Quote:
Originally Posted by Slava
I can't say that I have absolutely no concern at all. I just think that the recent rush to buy is because of the lower interest rates and that is a very different situation than a pure credit bubble or "NINJA" loans (No Income No Job) where there is no hope for repayment.
Eventually rates will rise....we are at the pure low, so you don't have to be a genius to see that! But will they hit the rates we saw in the early 80's? I doubt it.
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I wasn't thinking rates in the early 80's, even 8% would cause me to be paying 10k more a year to my mortgage. My payments would increase from their current amounts anywhere from 38% to 58% depending on my amortization.
I don't think we're heading for a huge tumble, nor do I think we're heading for 8.0% necessarily, but I do think a lot of people are buying houses because they came down "a little" and rates are down "a lot."
Now an inflationary time is a great time to own hard assets, but I'm not sure if real estate is one of them as it's mostly financed by large amounts of debt which is largely dependant on interest rates. I can't recall if I'm completely wrong on this, so jump in if you know better I'm just trying to think my way through it.
Yes cash is the worst place to be during times of inflation, but is residential real estate much better? Didn't the 80's housing bust happen due to inflation which made for sky high interest rates?