Bofa’s view

[peterb]

The mess really hit the fan when lenders decided to give money to anyone with a pulse. Having bought and sold houses from 1990 to 2007, I can tell you that I was blown away by lenders starting in 2003. I started flipping homes like crazy because I knew that anyone could now buy. Take a market that’s got decent demand and open up the funding spigot. You get massive inflation caused by incredible leverage. This makes a bubble. Bubble burst once it is recognized that they cannot sustain their growth rates and/or the debt can no longer be serviced that got them the growth. When leverage unwinds, it’s an ugly downward cycle. That’s what we’re seeing in the RE market now. Falling prices = no equity. No credit. Add unemployment and you’ve got a perfect storm. Even when prices get down to historical levels, like 5 times annual income, there will not be much demand due the psychological distruction of RE as an investment and the fear of job loss. When this happens, there will be real deals in the RE market. But then, we may take a lot longer to recover than in past RE cycles….

[paramount]

I don’t think such predictions were limited to 2003/2004.

[paramount]

I don’t think such predictions were limited to 2003/2004.

[paramount]

I don’t think such predictions were limited to 2003/2004.

[paramount]

I don’t think such predictions were limited to 2003/2004.

[paramount]

I don’t think such predictions were limited to 2003/2004.

[urbanrealtor]

[quote=Bugs] Someone correct me if I’m wrong, but didn’t we get into this mess when too many people in 2003 and 2004 extrapolated recent trends and then made prediction based on those extrapolations?

Exactly, hence the value of looking at the recent trends within the context of the long term trends rather than using ant point in a single cycle as the reference point.

[/quote]
Good idea in theory. However, there are still a large number of people who have cash and have always wanted something that give a roi that is at or better than recommended and is a tangible non-paper asset.

How many of us have relatives or friends who comment about wishing they had cash so they could leverage a portfolio of rentals? Perhaps I see more of this due to my profession, but I am seeing a lot of this and seeing it reflected in the volume.

[urbanrealtor]

[quote=Bugs] Someone correct me if I’m wrong, but didn’t we get into this mess when too many people in 2003 and 2004 extrapolated recent trends and then made prediction based on those extrapolations?

Exactly, hence the value of looking at the recent trends within the context of the long term trends rather than using ant point in a single cycle as the reference point.

[/quote]
Good idea in theory. However, there are still a large number of people who have cash and have always wanted something that give a roi that is at or better than recommended and is a tangible non-paper asset.

How many of us have relatives or friends who comment about wishing they had cash so they could leverage a portfolio of rentals? Perhaps I see more of this due to my profession, but I am seeing a lot of this and seeing it reflected in the volume.

[urbanrealtor]

[quote=Bugs] Someone correct me if I’m wrong, but didn’t we get into this mess when too many people in 2003 and 2004 extrapolated recent trends and then made prediction based on those extrapolations?

Exactly, hence the value of looking at the recent trends within the context of the long term trends rather than using ant point in a single cycle as the reference point.

[/quote]
Good idea in theory. However, there are still a large number of people who have cash and have always wanted something that give a roi that is at or better than recommended and is a tangible non-paper asset.

How many of us have relatives or friends who comment about wishing they had cash so they could leverage a portfolio of rentals? Perhaps I see more of this due to my profession, but I am seeing a lot of this and seeing it reflected in the volume.

[urbanrealtor]

[quote=Bugs] Someone correct me if I’m wrong, but didn’t we get into this mess when too many people in 2003 and 2004 extrapolated recent trends and then made prediction based on those extrapolations?

Exactly, hence the value of looking at the recent trends within the context of the long term trends rather than using ant point in a single cycle as the reference point.

[/quote]
Good idea in theory. However, there are still a large number of people who have cash and have always wanted something that give a roi that is at or better than recommended and is a tangible non-paper asset.

How many of us have relatives or friends who comment about wishing they had cash so they could leverage a portfolio of rentals? Perhaps I see more of this due to my profession, but I am seeing a lot of this and seeing it reflected in the volume.

[urbanrealtor]

[quote=Bugs] Someone correct me if I’m wrong, but didn’t we get into this mess when too many people in 2003 and 2004 extrapolated recent trends and then made prediction based on those extrapolations?

Exactly, hence the value of looking at the recent trends within the context of the long term trends rather than using ant point in a single cycle as the reference point.

[/quote]
Good idea in theory. However, there are still a large number of people who have cash and have always wanted something that give a roi that is at or better than recommended and is a tangible non-paper asset.

How many of us have relatives or friends who comment about wishing they had cash so they could leverage a portfolio of rentals? Perhaps I see more of this due to my profession, but I am seeing a lot of this and seeing it reflected in the volume.

[Author]

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