Thursday, June 15, 2006

Response to the Harvard study

From a reader in Hong Kong: The housing market in the US reminds me of the housing
bubble in Japan and Hong Kong in the past.

The rental yield can not cover mortgage payment or put it
this way, home investors must subsidize their tenant
for 3-4% per year if they have one.

If ppty price don't continue to rise, they are stuck
there, not to mention the price has started coming
down since end of last year.

Rising interest rate becomes a threat to all home
owners. Once the ppty price stops climbing,
re-financing is not available. People end up with a
bigger mortgage payment out each month. With zero or
negative saving in US households, it is simply a
question of how long they can stand before falling.

Some say the variable rate mortgages are only 25% of
all and some owners have 10% or above equity in their
home. Thus, it is soft landing! I just can't buy it.

When the HK ppty bubble bursted in 1997, people had
30% or above equity in their ppty and HK people are
loaded with their saving accumulated for the last 30
years. What happened to it? It came down by average
65% from 1997 to 2003.

Now the charts of the big builders tell me that they
have deteriorated since end of last year or beginning
of this year. Now the downturn has spread to other
sectors of economy and even to other parts of the

Cash is definitely King, especially in time of


Post a Comment

<< Home