Higher rates lower house prices. Basically, it's known as the Affordability Index. As rates go up payments go up and fewer people qualify for the loan. Want to sell? You lower your price.
However, in a couple of years the foreclosures are bought and the supply tightens and prices stabilize. If there's anyone left to buy, they drive prices back up. New house formation will continue for awhile as the 20 somethings enter the housing market as printing press money swamps the economy. Builders will come back and build more with government subsidies because having millions of homeless with guns is not good for politicians future job security.
The crunch comes when we boomers, collectively broke, have to work into our 70's. These jobs will not be going to new families who buy houses, cars, financial instruments, furniture, artwork, etc. These means that the coming "recovery" is fake fueled by "cheap" money like the last one. What's this mean for the next 5 or 10 years?
The next bust will be really exciting.
Expect an awful lot of new faces in Washington but not much will help us. We need to reset all this personal debt and start over. I think the government will have to send us a big check to "kick start" the next boom.
Do you think the people who own the government will allow this without a fight?
Real Estate & Housing Crisis: Negative Home Equity Is Worse Than You Think - CNBC
However, in a couple of years the foreclosures are bought and the supply tightens and prices stabilize. If there's anyone left to buy, they drive prices back up. New house formation will continue for awhile as the 20 somethings enter the housing market as printing press money swamps the economy. Builders will come back and build more with government subsidies because having millions of homeless with guns is not good for politicians future job security.
The crunch comes when we boomers, collectively broke, have to work into our 70's. These jobs will not be going to new families who buy houses, cars, financial instruments, furniture, artwork, etc. These means that the coming "recovery" is fake fueled by "cheap" money like the last one. What's this mean for the next 5 or 10 years?
The next bust will be really exciting.
Expect an awful lot of new faces in Washington but not much will help us. We need to reset all this personal debt and start over. I think the government will have to send us a big check to "kick start" the next boom.
Do you think the people who own the government will allow this without a fight?
Real Estate & Housing Crisis: Negative Home Equity Is Worse Than You Think - CNBC
There was a lot of talk last week about how negative equity, now at 22.5 percent of all homes with mortgages, according to CoreLogic [CLGX 18.20 --- UNCH (0) ], will affect the housing recovery. Then mortgage rates popped up to 5 percent overnight, thanks to the 10-year Treasury, and more folks voiced concern over today's potential home buyer and his or her ability to take advantage of this low-priced housing market.
Tooga | Stone | Getty Images
Owing more on your mortgage than your home is currently worth doesn't necessarily mean you can't afford your monthly mortgage payment or that you're going to go about your day any differently, other than feeling a little financially depressed. While it may make some more likely to walk away or "strategically default," most won't.
It does mean that you can't use your home to pay for anything, like a new car or your kids' college tuition, and it does mean that you can't move up to a nicer home without having to take a hit by paying off your mortgage with whatever stash of cash you have. Now here's the issue: The move-up buyer (which is the market we're counting on now to get us out of this mess, given that the home buyer tax credit pulled a lot of first-time buyer demand forward to the beginning of 2010). A significant number of move-up buyers, even if not underwater on their mortgages now, may be in a negative equity position when it comes to buying a new home.
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