“… One could have a high LTV loan in which the payment is 28% or so of one’s income and qualify based on traditional lending standards. Fast-forward a few years when prices come down in line with incomes.
Do you not think that at some point in the next few years that housing prices will revert to being somewhat affordable ?”
You guys still don’t understand the Deflationary perspective do you? Nope.
You keep presuming that the private lending standards are going to remain the same going forward. I am making the opposite assumption due to my Deflationary perspective on the economy and money supply going forward for the next several years. I believe that credit will become much tighter than it is right now because there will continue to be mortgage lenders and banks and even some credit unions that will bite the dust over the next few years as they write down their portfolios to market value and their solvency issues run their natural courses.
Low LTV loans also don’t account for enough risk in the loans either and lenders will revert back to more conservative standards.
However, if the Govt becomes the primary source for lending as many seem to think is going happen since it may become too risky for private lenders to continue to thrive as they have been, then all bets are off….at that point we are in really deep shit.
