Just for fun, let’s imagine a possible silver lining to the complete melt down on Wall Street. In this scenario, the next big shoe to drop will be access to consumer debt. No one is going to extend car loans, credit card debt, retail debt and so on. But this may not be all bad for our industry.
Imagine John & Mary Homeowner talking about their day. John says gas prices are up and his long commute is killing them. They need to buy a different car. “But no one is lending money for new cars,” Mary replies. John decides that if he can not have a better ride, he will have a better destination. “Let’s add on a nice deck for me to enjoy after my long commute.” Mary smiles pleasantly and reminds John that no one will extend an equity line for home improvement. Exasperated, John suggests they just buy a jacuzzi and settle for some easy relaxation. But Mary points out that no store is offering credit, so large purchases are largely impossible.
What do you suppose John and Mary do? What about next Sunday, out for a drive, when they see a nicer home, closer to work, with more square footage – and they realize they can own it for the same payments they are making now. What happens when the only money available is purchase money? Thanks to Fannie & Freddie (and FHA, VA) home loans will be plentiful while every other kind of debt will disappear for a while.
Supply and demand… the meltdown might be just what we needed.
(This post was first published here.)
Filed under: BUYERS, INVESTORS, LENDERS, POLITICAL & ECONOMIC FOLLY, REALTORS, SELLERS , bailout, Real Estate Future, REALTORS, Wall Street
[...] week I suggested that Wall Street’s Meltdown may actually help the housing industry. Consumer debt will dry up in the credit crunch and this bail-out will not have much impact in [...]