I think we longs are in for quite a fun day today and tomorrow. We're going out of 2005 with a bang. A good bang. And 2006 will be starting off on the right foot, as well.
Don't get caught up in the events of last January, 2005. It will not replicate itself in Jan 2006.
which part of US are you talking about? I thought most places they still can afford it except in california where the avergae price of a 3 bed home in a good school district is heading towards a million
The problem is not the loans anymore. Now, the loans HAVE to be accomodative or we would TRULY see a REALLY bad bloodbath. FEDS are desperastely trying to see a soft landing for RE. Most the country will be spared.
The problem has been the speculators taking advantage of cheap money to roll people up into WAY overinflated homes. Overinflated by the mere fact that people couild, due to cheap money, afford A LOT more house. The early birds in that game did VERY well. The late comers did less and less well as the entire housing market inflated beyond rwality ONLY due to the cheap money.
In short...it did not start out as a real estate bubble....but a CREDIT bubble. People bought as much home as they could afford a payment on. Originally, you may have paid the same amount per month for a $250,000 (on a loan made prior to 1998) that would later (in 2000) fund a $600,000+ home. The amounts a person COULD and was willing to pay per month dictated the whole deal, as always. Then, all of a sudden, people ended up paying $600,000 for a $250,000 home. The home's value did not go up. The money got cheaper.
Quite a perplexing dilemma to now fix.
Meanwhile, get out of RE if you're not already (except for your own private residence if feasible) and be ready to buy in a LOT cheaper. Probably the trough will occur about next summer 2006.
The investors of the mortgage pools that buy the loans from freddie and fannie are requiring 2nd appraisals and more stringent credit quality now. so it's the investor, who decides on how whacky the loans can be.
Hope the term "history repeats itself" does not apply to this Jan. But tread with caution. Last time I made lots of money in Dec only to give it back in Jan when I could not accept mkt turning bearish. This time it might be the opposite but one needs to keep a close watch
This applies to options as I play in options. With stock itself a +/- 20 does not really matter since with GOOG in long term you will always win