U.S. Homebuilder Confidence Unexpectedly Slumps To Three-Year Low In December

[TexasBushwhacker]

4. And then the shit will really hit the fan

Rising interest rates put people in panic mode, thinking if they don't buy now, they'll never be able to. That makes them vulnerable to paying for homes that are overpriced.

I went through one of those times in the early 80s. Interest rates were up to 14% fixed! A friend bought a tiny, 2 bedroom patio home for $50K in 1982 on an ARM. I thought it was nice (we were both teachers) but overpriced.

Fast forward 4 years. His neighborhood is covered with foreclosure signs, including his. When folks ARMS came due for refinancing, their homes were worth 20 to 30% less than they what they owed. About half of them walked away from their mortgages. I found a 3 bedroom, 2 bath home in the same neighborhood for $37.5K, $20K (35%) less than it sold for new just 3 years earlier.

People who aren't old enough to have gone through that housing crisis, or the one in 2008, might be vulnerable to a bad deal again, but not me. It took 12 years for that little house to get back up to what it originally sold for. TWELVE YEARS. I'm a renter right now. I would like to buy again, but when the median priced home costs twice as much as the median income family can afford, something's going to give eventually. It has to and it will.