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Originally Posted by warlock5
There is no point in argueing whether or not there will be a decline soon or not. No one knows. The stock market goes up and down every day, hour, minute, second, based on different information and events. Its the same shit with real estate. Markets are determined by what people "think" is going to happen in the future.
If a negative cashflow for a year or two won't hurt you. If a property value drop off for a few years won't hurt you -- then you have nothing to worry about.
But, some of you guys are overleveraged and will go bankrupt in a market down turn. I would not want to be in your position right now, even for a chance to walk away with a little extra money.
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Real estate isn't like the market. There's nowhere near the volitility.
The real estate bubble will pop based entirely on interest rates. Home loans specifically are based on interest rates for longer-term bonds, not the overnight rate, and those 10years haven't moved for shit for a long time now. When those rates start to rise, pain will follow... there's been so much 'free money' floating around, a lot of people have leveraged themselves into a really dangerous position.
Over the last few years, a significant number of jobs created in the US over the last couple years have been in construction, primarily house construction. If interest rates rise, those jobs go bye bye. Additionally, people leveraged out the ass on ARMs and interest-only loans (what an abomination those things are!) will find themselves suffering more with each increase in rates, leading to loan defaults and bankruptcies. Add that up with some potentially serious inflation woes (sky high energy prices that just keep climbing) and you're all set for an economic catastrophie.
I should point out that one man's catastrophie is another's gold mine. Defaults on loans and bankruptcies for one person means cheap acquisition and future profits for another person. The wise man would be one who tries to eliminate as much floating rate debt as possible, and get positioned to buy when the market turns down... but then "buy low, sell high" isn't exactly a difficult concept to grasp.
