An Interesting Perspective from London
The following is an email I recently received from a finance professional in London with whom I correspond.
I'm back in London now and just had another look at this (Could Net US Home Equity Fall to Zero), as previously noted it is excellent.
I believe housing numbers are out today - it will be interesting to see how they look. So many people are leveraged I just dont see how this stuff can turn around and as you note the longer term trends are poor.
I spent 2 weeks in Lansing Michigan and you can buy homes there that are actually decent (although you may need to carry a gun) for $25,000. I looked at one for $55,000 split in to 3 apartments renting at about $400 each, fully rented. The rental market there ($300-$400 a month) is solid, I know a few VPs that are now essentially slum lords with 4 or 5 $40K homes split like this and almost all have full rent. When most people can't qualify for a mortgage on $25,000!! you know things are poor. This reminds me of the Great Depression when fortunes were had by anyone with any capital at all. In fact, I am tempted to pack up, move to Michigan as an AVP on a good salary and start buying this stuff up. There are entire farms there for $250,000 with 60 acs. of land, 2 story nice home, and $1,200 a year property tax due to ag zoning 20 minutes from the state capital. Again, no one has capital.
Meanwhile credit continues to tighten. I have now had my 3 british credit cards all "reduced' regarding available credit (this caused some problems when I went to book a $600 dollar dinner for a large work group in Michigan) for no good reason and the interest rates jacked - and I pay on time and rarely hold a balance unless it was work expenses. I wonder what they are doing to people that don't have jobs.
I'd be interested in your view on big cities like London and New York, it seems they would get hit worse over time, I could throw a rock in London and not hit anyone that can pay 20% down on a 400K pound house even though that is what a decent two bedroom goes for here. If we are shifting to an Asian "saver" model *unlikely* that would take, what, 10 years or more to work up?
I guess at least (for now) there is little world panic like 8 months ago, and guess what, my firm had record Variable Annuity sales last month (ever). I may be sitting on the next bubble.
I'm back in London now and just had another look at this (Could Net US Home Equity Fall to Zero), as previously noted it is excellent.
I believe housing numbers are out today - it will be interesting to see how they look. So many people are leveraged I just dont see how this stuff can turn around and as you note the longer term trends are poor.
I spent 2 weeks in Lansing Michigan and you can buy homes there that are actually decent (although you may need to carry a gun) for $25,000. I looked at one for $55,000 split in to 3 apartments renting at about $400 each, fully rented. The rental market there ($300-$400 a month) is solid, I know a few VPs that are now essentially slum lords with 4 or 5 $40K homes split like this and almost all have full rent. When most people can't qualify for a mortgage on $25,000!! you know things are poor. This reminds me of the Great Depression when fortunes were had by anyone with any capital at all. In fact, I am tempted to pack up, move to Michigan as an AVP on a good salary and start buying this stuff up. There are entire farms there for $250,000 with 60 acs. of land, 2 story nice home, and $1,200 a year property tax due to ag zoning 20 minutes from the state capital. Again, no one has capital.
Meanwhile credit continues to tighten. I have now had my 3 british credit cards all "reduced' regarding available credit (this caused some problems when I went to book a $600 dollar dinner for a large work group in Michigan) for no good reason and the interest rates jacked - and I pay on time and rarely hold a balance unless it was work expenses. I wonder what they are doing to people that don't have jobs.
I'd be interested in your view on big cities like London and New York, it seems they would get hit worse over time, I could throw a rock in London and not hit anyone that can pay 20% down on a 400K pound house even though that is what a decent two bedroom goes for here. If we are shifting to an Asian "saver" model *unlikely* that would take, what, 10 years or more to work up?
I guess at least (for now) there is little world panic like 8 months ago, and guess what, my firm had record Variable Annuity sales last month (ever). I may be sitting on the next bubble.
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