[lbo-talk] housing bubble?

Doug Henwood dhenwood at panix.com
Fri Jan 28 13:36:06 PST 2005


Jordan Hayes wrote:


>I said there was (typically) no margin call. If you get stuck in a
>limit down futures contract, you can get wiped out in ways that are
>(again, typically) not possible with houses: you can't be forced to sell
>your house _just because it's value goes down_ ...

No, but if you've really stretched to buy the house on the joint assumptions that rates will stay low and prices will rise (and maybe that you'll keep your job) you may come to regret the decision.

And the negative wealth effect from declining house values could be strong, just as the positive wealth effect of rising house prices has been over the last several years. Britain in the early 1990s offers a precedent.

Doug



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