Disastrous Property Market In Us

[Realistbear]

http://www.builderonline.com/industry-news...rticleID=240631

The trend is potentially ominous. The real estate market is cooling in some areas, and rates on adjustable-rate loans are creeping up. As a result, some no-money-down buyers could owe more than their homes are worth.

The median first-time home buyer scraped together a down payment of only 2% on a $150,000 home in 2005, the NAR found.

Already, home prices in many areas are declining, and the "For Sale" signs are hanging in front yards longer. There's now at least a 50% risk that prices will decline within two years in 11 major metro areas, including San Diego; Boston; Long Island, N.Y.; Los Angeles; and San Francisco, according to PMI Mortgage Insurance's latest U.S. Market Risk Index.

"If we do get a spike in mortgage rates, and a modest decline (in the housing market) turns into a rout, there's almost no bottom to that," Baker says. "That's a crash scenario."

In the history of the booms and busts in house prices the UK and the US have moved together. Lessons can be learned by observing the meltdown in the US because its happening here only our VIs are not so forthcoming about it.

[Flash]

People will look back in future and say that the signs of impending disaster were so obvious, "why didn't people see it?"

The truth is, deep down a lot people all ready do. However, if you are part of herd all doing the same thing, it is very hard to be a contrarian. Your actions seem justified only if they are repeated by others.

When you take a look at a broad swaythe of rich and successful people, in almost any profession, it is interesting to note that most have one thing in common.

...they dared to be different.

[Realistbear]

People will look back in future and say that the signs of impending disaster were so obvious, "why didn't people see it?"

The truth is, deep down a lot people all ready do. However, if you are part of herd all doing the same thing, it is very hard to be a contrarian. Your actions seem justified only if they are repeated by others.

When you take a look at a broad swaythe of rich and successful people, in almost any profession, it is interesting to note that most have one thing in common.

...they dared to be different.

When I STR I put about 10% into the stockmarkets and most of that in a Fidelity fund known as the "Contrafund." It has done very well. Following the herd is the best way to lose money as success is for the few.

[The Masked Tulip]

I am begining to feel that it is all now begining and that I am watching the World's first **********. It almost feels like a car accident when you know what the outcome is going to be but everything has just slowed down.

You are right Realist, the US and UK are so closely linked and I do think that stories of a HPC in the US on our TV News will be a major factor in triggering the crash over here.

[Marina]

When I STR I put about 10% into the stockmarkets and most of that in a Fidelity fund known as the "Contrafund." It has done very well. Following the herd is the best way to lose money as success is for the few.

I would say it is clear the herd is putting money into equities now. Are you getting out?

[Realistbear]

I would say it is clear the herd is putting money into equities now. Are you getting out?

I am not putting anymore in that's for sure! 10% of my STR proceeds was my way of saying I will not follow the herd by betting the farm on another high risk vehicle. The investing herd only just seem to be getting out of houses into stock in which case we may have a year or so in which the returns will be healthy. Houses, on the other hand are at the wrong end of the cycle for investment.

The difficulty I see in the US and UK markets is that the stockmarkets are inextricably connected to housing. Housing is the underpin and there is just enough bad news out there to keep the market volatile enough that a crash could come at any time--that is why the VI propaganda machine is in overdrive now pumping out "good news" even if it is spun beyond recognition.

Edited January 20, 2006 by Realistbear

[Flash]

The difficulty I see in the US and UK markets is that the stockmarkets are inextricably connected to housing.

I'm not so sure.

If you look at the performance of the FTSE from 1990 - 1994, during the last housing crash, you will see that the market actually performed very well.

There is often a disconnection between stockmarket performance and that of the wider economy. Analysts don't often like to admit that, because they are paid lots of money to analyse the market and come up with economic reasons as to why it is moving in a particular direction. The fact is, they don't know and simply spend most of their time driving via their rear view mirror.

Markets are driven by human nature which is by nature, irrational. The housing market could tank and the stock market could still go up. Or it might not. The fact is I don't know, but I never fight the market, I always go with it. Markets can stay irrational longer than I can stay solvent.

The housing market is about as irrational as it gets, but that's not to say it won't get worse still.

[Yonmon]

Don't forget, the vast diversity of companies listed on global stock markets. Far more diverse than property.

I think therefore that equities have a bit further to run, but it's certainly prudent to start looking out for a market top.