be interest rate rises. Usually inflation translates into wage increases (wage inflation), and more people make more money which gets worth less and less because all prices are rising at the same time.
The more important factor which I haven’t seen here yet, is that as interest rates rise, home prices have to fall. Because the new buyers can’t possibly afford the new payments. I also see stagflation, prices going up but wages not going up. This will put huge pressure on home prices. It takes time for a bubble to burst, and many people can’t get loans at good rates right now, hence the lowering of home prices…
I am on the sidelines, sold in Dec 2006, will watch and see what comes.
