Tuesday, March 08, 2005

Because Mr. Market Says It Shall Be So

Barry Ritholtz thinks a 30% "haircut" to the real estate market would be significant but manageable. I disagree. As the saying goes, this "ain't" our parents real estate market.

The table below says it all. Again, I don't do timing. All I am saying is Mr. Market goes where he goes with the least number of people as possible. All of you real estate bulls will never be able to convince me that Mr. Market is going to allow 42% (69% if we include those with less than 10% equity in their home purchase) of first-time home buyers to leverage up the way they are and be on the right side of the trade. Huh uh, ain't going to happen. I don't know an easier way to explain it.

How much did they put down?
The majority of first-time buyers had downpayments of less than 10 percent.

Size of downpayment / First-time buyers putting this much down
0% / 42%
1% - 9% / 27%
10% - 19% / 12%
20% - 29% / 10%
30% - 39% / 2%
40% - 49% / 1%
More than 50% / 6%

- Source: National Association of Realtors

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