A poster previously mentioned that in the run-up, a lot of people make a lot of money which their readily re-invested in higher-priced, more luxurious houses hoping the climb the housing ladder to riches.
These “stealth” investors/flippers have a stash of cash from their previous gains to tide them over for for years. Say a homeowner has $300k in cash to help him make payment on a house he can’t afford on his salary alone.
What do you think is the staying power of those lucky homeowners who profited from the boom? 5 years, 7 years, 10 years?
My hunch is that a downturn of more than 5 years will cause a lot of pain for the homeowners who have to dip into savings to make the payments.
Maybe some can afford the higher payments (possible at a high ratio of 38%), and invest the 300k in other areas to reduce the dependency on real estate. Interest bearing accounts alone are in the 5% range, providing $1,250 per month. This would provide a lot of staying power.
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