pop goes the bubble!

[cavalierlwt Profile]

http://news.yahoo.com/news?tmpl=story&u=/ap/20050827/ap_on_bi_ge/greenspan

Not an interesting subject to you younger folks, but a housing bubble pop will be HUGE. When Greenspan says it, it happens. Everyone's been waiting and waiting for it to happen,I honesty believe it's starting now. 3 months from now I think we'll be looking back at the end of summer as being the starting point. When the stock bubble burst we had some easy indicators, massive one day drops. We won't get that, but we will have massive one month drops when speculators start running away from the market.

[JimmyTango Profile]

I am amazed the housing market has stayed this high for so long, as there was no reason for it at all.

[cavalierlwt Profile]

There's a lot people, average Joe's, that are buying (additional) houses on loan, spending 10K (from the loan) doing some minor upgrade/fixes, and then 'flipping' the house for an extra 50K+ over the price of the loan in matter of 2-3 months. There's whole TV shows devoted to it on the DIY network. These people can barely afford the mortgage on the house they're living in, they pull this stunt and then 'flip' the house before the second mortgage can destroy them. It's risky but it works while the market is rising and rising. When the bubble bursts, they'll be the ones holding the bag, along with the banks that are lending them the money--I smell a tax payer funded govt bailout on the horizon.
IMHO, Banks are the biggest reason that this continues. They are throwing money at people, just like the credit card companies are. In the past, it was rare that the bank give you a mortgage that you really couldn't afford. Now, they'll give you a mortgage that a person can only afford as long as they and their spouse manage to keep working overtime every week for the next 20 years. As soon as you stumble, boom, you're ruined. And people think that if the bank pre-approves them for $250K, then they must be able to reasonably afford to pay back the mortgage on $250K.
People have to realize that the industry *will* sell you the rope to hang yourself.

[Namloot Profile Website]

This same thing happened in the late 80's, it's cyclic. Like some great person once said "Those who do not learn from history are destined to repeat it".

[cavalierlwt Profile]

Yep. You know who else didn't learn from history? US auto companies. 1973 we had a major oil cruch (OPEC embargoed us), the US car manufacturers kept making HUGE cars with monster V8 engines, gas hogs. The Japanese imports at that point we not making a dent in the US car market. At the time, Japanese cars were not the well made autos that they are now--think Kia or Hyundai. Suddenly, everyone started buying those cheap little shitboxes (as we called them) that were good on gas. The rest is history. And it's happening again. US companies are pushing SUVs, Japan is pushing Hybrids.
brilliant!