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Real Estate Is Doomed - Part 2: Times Have Changed

On the left hand side of the chart below, mortgage rates peaked at 18.28%. By comparison, today's rate is hovering at less than 4%, a whopping 4.5 timesoff the peak. More importantly, there was no time in history when a mortgage loan was cheaper than today. As we now know, it was all the Fed's doing. Mathematically, unless they figure out a way to go negative, they are done. Can the real estate market flourish when 35 years of continuous stimulation is removed?

35 years ago, a 20% down payment was the norm. There were 3.5% down FHA loans, 5% down agency loans available as well, but they were not particularly popular because of the cost of mortgage insurance. The net effect of a larger down payment is a bigger cushion that helps with absorbing market fluctuations. Today, especially at the entry level, there is no room for error. These <5% down loans are all one paycheck away from default. Read more