Sometimes I wonder when I will buy real estate; it is certainly possible that we have a long slump like Japan did. Our housing market may not turn around in 7 years, as history has shown, but could take 15 years, like in Japan.
Unlike the Japanese, Americans don’t associate much shame with failure. Americans will walk away from their houses when they’re under water. I know that I would.
It’s no longer the local banker that’s holding mortgages. The public is not going to have much sympathy for the giant faceless financial institutions.
I beleive that we’ll be facing 2 parallel problems in the next 10 years.
1. The crash of real estate. Millions of people will see their wealth evaporate.
2. The ever escalating cost the war on Iraq. The war boosted the economy in the short term but we’ll have to pay for it somehow.
These two problems will bring back the bad-old-days we had in the late 1970’s and 1980’s in the aftermath of the Vietnam War.
I don’t beleive that Fed can do much to fix these problems.
Well, there you go again, Perry. I agree with your first point, but that’s going to be a much more important factor in future economic performance than Iraq. Military spending as a percent of GDP is right about where it was in 1993, and far below where it was in the 60’s.
The President and this Congress are spending like drunken Kennedys (but I repeat myself), and I think the prescription drug benefit, earmarks, and general government wastefulness will hurt us in the future; the housing-driven recession we all anticipate won’t be good for tax revenues either. In short, the government has lots of financial problems. Iraq isn’t one of them.
I don’t think falling RE price will prevent me from buying when monthly mortgage is = rent. That’s my buying point for my primary resident. Even if it keep falling for another 15 years, by then, I’ll have a house, free and clear, and hopefully enough money to start considering retiring, or at least semi-retire. Personally, it would not be very wise to time for the bottom, because at a certain point before the bottom, rent will be more expensive than buying. At that time if you rent, you’ll be waisting money and time. So if it takes 15 years to hit the bottom and turn back up, you might have lost many years to pay off your house at a rate that’s cheaper than rent.
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