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  • snugly60031 snugly60031 Jul 16, 2005 9:43 PM Flag

    House Price Appreciation

    You're right - far more recessions than depressions. However, if the housing bubble bursts, instead of isolated pops, there will be a depression. It does seem that it is more likely that there will be some kind of deflation in housing, rather than a cataclysmic burst. Regardless, once the air starts coming out of the bubble, there will be many people in many markets across the US who will find they can't sell their house for as much as they paid for it. Couple that with loss of jobs due to recession, and many will simply walk away from their mortgages, and banks will have to repo them. Since banks don't want to be in the real estate business, they will price them for quick sale. That is how the spiral downward in prices begins. As the increasing glut forces down the prices, more houses will be go on the market. You know how it works; just like the stock market in 2000 - 2002. I believe there are many of the same dynamics at work in a bear market for stocks or houses. Currently, the greater fool theory is still at work in both markets, sooner or later the music stops. IMO it's sooner than later. We'll see. Snug

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    • Snug,

      It's not called *real* estate for nothing. It may be overpriced or underpriced but it still has value. The events of '00 involved things that had little or no value. Predictions of doom are always with us. My earliest introduction to economics was listening to my father wondering when the end would come.

      A little off the subject; I work with several doctors that lost a lot of money in the market and have to work at ages 75 or even 80. At least they have to work to maintain their lifestyles. I think it's probably good for them to work.


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