Any good economist will tell you the last phase of a boom and first phase of a crash (or downturn, if you prefer) is the moment when everybody buys into the idea that you just can't lose. Throw your life savings in...the water's great. And I mean everybody, from your next door neighbor to the waitress at the diner down the street.
More after the break...
Need some evidence? Try this article.
http://story.news.yahoo.com/news?tmpl=story&cid=2026&e=5&u=/latimests/puttingstockinprop
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Read some of the quotes. Scary, aren't they? Is this really what average Americans do with their 401(k) plans? Unfortunately, it seems to be. How many of you know (or are) someone who's cashed in their 401(k) to buy a house? Did you realize that's about the stupidest financial decision you can make?
There won't be a Black Monday. Real Estate doesn't work that way. It'll be slow motion, over the next 2,3 or 5 years. Think about all those folks in 3-5 year ARMs...or maybe interest-only loans. What happens if the price doesn't go up...and you can't refinance? Think you can afford that house at 7%? 8%? And those numbers are STILL very low interest rates. What happens if it goes higher?
The bubble isn't going to burst. It already has.