Real Estate vs Stock Market?

T

TM_Direct

Many a "pundit" are now claiming that the real estate decline is good for the stock market....the rationale being that RE speculation money will be transferred to the stock market......Does anyone else buy this? Im having serious concerns that the RE crash will KILL the stock market later this year as people take boatloads of $$$$ from their personal accounts, their IRA's and their 401K's to save their homes.....


................am i being paranoid or is this a real concern? where will the money flow next???

( I have no raw data to back this up, just personal speculation so your comments are welcomed even if you call me JACKASS!)
 
I agree with you. There are a lot of speculators who bought with little down so they have little equity now. Even if they sold their properties so that they can invest in stocks, they have nothing left to invest. The people who bought solid, profitable properties that produce cash flow are in no hurry to sell at depressed prices, so they're not the ones to prop up the stock market. With the RE market going south and so many adjustable mortgages about to adjust, people are going to need to sell stocks or cut back on spending to make the monthly payment. Either way, it's not good for the stock market. Combined with the fact that the P/E of the Naz and SP500 are above historic values, things look gloomy
 
It seems like money used to flow -

Real Estate > Bonds > Stock Market

With interest rates not rising much it may just go
real estate > stocks

The money has got to go somewhere

Bonds (1979-82) > Stocks (82-87) > Real Estate (87-91)
> ? (92-94) > Stocks (95-2000) > Real Estate (01-06) > ?
 
Quote from TM_Direct:

Many a "pundit" are now claiming that the real estate decline is good for the stock market....the rationale being that RE speculation money will be transferred to the stock market......


................am i being paranoid or is this a real concern? where will the money flow next???

More...
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Probably not the best one to comment on fundamentals/LOL

And even though 4th quarter stock market tends to be uptrendy, but thats not a prediction, & i see 3 fundamental factors which helped the downtrends of 1929 & 1987 present now.

I dont consider downtrends negative at all[unless one has no selling plan] And dont think RE decline has to effect the stock market, many homeowners/commercials dont sell just because a certified appraisal is less.

:cool:
 
Quote from TM_Direct:

Many a "pundit" are now claiming that the real estate decline is good for the stock market....the rationale being that RE speculation money will be transferred to the stock market......Does anyone else buy this? Im having serious concerns that the RE crash will KILL the stock market later this year as people take boatloads of $$$$ from their personal accounts, their IRA's and their 401K's to save their homes.....


................am i being paranoid or is this a real concern? where will the money flow next???

( I have no raw data to back this up, just personal speculation so your comments are welcomed even if you call me JACKASS!)
More...

I agree totally. The funny thing is that Wall St. bought tons of these packaged loans...and those weren't just subprimes. Half of loans written last year were Alt-A(or exotic) loans that are either interest-only/zero-down, etc. When the teaser rates on those reset and people owe 115% of the original price, and mind you that price was from the bubble's top, people are just going to walk away I'd say.

You'll see a lot of banks and firms STUCK with houses that no one wants to buy, can't buy(because of tightened credit restrictions), etc.

If these lenders hadn't pushed ridiculous loans on people to squeeze another year of the RE boom and instead had let things run their course, we'd be a healthier economy. Right now I'd say we're pretty much waiting for a disaster...more houses on the market due to foreclosures equates to a lot of people losing money, jobs, assets, etc.

I don't really see a way to fix it either...if they hadn't given loans to unqualified people in the first place it wouldn't be such a mess. Testifying the other day in front of the Senate panel, Sandy Samuels, an exec from Countrywide(the country's largest lender), admitted that approximately 60% of people who they gave these Alt-A loans to wouldn't qualify for the fully indexed rate. That's an ugly thing to swallow.

Read this:
http://www.billcara.com/CS Mar 12 2007 Mortgage and Housing.pdf
Every paragraph will make you say HOLY SHIT! :eek:
 
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