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 March 08, 2007
Pattern in Turmoil of Housing Market Seen
Some analysts of the housing market situation are of the belief that it is following a similar path as the stock market. The stock market's bubble most recently burst seven years ago.
The bubble begins with a "displacement" which causes a sector to look more favorable with historically low interest rates being the "displacement" in the housing market. This situation tends to be followed by a boom which is characterized by easier access to cash, which in turn leads to what the author refers to as "pure speculation;" and is then followed with what is termed as "revulsion," a state in which cash is shut off and a panic ensues.

Currently, the housing market seems to be in a "revulsion" phase. Observers are reporting increases in defaults on subprime mortgages, which in turn causes more stringent underwriting standards to be adopted by regulators of the banking industry along with Freddie Mac's recent decision to stop purchases of loans that are of high-risk.

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