[Stu949]

Many good points – as I have also wondered if the Fed will bail the housing market out. So what is the Fed going to do?

They could slash rates again; however, the dollar sell-off would be significat. The dollar has already been selling off, and that is in an environment of rising Fed rates. With a dollar sell-off, long term rates would rise dramatically. As it is, Iran and Russia are working to sell oil in a basket of currencies (or primarily the Euro). Once these oil bourses get up and running, many of our dollars will come back home – this will only add to the rampant increase in the current money supply.

As it is, we borrow close to 3 billion from foreigners every day. To add to that, here is a quote from Rich Dad’s Robert Kiyosaki about the state of our government’s finances: “According to the U.S. Treasury Department, America’s first 42 Presidents, from George Washington (1789) to Bill Clinton (2000), borrowed a combined total of $1.01 trillion from foreign governments and financial institutions. From 2000 to 2006, the Bush White House has borrowed $1.05 trillion alone. Yes, that means we have borrowed in the last 5 years what we had previously borrowed in the first 211 years of our country.”

What does all of this ultimately mean? The Fed will continue to raise interest rates, but will halt at some point. They will let the housing market take a hit before they realize how bad it will really get. By the time they think they will be able to lower rates again, we may be on the brink of a dollar collapse – read up on Germany’s hyperinflation in 1923, John Law of France in 1719, and Rome’s inflation around 300AD. Inflation happens when humans control the flow/amount of money in circulation – it is inevitable.

As some posts stated above, it will probably be good to get out of high-density cities. Unfortunately, people will get desperate. It is probably prudent that people prepare now – the government is not going to bail us out. With the national guard overseas, immigration issues coming to a head, and an economy that is headed for an eventual fall, our security is at issue. Prepare for it the best you can.

[Stu949]

I just want to say that anxvariety is SO right!

My fiance and I are 26 years old. We’re both college grads, and we’re working professionals (she is a CPA). We make a combined $150,000 a year gross – we’re not “typical” 26 year olds. Most of the people we know around our age (mid 20s and early 30s) are in enormous debt. Only 5% of those friends own a home/condo; however, their loans are adjustable. We’re starting to hear from those friends that the payments are getting tougher to make.

At any rate, all the others either live 8 to a house or still live at home. Among these individuals, most are college grads who work full time (the lowest paid is $40,000 a year). I guess my point is that none of these college grad/working professionals are or will be buying a condo any time soon. This is coming from the top 10% of wage earners for this age group. In fact my fiance and I are considered “wealthy” by government standards, as we are taxed heavily because we “make” too much. We can’t buy a home, but we’re too wealthy.

I’m not trying to whine and complain here; I’m just trying to reiterate what anxvariety said above. There currently isn’t, and there won’t be buyers for the starter market until something changes. The baby boomers never had to pay 60 to 70 percent of their income on housing, so why should the indebted generation of the twenty-somethings have to… Anyone who spends that much of their income on housing is the bigger sucker! There are still many out there; however, they’ll get burned with the rest. I’m not going to reward and/or bail out the suckers who made horrendous financial moves by buying a house they couldn’t afford. I’ve worked too hard to be indebted for the next 15 years in a one-bedroom dump. I look around at my friends and others (the people anxvariety referred to) and I see that they won’t be in any position to buy my piece-of-crap condo if I were to buy one at this juncture.

The people who think the twenty-somethings are going to buy their starter home some day are in for a rude awakening. It won’t even be a matter of making the decision to buy, the Federal Reserve is already talking about reigning in the rampant, exocitc mortgage market. After all of the foreclosures we see in the next few years, even people like my fiance and I (with 770 credit scores) will not be able to get a loan. Oh well, I don’t think real estate will see significant appreciation for next 15+ years.

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