Well, “credit markets tighter” can mean many things. If you simply mean “low prime rate,” then yes, I could be wrong about that, but I said “you won’t be able to borrow enough to buy,” which encompasses many issues.
Just because prime rates are low doesn’t mean you can borrow enough to buy. Remember, this would be near the bottom of the market and it could very well be that a tight mortgage market has been driving the market down all along. Also, the fed could be lowering rates to try to loosen up the market, which refuses to loosen.
There may not be capital available due to issues with Asian investment patterns. Lenders may be squeezed due to foreclosures. They may be under new regulations that won’t allow them to pursue “alternative loans” as they have recently. Current homeowners will be stuck under high loan-to-value ratios. Lenders and real-estate investors will be scared of high loan-to-value loans, and more cautious about loaning into a dropping market.
On the upside, after the bottom, yes, lending will have to loosen up, but at the bottom and just before, cash will be king.
Also, keep in mind, the cycle I am talking about will last 10 years. I see things happening much slower than the rest of the crowd here. 20% down in the first year after the peak is absurd. I just don’t think the market moves that fast, especially down. We aren’t talking about soybeans here. A housing crash is a slow-moving thing.
Look at Rich’s charts. Look how long it really takes for the bubble to “burst”. In housing, the bubble seems to leak badly for a long time, which is quite excrutiating.
The initial poster said “I have no intention of selling in the near term so I am not concerned about the short term.” I wouldn’t be concerned about the short term either. Still time to get out. The long term is what worries me. Look at how many years it would take for incomes to catch up to house prices if they stayed flat! 15 years! Wow. That is a long term problem.
