Quote:
Originally Posted by Arctic Fox
There are plenty of signs of a severe downturn in US property, with home sales down for 12 straight months in a row, the weakest set of numbers for more than a decade.
If the property market crashes, it will tip the economy into recession.
If there are losses on mortgages, it will threaten the stability of the financial markets and will determine what the Federal Reserve will do with interest rates.
In 2008, the collapse of the subprime mortgage market triggered a global financial crisis.
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I would say that used home sale prices in The Villages are down at least 10% since last summer, but at that point they were UP about 20% over the previous two years. Many would say that the prices now are more where they should be, but people selling their houses are getting less than they’d hoped for. Most of this is due to the need to raise interest rates. Two years ago you could buy houses for 3.5% interest, which is amazing and unusual. Now it’s more like 6%, which is much closer to the historical norm. However, that increased rate has cut down what people can afford or lenders will lend.
Subprime mortgages happened from greed—by lenders and buyers. Lenders loaned buyers far more money than they could afford to repay, and with less money down. That isn’t happening now. Buyers thought they were going to make killings buying and selling houses and accepted stupid risks like balloon payments they couldn’t pay without selling their houses for whatever they could get. I don’t think that is happening now, either. So I think we will be okay.