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Posts Tagged ‘housing bubble’

Subprime Will Return, Alt-A is Dead

06.08.2009 · Posted in Real Estate Articles

Like a Phoenix rising from the ashes, Subprime lending will make a comeback. Lenders focus on the three Cs: Creditworthiness, Capacity, and Collateral. Creditworthiness is measured by one's FICO score, Capacity is based on one's income, and Collateral is the value of the property the loan is being written against. The subprime lending business model ...

The High-End Suburbs Will Also Crash

06.06.2009 · Posted in Real Estate Articles

The course of a financial market, particularly the real estate market, is a long and winding road full of twists and turns and unexpected outcomes. It was certainly foreseeable that banks and builders might fail and the GSEs might need to be bailed out, but the how and when of these occurrences are always unpredictable ...

The Loan Program for the Next Housing Bubble

06.05.2009 · Posted in Real Estate Articles

Lending during the Great Housing Bubble was too messy. There were too many loan programs. Since real estate always goes up, and since people want immediate access to this appreciation to spend it like income, a new loan product which readily provides this money is in order. The Option ARM was a major innovation. By ...

Can You Still Make Money Flipping Houses?

06.04.2009 · Posted in Real Estate Articles

Speculation is a battle. The forces of greed and fear drive the financial markets, and the speculator attempts to profit from these moves. Speculation is not investment, although most do not understand the distinction. Speculation is the battle of the individual against the herd. For those who understand it and have learned to move against ...

Why Did We Have All Those Bailouts?

06.03.2009 · Posted in Real Estate Articles

It all starts in the housing market. Realtors peddle fantasies of unlimited wealth that leads to people wanting to overpay for houses. The desire for real estate at any cost provides an opportunity for lenders and mortgage brokers to make huge origination fees if they can lower standards and qualify more people. ...

Housing Desire is Not Housing Demand

06.03.2009 · Posted in Real Estate Articles

The last line of defense for the housing bulls is the fallacy of pent-up demand. Belief in this fallacy relies on people's inability to distinguish between desire and demand. Most people want a house. About 65% of Americans own their homes, but probably 95% of residents wish they did. The desire for housing always exceeds ...

Why Were People Buying Houses While Prices Were Dropping?

06.01.2009 · Posted in Real Estate Articles

There is a great deal of price volatility in California. There are significant periods of time where house prices will appreciate faster than incomes increase. This is purely the result of irrational exuberance. Prices cannot rise faster than incomes on a sustained basis, but prices can certainly go up faster than incomes when a bubble ...