What is happening with the low,low interest rates?

I am paste-ing a discussion between a realtor and a reply. The reply, in my view as a trained/practsing economist, hits the problem right on head. It is makes a humorous reading!

Read on...

THE BEACH. FORMERLY KNOWN AS THE BEACHES

Real Estate in the beach area is sizzling hot again. Agents can't bake the buns fast enough. Things are going through the roof. In fact RE in general is once again out of control. Sales are booming, prices are climbing. Hey! What's going on? Was all the bad news about the economy a lot of BS? You know, about all those bank failures, AIG problem, automobile mfgs demise, job losses, extensive consumer debt overload, and the list goes on. In general, public mood is good, and they're out there buying things left, right and centre. Where is the money coming from all of a sudden? Oh! I forgot. In 1990 it cost about $1100.00 per month to carry a $100,000 mortgage. Today that same mortgage costs around $350.00 per month, and furthermore, such low payment structure is secured for at least 5 years. The current boom as such, makes a lot of sense doesn't it? It all sounds good, but the big problem I see, is that we are getting back to what got us into trouble in the first place: Big sales & big price increases, copmbined with BIG GREED. This madness in my view will evetually lead us to THE GREATEST DEPRESSION THAT MANKIND HAS EVER WITNESSED. It will happen, and I am giving you advanced warning. But don't come back to me and say: "Even a broken clock is right twuce daily", or throw other insults at my superior intellingence.

posted at: 5/2/2009 11:36:24 AM


Comment on this posting
re: THE BEACH. FORMERLY KNOWN AS THE BEACHES

As a reply to above posting:

There is a very simple explanation for the current real estate market boom. It's called the 3% long term mortgage. It's like buying a $400,000 house for only *$100,000 (*based on a 12% mortgage structure). Additionally, those who were deep into debt, are now restructuring their debt load at a much lower interest rate. The thousands of dollars they are now saving on their greatly reduced monthly debt payments, is being used on making purchases on a variety of items, thus boosting the economy. The problem: You can only boost your car battery so many times. After that, it ain't accepting the boost no more baby.