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Street Level Economics |
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Geographic Area: California (San Diego) Reporter: Scott S.
As I'm a full time trader, I can relay what
I'm told be people I talk to who work in the real world. My contractor
knows a lot of people who are hurting in the markets and are afraid of
losing their jobs. Concern is definitely creeping in. A neighbor who is
in-house counsel for a small publicly traded company (consumer products)
says they are running out of cash and potential investors don't seem to
willing to take risks. Another neighbor is a mortgage broker. He's been
very busy with Interest-only loans, says they are very popular. He also
says that the only loans they are doing are the kind they wouldn't have
done a couple of years ago. Can you say "everybody in the pool".
Another neighbor manages a large Lincoln
dealership. 6 months ago, the Navigators were flying out the door. No
interest loans and all. Now, sales are very quiet.
Real estate seems to be holding up, but I
honestly think we've seen the top. Cap rates on rentals are as low as
3% (per the mortgage broker), with buyers expecting rent increases and
appreciation to make them the money. This combined with low-quality
loans can't be good for further price appreciation. Another neighbor
asked me the other day, "Can you see anything to cause prices in this
area to drop?", using a tone indicating that he couldn't foresee prices
falling. Yeah, I told him, $350/sq. ft. is a bargain, then I reeled off
about 4 fundamental reasons real estate could get crushed. Reminds me a
lot of Nasdaq 5000.
Relatives who are in the armed services
expressed frustration over the weekend re: the stock market and how they
are losing $$ every month with their automatic contributions. I asked
what would make them discontinue the contributions (not matched, by the
way), and the response was, nothing, we just wish the market would head
back up. Two plus years of throwing money away and nothing to hint they
will stop. Unbelievable.
I have to admit that with home prices in my
area doubling in the past 5 years, it is hard for those with equity to
feel too strapped. But I imagine once real estate prices start falling,
the fit will hit the shan.
One last note
My sister in law worked for an interactive
TV company in Silly Valley. She was recently laid off and is taking
the summer off to play. She has so much equity built up in her house
she bought 10 years ago, she feels no financial pressure whatsoever.
Figures by the fall, that the economy will be bouncing again and she
will have no problem finding a high paying job.
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