Can real estate survive the coming RATE HIKES?
Well, the optimists seem to be whistling passed the grave yard on
this one!
The optimistic view is that higher rates will make more people STAY
ON RENT. And, that is true. Mr Zell will be "in the money" again.
But, what about those teaming masses who already own a home!
If you cut back on willing and able buyers; there is bound to be a
DECLINE IN PRICES.
And, frankly, that would be a disaster in this TOXIC bubble
environment.
MANY MARGINAL BUYERS AND BANKS ARE NOW UP TO THEIR NECKS IN TOXIC REAL ESTATE DEBT.
AND IF THEY TRY TO SELL PROPERTY BOUGHT AT THE TOP OF THE BUBBLE;
They are no different that those who bought the Internet Bubble at
the top. PRICES WILL FALL!
IT IS VERY POSSIBLE THAT THE RESULTING "NEGATIVE EQUITY" WILL INSPIRE
DEFAULTS UNLIKE ANYTHING WE HAVE EVER SEEN.
AND WORSE YET, BANKS AND MORTGAGE COMPANIES WILL HAVE TO DISCOUNT
THEIR MORTGAGE PORTFOLIOS TO REFLECT THE HIGER FED FUNDS AND BOND
YEILDS.
For example, what is the "value" of a $100,000 mortgage at 5.5%, when
the 10 year bond is at 6%? WELL, IT'S NOT $100,000, TO BE SURE!
ONCE THE NEGATIVE EQUITY BALL GETS ROLLING THERE IS NO TELLING WHERE
IT WILL STOP. But I can gaurantee you one thing:
A BUBBLE IS A BUBBLE IS A BUBBLE!
And, those areas with the worst bubbles could be in the most trouble.
REJOICE, NEBRASKA HOMEOWNERS!!
