according to the article 90% of homeowners believe that their home value will either stay the same or increase in value. Most homeowners (53%) believe their houses will increase in value modestly over the course of the next year.
These homeowners are all wearing the THICKEST set of rose colored classes I have ever seen in my life!
Does anyone who owns a home understand the nature of CYCLICAL markets…seesh! what a bunch of dumb idiots!
Another thing to consider is the eroding effect of inflation. For example, people who are getting 2004 prices for their homes now may think that they haven’t made any profit and have just stayed even, when in fact they have lost 8%, factoring in a 4% yearly inflation.
I think all that optimism will just make things worse. If people think that their home price will continue to increase then there is no motivation to save or prepare for the adjusting ARM. If they think that when the ARM resets they can just refiance because their house will be worth more, they will be in for a big surprise. If they had any clue they should start preparing for higher payments or even consider selling now before prices fall even more.
It’s usually good to be optimistic, but in this case, it’s just going to make things much more painful.
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