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Now…. Understanding Today’s Market
Enter,
Happy times. In 2002
you could buy a waterfront home for $195,000. The
bank was happy to lend and a year later you
could get a
$100,000
home improvement loan on top of your original mortgage. Property prices
were
sky-rocketing. That trip with the family to Athens was finally at hand. Look out Zeus, here we come.
In
2004-5 the Media Hype was the “Housing Bubble
Can’t
Last”. The market was seriously
overheated and home prices were reaching levels beyond the ability of a
most of
people to afford. What shall we do?
To
the rescue “SUB-PRIME”. Now, everyone that
had ever dreamt of owning their
own home could
get a
cheep 3-4% loan and move right in. Everyone
was happy. The
banks
were making lots of loan$, investors
could buy a dozen properties,…apply fresh paint and double their
investment,
the economy was strong and home prices just kept going up…”Up..Up an
Away in my
Beautiful, My Beautiful Balloooon”..
Then
at the end of 2005 LIGHTNING (oh poo) struck. If
prices continue to increase at the current
rates… no one will be able to afford a home, even
at 3-4% interest rate. What
ever shall we do? First…Cancel the trip
to Athens
to
visit Zeus and company. Those teaser
3-4% loans turn out to have another more sinister life.
“Adjustibility” and it wasn’t down.
But
that’s another story.
Today
the 2008 Market has
done what it
had to
do. Not a big surprise after all. Prices have returned, painfully, to the days
of 2003-4 and believe it or not… people still need a place to live. The market isn’t dead after all.
And…what’s
that…. Shhhhhh. ………………………………….DEALS.
Oh
here come those sneaky investors. Who said
DEALs? They
can smell the deals
a mile away. As it
turns out, the market is all about VALUE. We
tend to get that confused with PRICE. Two
very different concepts. That
$195,000 home I bought in 2002, was
worth $639,000 in 2005, now $485,000. Darn… I lost $154,000…or
did I.? Maybe
I’ve
made $290,000?
As
in all market environments, media
hype inevitably gives way to underlying
VALUE. That $639,000 price never did
represent my home’s VALUE, just the air in that big balloon.
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