TheNewWorldMan wrote:
twnkltoz wrote:Many people defaulted on their mortgages because they couldn't afford them. Their lenders approved them for way more than they could afford, and they couldn't make the payments. That's why lenders are raising the minimum scores for 100% financing. Credit history is important.And that's another reason I'm buying a home abroad...in the coming months we're going to see a pendulum effect. The system will over-react (it always does) and we'll go from mortgages being handed out like candy on Halloween to practically NOBODY getting approved. Banks are going to shy away from high and even medium-risk loans...you'll have to have the credit rating of Satan Himself to qualify for a mortgage. And since for me that's, oh, about thirty years away, it ain't gonna happen.The one plus side to this for potential homebuyers is that by 2008 to 2009, with all that jive mortgage money pulled from the housing market, demand will slump and housing prices will plummet. So if you're more fortunate than I am and you have $30,000 or so of cash, or a nosebleed credit rating, you'll be able to get yourself a great deal on a home.
first off Mr. Doom and Gloom:
You come across as an "America is Dumb" type. Just leave then. 
Secondly - do you realize that if housing prices "plummet" as you say, many of us won't have jobs with which to buy these homes at ANY price anymore?
@Anonymous wrote:
first off Mr. Doom and Gloom:
You come across as an "America is Dumb" type. Just leave then.
Secondly - do you realize that if housing prices "plummet" as you say, many of us won't have jobs with which to buy these homes at ANY price anymore?
That may just come to pass.
Housing prices are overinflated in the United States. The cost of housing has consistently gone up 3 to 4 times as fast as wages, for over a decade now. Common sense says this is unsustainable. In order to afford these inflated housing costs, millions of people took out loans that would require substantially higher incomes to repay in the long run. In short, billions of dollars in fiat money was pumped into the economy, creating an asset bubble.
Now reality is asserting itself, and now that the supply of fiat money is drying up, people are confronted with the reality that the real value of their homes did not go from, say, $190,000 to $450,000 between 1998 and today. The Home Equity Fairy didn't apply a layer of gold to their roofs. The actual value of the home is the 1998 price plus your common garden-variety inflation, which would make it, oh, probably around $250,000. Not almost half a mil.
There are two basic ways this can be resolved. The smartest is to allow the laws of economics to assert themselves, and the value of the asset to return to market levels. The only other alternative is for the government to step in and either confiscate money from the rest of the economy to prop up asset prices, or print money and run a deficit to prop up the asset prices. In both cases, the consequences are worse.