Okay this is seriously retarded. There’s nothing else I can say. All the sudden this is HUGE news!!!! For 6+ years I’ve been asking HOW STUPID can people be? Real Estate is not a money making industry. You can’t flip the same house for $100,000 / year. This cannot be sustained!!! I don’t even know where to begin. Let’s start with the basics.

Real Estate prices are a function of a few things:

• Proximity to metropolitan areas - obviously something closer to income centers costs more, larger areas yield higher values
• Income Levels - this is a no brainer
• Interest Rates - the lower the interest rate, the more you can afford to borrow

The first two are fairly evident. Let’s dig into the last one. Consider borrowing some amount of money at 4%. And let’s say that loan is adjustable and interest only. And let’s say your payments are $2000 @ that 4%. When (not IF) that interest rate goes up 1% to total of 5% you now have a payment that is $2500. From just 1%!!! 1% sounds like nothing, but it means your payment goes up approximately 25%! Because the interest is now 25% higher.

So should the government step in and protect Retards??? Seems dumb. If someone is dumb enough to sign up for something stupid, I say let them foreclose. And yes when 50% of the loans are in default, the banks will have a problem, and yes the economy will have a problem. Because we wrongfully think that real estate is an industry.

There are a few things at work here:

• Why do people borrow as much as they can afford? - Dreamy outlooks, “oh I need a house”. No you can’t afford a house! The problem is there is no accountability. The lenders don’t seem to be accountable. The borrower isn’t accountable.
• Why did interest rates go to 1%!!! - Because the government was scared the economy would crash! So they lowered interest rates to 1% and at some point they will either cause serious inflation, or really stagflation in this case, which will require they raise interest rates back up and GET OFF THE CRACK!
• Has anyone noticed the value of the US dollar lately? - It’s worth half the amount in world terms as it was 7 years ago! So what’s that mean. Well your house that you think is worth “double”, isn’t. And your income that hasn’t gone up much at all is HALF what it was 7 years ago. So effectively the nation has a 50% pay cut, but no one sees it or talks about it.

The DOW is down? No kidding! The world economy has been living off our crack. It’s time to get off the crack, and detox like they junky we are.

This entry was posted on Tuesday, March 13th, 2007 at 3:40 pm and is filed under Retards, US Economy. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.