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Millionaire Now! by Larry Nusbaum

This blog is based on the organizational principles found in my new book, "Millionaire Now! - A Financial Toolbox with Seven Steps to Wealth".

Housing, housing & more housing

Posted on 09/29/2006 12:36 PM | Link | Post Comment

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Housing slump could pinch consumer spending, from MSNBC.com, reports that some analysts are voicing concerns that the end of the housing boom could also spell the end of the extended consumer shopping spree because homeowners are not pulling out cash from their homes due to a flattening out of the housing market. "We have seen consumers use their houses at ATM machines," said John Marcell Jr., a mortgage broker in Upland, CA. "Whenever they get their credit card debt up high, they go ahead and refinance and bail themselves out. That's well and good as long as you have a rising market. But when that rising market no longer rises, you have some real issues." Homeowners have tapped more than $250 billion in equity from their homes this year according to the latest forecast from Freddie Mac. The same forecast sees cash-out refinancing falling sharply next year-- to $152 billion-- and to $108 billion by 2008. Many economist see continued job growth and relatively mild inflation as signs that the housing slowdown will not have much significant, harmful economic impact.

New home sales rise as prices fall, from MSNBC.com, reports that sales of new homes posted the biggest increase in five months in August, raising hopes that the steep slide in the housing industry may be leveling off. Sales of single-family homes increased by 4.1 percent last month. The gain was better than the 3 percent decline economists had been expecting. The price of homes sold in August fell to $237,000, down 1.3 percent from August 2005. Some economists attribute the rise in sales to the recent decline in mortgage rates. I attribute it to the large hard dollar incentives by the builders. New home sales were up in every region of the U.S. except the West, where sales fell 17.7 percent.

Homes Seen as a Nest Egg By Most U.S. Homeowners
Although housing prices nationwide are falling, nearly half of all homeowners still expect the value of their homes to rise at least 5% a year, according to a recent survey of 1,003 Americans by RBC Capital Markets, a corporate banking and investment banking firm. Our homes are still our nest eggs: About 80% of homeowners surveyed estimated that they have at least $50,000 of equity in their homes, and 60% said they have at least $100,000. Surprisingly, many of those polled are immune to worries about interest-rate hikes, since they've already paid off their mortgages. But those who got risky variable-rate and interest-only mortgages are getting worried: Nearly four out of 10 such borrowers are concerned about how they'll meet higher payments.

Has the Housing Bubble Burst? from Peridot Capital Management
Chad makes a rational case and suggests that "everyone just threw around the bubble term because we had experienced one in Internet stocks a few years back and it was easy to categorize a very strong housing market as a bubble."

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