"The crash of the housing bubble will not be pretty"

[Jcrowley]

Housing Bubble Catastrophe 
by Mike Whitney
www.dissidentvoice.org
January 18, 2007

“The crash of the housing bubble will not be pretty. Millions of people stand to lose their homes and life savings. However, it was inevitable. The bubble created a fantasy world that could not continue. At the peak of the bubble, 160,000 people a week were buying a home, most at bubble inflated prices. The longer the bubble persists, the larger the group of people who paid way too much for their home. While it is not good that so many dreams had to be ruined, the number will be even larger if the bubble deflates slowly. So I make no apologies about hoping for the hasty demise of the bubble.”

 -- Dean Baker, “Slow Motion Train Wreck” (The American Prospect, 8/2/2006)


“No question about it, the housing downturn is here now, and it’s big.”

-- Jim Hamilton, “New Home Sales Continue to Fall” (Econbrowser, 8/25/06)


I wonder if Alan Greenspan takes a copy of the business page along with him on the chair lift at the Aspen, so he can read about the plummeting housing market before swooshing down the well-groomed bunny slopes at his favorite ski resort. After all, no one played a larger role in inflating what the Economist called the “biggest equity bubble in history” than the retired Fed-master. His low interest rate bonanza triggered a stampede of speculation in the real estate market sending prices through the stratosphere and setting the stage for the biggest economic bust in American history.

The whole catastrophe was cooked up by Sir Alan and his coterie of brandy-drooling elites at the Federal Reserve.

Thanks, guys.

Greenspan has undoubtedly taken note of the sudden spike in foreclosures, which have set off alarm bells from Wall Street to the American heartland. The effects of his “cheap money” policies are finally sending tremors through America’s fragile economic landscape. In September 2006 the US Foreclosure Market Report released a statement that over 112,000 homes had entered some stage of foreclosure -- “a 63% increase from September 2005”! September was the second straight month in which more than 110,000 new foreclosure filings were reported nationwide, evidence that the spike in August was not just a “one-month anomaly.”

No, it is not a “one-month anomaly” and it is bound to get considerably worse as $1 trillion of ARMs (Adjustable Rate Mortgages) reset in 2007. The rising foreclosure numbers are the result of rising monthly payments on the new-fangled loans that have low introductory interest rates, but can unexpectedly double after a two or three year period.

[barb162]

1. Why can't people go to a remortage at a fixed rate loan in 2007

instead of fooling with the adjustables. Thwe fixed rate loans right now are historically quite low

[enid602]

9. no equity

Many people paid with little down, and have already lost non-existing equity due to the price slump. They're trapped.

[barb162]

14. Yeah but they don't require as much down as they did a long while back

I'd beg borrow and steal to get whatever down payment was needed to go with a low fixed rate.

[Jim Warren]

26. As would many if they could

I just think with other financial strains, a lost job or wages, many end up with no way out.

[sanskritwarrior]

41. I don't understand

I bought my house on an 80/20 with the 20 being an ARM after one year of watching the ARM go up, I refinanced to a 30 year fixed at a slightly higher rate than my 80% but lower than my 80/20 % averaged out. I took a chance and refinanced for 20,000 more than I bought it for and paid off my car loans and my wife's student loans.

So the end result is I financed for 80% of the value of the house, I have no car loans and no student loans and I pay 19 dollars less than I did before I got rid of the ARM, so where is the danger to me??

[dysfunctional press]

2. both of those articles are from last summer...

it's only january, but things seem to be selling well enough in our chicago neighborhood.

[EVDebs]

3. Prohousing movement and 'tinyhouse' innovations during Katrina

Prohousing (see recommendations)
http://www.konzak.com/prohousing/index.html

and

Tinyhouses at
http://www.tumbleweedhouses.com/about.htm

seem to be the best steps forward. Can Congress add provisions for composting toilets like the Phoenix model

Phoenix Composting Toilet
http://www.compostingtoilet.com/LITRACK/Articles/ebuild.htm

and you have water savings. Include solar electricity and voila, you can really begin to save some big bucks. Too bad everything is McMansions nowadays.

[Jim Warren]

27. One more

http://www.clivusmultrum.com/index.htm

[EVDebs]

57. My point is that these alternative toilets are ILLEGAL in most areas of the US

since Republican AND Democratic congresscritters want to keep them illegal in order to continue doing things the same old way.

[krispos42]

4. Stop selling, start waiting

Oh, well. 40% of homes sold were to people who already owned a home. It was people buying them to sell them again in 6 months or a year for a profit.

Hopefully the cheap prices will push people out of the renter's life and into home ownership. I rent, and my roomie/landlord only owns the one house, so she's stuck here. Works for my stability and my situtation.

[dysfunctional press]

7. what "cheap prices"...?

i get the impresion that some people are expecting house prices to be cut in half or more-

it AIN'T gonna happen.

[krispos42]

10. Even if they just hold steady for a few years

The inflation of wages will put more working-class people into the position to buy instead of rent.

[kath]

35. "inflation of wages"??? what inflation of wages? Most people's wages

aren't keeping up with inflation (if they manage to keep a job at all)

[krispos42]

37. Ah, but that was under the Repubs

Housing doubling while wages stay stagnent.

Now it will reverse. It had better, or we're going to be in seroius trouble

[the other one]

15. It WILL happen

The average house will lose about 50% of its value, some markets not so bad, others far worse. But it won't be a crash; it will be more of a steady grind with values losing about 4-5% per year for a decade or so. Some years will be worse, others might even be up a little, but over the next 10-12 years real estate values will drop in half.

[dysfunctional press]

18. keep dreaming...

for housing prices to drop by half- the economy would have to be SO fucked up, that nobody would be working, and wouldn't be able to afford them anyway.

sheesh....:eyes:

[Leopolds Ghost]

21. IOW, you're admitting housing values are responsible for massive inflation due to "tulip effect." nt

[dysfunctional press]

23. nope.

nt

[Leopolds Ghost]

25. Housing values have tripled or quadrupled in urban areas. That is the CLASSIC tulip effect.

All inflationary pressures have been directed into a single market good.

This is what allowed Greenspan to promote the essential facade of "the zero inflation economy" with lies such as "but the QUALITY of housing has quadrupled" or "but the speed of COMPUTERS has quadrupled while the price remained the same, offsetting price increases in other computer goods."

Thanks to housing values, real inflation has been enormous, because it is concentrated in populated areas (cities).

[Solo_in_MD]

31. Doubtful

The floor becomes something near replacement cost, what it would cost per square foot to build another home. With the cost of building materials still going up, there is an effective price support for existing homes, at least in areas where people are moving to. In areas like the rust belt and some parts of the northeast, the housing freefall is not bubble driven, but jobs etc.

There are still special case markets like San Diego, San Francisco etc, which are in dire need of a correction. That correction may also reverse the gentrification in previously affordable areas of some cities.

Overall, its not a one size fits all definition of the housing markets in the US, let alone the world.

[Polemicist]

61. Housing fundamentals are still very, very strong....

I'm in the industry and know a little about the subject.

While the low cost of money and poor performance of alternative investments drove speculation in housing, there isn't nearly the bubble that some doomsayers have noted in this thread. And there are very good reasons why housing values will not decline as the poster above states.

We are currently building fewer housing units than the growth of the nation's population. This has been the case for a number of years and will continue to provide upward pressure on housing prices.

Speculation in the housing market has bubbled prices in some regions of the country, primarily the West Coast, Northeast, and Florida, while most of the rest of the nation has had much more modest gains in values. Housing prices will always track up with lower interest rates and then plateau when rates go up again. You have to look at the longer term average appreciation to see that current values in most markets aren't a "bubble" but reflective of fundamental long term value in the marketplace.

As long as inflation remains in check, overall rates will remain relatively low. We are still in a rate environment that is extremely low compared to the last 25 years overall and we are near the top of the current rate hike cycle. We can look toward steady and/or moderating rates in the future which will let what market pricing bubbles from over speculation work it's way out of the housing market over the next 12 to 24 months. It will be a soft landing, not a crash in housing values.

There's no need to freak out over the housing market. Things will work themselves out over the next year or so. Most parts of the country will have no price drops at all, just a plateauing of pricing. And if you got an ARM that's upside down, try negotiation with the lender to refinance based off of current value. In that situation, they are your partner, not your creditor. If you walk away they lose big time. You might be able to get them to "write down" part of the mortgage balance, if you work it right.

[Leopolds Ghost]

20. Most working-class families have already been gentified out of the city. n/t

[dysfunctional press]

24. not the city of chicago.

nt

[Solo_in_MD]

32. You are correct for the snow and rust belts, but in the more desirable

areas like Seattle, San Franciso, San Diego, Wash DC...it has indeed happened

[Horse with no Name]

5. I've been watching homes in the Phoenix area

for rent. They have definitely had a sellers market.
However, over the last month, I have seen the prices for rentals drop.
Not drastically, but the rents are dropping nonetheless.

[Viva_La_Revolution]

6. Thanks! and I have a question ...

I know someone who recently sold 2 rental houses and intended to use the proceeds to purchase 4? plex and convert it to condos. The property they had picked out turned out to be too risky of an investment, and they pulled out of the deal.

What should they do with the money now? Find something (anything) to dump the money into to avoid taxes, or just take the tax hit and look for something (a much better deal) later?


I always have a hard time with these issues. I tend to put myself in the place of the person who is losing their house, while some-one else salivates about the profits they will make off the deal. :(

[the other one]

16. Hide your money in Gold!

The final safe haven.

[Leopolds Ghost]

22. Yes, Viva La Revolution... I can't stand folks who think they have the right to

Turn a tenant's home into condos in order to make money, because tenants in the US have lost their rights to be treated as equal citizens.

I assume your friend has some other qualities that make them tolerable to hang out with. Otherwise, why facilitate their misplaced anxiety/agression? Most people will never get the chance to "turn their money over". Our society teaches them that that is the highest thing they can aspire to, because then they can afford to cocoon themselves inside their gated 20-story condo, or their McMansion in the suburbs, and veg out.

I just had a meeting with some "lifestyle visions" entrepreneurs. Very nice people in person. Not wealthy. Just...mercenary. It is all about making money for them. That's what they were brought up to believe.

[Jim Warren]

28. Curious

Could you elaborate just a tad please, without giving anything away of course, about the nature of these
"lifestylist" and their mission......I'm curious.

[Viva_La_Revolution]

47. This guy is very focused on money...

it's sad, really. We go round and round about economic policies and taxes and welfare and etc.

[davidwparker]

8. What is the best way to play this? I bought a home 2 years ago and

have credit card debt because I had to replace the heating/cooling system. I'm thinking about taking a 401K WITHDRAW, not loan, to pay all or part of it off.

If there is going to be a crash, won't that affect the market, which is what my 401K depends on. I'm thinking I'd rather pay the penalty on the withdraw than to continue paying the interest on the cards for the next 3 years.

I'd hate to have a house value cut in half, owe on my heating/cooling system, and have a 401K deflate because Greenspan was manipulating the economy on *'s behalf -- as I understand it.

I've got 4 houses very close to my house that are up for sale and have been for a while.

[Digit]

11. Can you take on a temporary job?

It's tough, I know.

[davidwparker]

13. No, it's not that bad. I was debt-free before buying this house and would

like to be again. It seems dumb to have 6 figures in a 401K and then have to pay interest on credit cards. When I chose the heating/cooling system that I got, I thought, if I moved again, I'd just pay it off as part of any sell. But, with the housing slump, that may not be possible -- not that I'm moving. I just don't like the thought of the housing slump and not getting out the house what I put into it.

When I get my taxes back, 1/3 of it will be paid off. I'm not doing anything with the tax return other than applying it to the balance.

[skids]

17. You're not in that bad shape. Don't panic.

Save any 401K withdrawal plans for the eventuality that you might find yourself out of work, or if you find yourself "upside down" on the house and the mortgage company starts acting squirrely.

If you're umemployed the tax penalty + income tax doesn't bite you so hard due to being in a lower bracket, if you have to do it while working to right the mortgage, that will suck. As long as you are not planning to move, just play it calmly and by the numbers -- pay down the debt with the highest interest first, and to the best of your ability, and don't do anything extravagant. Almost a guarantee that you'd lose more in tax penalties on withdrawing that than you will on interest. Do make sure your 401K is as diversified as you can get it, and keep a close eye on the credit card account to make sure they don't find a way to jack your rates.

Oh and if you're in an ARM refinance quickly, there may barely be time.

[davidwparker]

40. thanks for the advice. I won't touch the 401K. I'm not in an ARM, it's

6.25% fixed. I'll just be patient while paying off the heating/cooling system.

The 401K is a little bit aggressive for now. As it turns out, I got the statement in the mail today and it went up another 6K. So, unless there's a job loss, I'll keep it working for me. In 2 more quarters, if things continue, it will grow enough to pay off that heating/cooling system anyhow -- even though I still won't touch it. Just good to know its paid for somehow if things go south for me.

thanks again.

[Lasher]

19. skids offers good advice

And if you really fear a stock turndown will seriously diminish the value of your 401(k), move into the safest haven your plan offers. Bond mutual funds or money market funds are considered havens that are relatively safe from stock downturns. I would consider it a drastic measure to move completely out of stocks and into such accounts. I favor diversification like skids advised. But I just wanted to demonstrate that you don't have to withdraw your money from your 401(k) to protect it from a downturn, if your plan offers such investment options.

About half my IRA investment is in a money market fund that's currently paying about 5%. That's my safe haven. The rest is in stock, about half of which is foreign equities. Foreign stocks have been doing about twice as well as US stocks during the past 2 years, and I believe this is due to the 'fair trade' migration of jobs out of the US, the decline of the US dollar, and Republican economic policy. But foreign stocks might not be as vulnerable to a US economic downturn as domestic ones.

But please don't withdraw from your 401(k) if you can help it. In addition to paying big penalties now, you might be damning yourself to a life of poverty in old age.

Good luck,

Lasher

[davidwparker]

39. Thanks for the advice. I won't take any out. I'll just hold my nose

when I pay the credit cards. It seems like if you own a home, you're always shelling out for something. If you rent, then you don't get tax breaks and equity. I have just two more years before the heat/cooling system that I put on my credit cards is off. I don't owe anything on my car and it is a 2003.

have a great weekend

[PerfectSage]

12. Watch the New home builders index

The rally that began in the summer and took the hgx back above the 200 day moving average(pink line) is probably over and new 52 week lows are on the way.

http://stockcharts.com/h-sc/ui?s=$HGX&p=D&yr=5&mn=0&dy=0&id=p63174365959

Here's a one year chart. Can the hgx break out above the 240 recent high or will it fail? $64k Question?????????

http://stockcharts.com/h-sc/ui?s=$HGX&p=D&yr=1&mn=0&dy=0&id=p11125645537

Stockcharts.com won't give me a linkable version of the hgx, just 5 year and 1 year charts of the dow? Try typing $hgx into the ticker symbol box.

[Gregorian]

29. Prices are softening. Deflation of the market is inevitable.

There are many facets to this market. But like everything that has been happening in this country lately, the hardest hit will be the poorer. It's the economy that is keeping this alive. You know, for the first time I just thought of the housing market as a pyramid scheme. There's a chain reaction of sorts, to housing sales. One buyer who can't sell, doesn't buy the next place. Residential sales are going to be the hardest hit. Right now residential inventory is huge. Sales are moving more than they were a year ago, for whatever reason I do not know.

But there is another facet of real estate that isn't so affected by any deflating of a bubble. The special properties. The inventory on those is extremely low. And the prices are sky high. People who own that kind of property, own it outright. And the tax burden is almost zero. And like anything of great value, the prices will almost not change. If housing deflates, these people don't sell. They just hang on to their 100 acres. Once again, it's the poorer who are going to take the brunt of this mess.

I'm typing this while having just sold my home on 65 acres. I should be happy, but I'm so distraught. I'm not buying. It's not that I'm worried about the market. I can't find a thing on the market. So many people have bought country land that there almost isn't any left to find. So I move into a rental and wonder what life has in store for me. I guess it could be worse. I could be one of those who listened to green spam and got an ARM. And be trying to get out. Very scary times. Prices should begin dropping. But I fear that something else could happen. We're nearing an economic disaster.

[fed-up]

33. I found my house w/out a realtor and saved over $50K-

I managed to sell mine within 60 days of listing it (and for $50K more than realtor suggested). I had done my homework and had priced it lower than current value, knowing there were 5 times the normal number of houses on the market. The problem was that the realtor had wanted to really, really, really, lo-ball the price to ensure that it would sell faster (and that he would get his commission faster).

When searching for one to buy I was totally disgusted with what I had seen online for the previous 4 months and I decided to find my own house w/out a realtor even if it meant knocking on doors in the neighborhood I wanted and asking people if they wanted to sell. Lo and behold the first morning I deviated from my normal path and took a right instead of a left, the third house down had a "House For Sale" sign in front with no phone number. Turned out to be the perfect house and I paid $50k less than market value.

Do NOT rely on a realtor!!!

good luck

[davidwparker]

43. good for you. glad you did it without an agent. for the house that

I have now, we found it. I had signed buyer/broker, had had to pay her fee, but due to the sellers market we had at that time -- not now -- and moving more to a rural area, I got this house for less money that what the agent was showing me. I'll be glad when it at least gets back to neither a buyer nor a seller market.

the plan is to keep this house until there is a sellers market again, whenever that is, and then move from a house to a large condo, like the one that I found on my own but I messed myself up dealing with that real estate agent.

[Phoebe Loosinhouse]

30. The percentage of income directed towards housing should be everyone's first clue

What percentage of your gross income do you put towards the roof over your head?

Before Greenspan's fake economy, when he took pressure of the stock market failure by funneling money into the housing markets with artificially low rates and when banks loosened their qualifying conditions to the point of insanity - the benchmark used to be no more than 27-30% towards housing. Americans today are often spending 50, 60 and above percentages on their shelter. This also means they have no means to save for a rainy day. When they lose their jobs they are out on the streets in months because they have no cushion to fall back on.

The other factor people are often unaware of is the issue of - how many houses for sale simply did not sell at all and came off the market? The market is even softer than what statistics show. I am amazed by how many quietly empty houses there seem to be, even in nice neighborhoods.

[davidwparker]

44. 35% of gross. I'm learing this finance game and I think I got that one right.

[davsand]

34. That high foreclosure rate is gonna be a BIG factor.

There is a lot of property out there that is in or headed into foreclosure and the lenders want out from under it. They are holding paper on properties that they may not be able to get the loan value for. There were a lot of loans written with little to no down payment, shaky credit or even unworkable payments and THOSE are a problem. When you add in the number of adjustable rate mortgages that have adjusted upward to the point that they are no longer workable, you have a pretty serious real estate market issue.

They (the lenders) can, and do, end up selling a repo for less than what the loan was for. That not only hurts the lender but it also means that buyers are spending less for those houses--thus the area prices have "dropped."

It should be a huge warning flag that the sub-prime lenders are going "belly up" right and left.



Lura

[specimenfred1984]

36. Incomes vs. prices

Incomes in most areas still don't match housing prices so prices will continue to fall. Creative financing temporarily avoids the income problem but that's only temporary. Sooner or later, the buyer has to pay up.

Builders went crazy building during the bubble so in addition to people not being able to afford homes, there's a huge amount/supply of homes out there now.

Everybody wants a nice home and the banks have fed all the peoples' delusions of being able to afford it. The housing market will only bottom when delusions disappear, which could take years.

[jelly]

38. I'm glad I didn't buy.

I've been in the market about four years. I couldn't get myself to buy the house I wanted at the prices offered, and a fixer upper was just not for me. But of course, that still leaves me in my early thirties, 12 year old twins, still no home that we can call our own, and looking forward to renting for who knows how much longer.

[davidwparker]

45. it's a mixed bag. I owned a home and sold it before some surgeries that

I have had. Went back to owning at the height of a sellers market here. now that I see houses for sale everywhere, I wished that I was still renting. You are certainly more foot loose and fancy free when you don't have the weight of a house and its maintenance to deal with.

It's a mixed bag.

[GETPLANING]

42. Historically, when the housing market falls,

the rest of the economy falls about a year later. Pay off your outstanding debt while your money has any value.

[alarimer]

46. Speaking as someone who will NEVER be able to afford a house

I'm just glad I can afford rent. I have no hopes of ever owning and I am not sure I want to really. I am the world's laziest human so I am sure I don't need to deal with all the maintenance crap and lawn-mowing.

Still I think people who shouldn't buy houses have been doing so. People are way overextended. I don't see why our society encourages everyone to buy a house. Well I suppose there are economic benefits for people to do so. And tenants of course have very few rights in most places. They can raise your rent whenever they want to whatever they want and all I can do is move somewhere else. So making someone else rich is not a great idea either, I realize. But I have no choice for the moment. I have been encouraged to buy by people who seem to think as long as you have a job, it would be okay. My sister tried to get me interested in one of those interest-only loans, which only sounds like a good way to lose everything.

But I am of the opinion that it would be far better to rent and save a down payment, if I could save money, which I can't seem to do anyway so it's a moot point. And I have decided not to put down roots anywhere. I plan on moving to get better jobs as often as I need to and owning a home would just be an impediment to that.

I am 38 years old; I have a job that pays okay but I have no savings, no retirement other than what is offered by my job. I have nothing to show for years and years of work and no hope of ever seeing anything in the future. So I am fucked no matter what; when I get too old or sick to work I am going to go play in traffic. Seriously. I have no one and most like will have no one to help me out. Apartment living sucks, but at least if something breaks, i don't have to fix it or deal with contractors and the like.

[Viva_La_Revolution]

48. wow. I could have written that...

From the first sentence to the last (except for playing in traffic. I thought maybe lighting myself on fire on the porch of some spawn of the Bush Family.) and I'll be 38 in March. :hi:

I plan on starting a commune when the economy crashes. You can come stay with me. :)

[alarimer]

49. A commune is probably a good idea

Although, my grandmother shacked up with a man (a friend of the family) when she was in her 70's. Maybe I'll do that instead of playing in traffic. Maybe someone much younger.

[Viva_La_Revolution]

50. I figure the commune idea is the best of both worlds...

I'm sure there will be several fine 'younger' men running around in MY commune! :rofl:

[Jcrowley]

51. Just wanted

to say as regards your question upthread that my advice to the folks you mentioned would not be what they wanted to hear at all.

I find it morally repugnant that people find Shelter as some possible investment opportunity.

What is it about a culture that forces people into positions of indentured servitude for that which is an inherent right? Let's look at that. But we are far from looking at that instead we trim around the edges and are satisfied to negotiate the terms of our slavery.

Food, shelter and cloth are rights not privileges.

Ever been to barn raising where everyone works together? That's who we are. Communing. Communal. Community. We're hard-wired for that.

[Viva_La_Revolution]

54. I don't care if it's a right or not...

but I will not stand by and let someone make a family homeless in the name of greed. :patriot:

[Jcrowley]

55. Then

I'm not sure what your question is in the first place.

Cuz as I see it when those rights are enforced or a part of our national ethos the issue of homelessness is no longer with us. What a disgrace. To even tolerate the concept of homelessness.

:hi:

[Viva_La_Revolution]

56. the thing is.... this person is my boss

it complicates the whole conversation.

He asked me what he should do with the money (from a straight fiscal point of view) and I had no idea.

I've already given him my OPINION, but he's more interested in not losing money on this deal.

[roamer65]

52. I used Suze Orman's formula for telling if you lived in a overpriced housing area...

...and it said I was by about 50K. That was about 1.5 years ago. Guess what? Prices have dropped by about 40K-50K already. She was right. Instead, I bought a nice little double wide for really cheap in a park instead. Glad I listened to her.

[alarimer]

58. Well I don't know if my area is overpriced or not

But a friend of mine was looking for a house under 90K and could hardly find anything that wasn't in a crappy neighborhood. But they are building homes here like crazy and all of them are cookie-cutter identical with postage-stamp sized yards, which is not my cup of tea even if I could afford it. Too many suburban areas are so bland and boring I can't believe anyone wants to live there. But they do apparently.

[Matariki]

53. In the past it was considered good for communities to have a large number of owner occupied homes

The idea being that it would add stability to the community and people owning homes would generally be motivated to take better care of their home and neighborhood than a renter. After WWII there were lots of programs to help first time home buyers.

It's really unfortunate that buying a house now is more about 'investment' than shelter or community.

ps - i'm not disparaging your choice of renting. these days it's probably economically smart.

edited for dumb spelling.

[alarimer]

59. Since I am not very handy and not inclined to lawn care

It is easier for me to rent, even if it is a pain in the rear a lot of times. I don't want to have to come home from work and deal with anything else but relaxing.

[Gwerlain]

60. If it comes the way people are expecting...

it will cause deflation. Debt will have to be paid off with dollars that are worth far more than they were when you incurred the debt. The lessons are:
1. Get rid of your debt.
2. Hold on to as much money as you can.
That money will be worth more later. And you're paying the debt off now with money that's worth less than it will be later. In other words, getting rid of the debt now is a net savings, unlike in an inflationary economy where postponing paying off the debt means that the debt is actually worth less when you pay it than it was when you incurred it. Interest aside, of course.

[Gregorian]

62. I don't see how we will avoid inflation.

With petroleum prices going up, I don't see how we can have deflation. Maybe I'm missing the big picture. I'm not into economics.

How can we have deflation when prices are going up? Everything is tied to gas. I'd like to know the logic. I suppose it's only housing that you are talking about?



If you are correct, I'd be happier than I am right now. I fell into real estate in 1990 when I never ever thought I could. A beat up fixer house from hell. I worked all the way to where I am now, with a big expensive farm, which I just sold. And I have nothing but digits in a bank account now. And I hate it. I never wanted money. So if you are correct, I sure accidentally did the right thing again.