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June 21, 2005
Hard Landing
It's in the air: the frenzy and the folly of a bubble as the end nears. The real estate bubble in the U.S. has reached absurd heights. According to the National Association of Realtors (NAR), 25% of those purchasing homes last year made no down payment (see article here). The increasing use of no-interest and negative amortization mortgages is undercutting the traditional (financial) rationale for purchasing a home. Meanwhile, real estate prices are falling in Australia and the UK (ours is part of a global real estate bubble), and it is only a matter of time before they begin to fall here. Given the extent of the run-up in housing values in some areas of the country, and the increasing willingness of American home buyers to adopt imprudent risks, this is unlikely to be a soft landing.
Posted by Audi Partem Alteram at June 21, 2005 01:54 AM
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