Real estate bubble.
So my wife has been nagging me to post something in my livejournal and I finally gave in I guess. First I just wanted to say hello to the nice ATP people who befriended me and apologize for not replying to them.
Some of you may have notice a slight run-up in the price of housing lately, in fact in some areas along the coast it's downright insane. Lets take Los Angeles as an example. If you're willing to spend $379,000 you can purchasethis gorgeous crackhouse in the middle of compton, that's gangland for those of you not familiar with the geography. Or for only half a million you can get this complete teardown in Silverlake (also gangland, but slowly being gentrified).
Of course if you read the LA times or listen to any real-estate agent this is not a bubble but perfectly normal, apparently being able to rent a house for half the price it would cost to purchase it with a conventional mortgage is normal. The reason people are still buying these teardowns is due to the abundance of interest only loans and negative amortization loans, in LA 40% of all new loans are now interest only and the number is rising. Add to this strange belief that somehow owning a house with no equity is better than renting. People apparently believe that the housing market will never go down, if they don't get a foot in the door now they'll never own a home and that by the time their interest only loan or negative amortization loan is due to reset -- their ruckle of a home will have appreciated another $100k so they can just refinance out of it.
I feel a bit sorry for these people, they are about to learn a very expensive lesson. History shows that the housing market goes up and down just like any other market. Anyone who owned a home in LA in the early nineties can attest to this. When the market goes down -- and there's an abundance of signs that it will happen soon -- their homes will be worth less than their mortgage. On top of this their interest only loans will reset and their payments will double with no chance of refinancing. There will soon be a lot of foreclosures on the market.
Oh, and don't get me started on all the speculators who are quitting their jobs to "flip" houses on the market, it's the daytraders of the IT bubble all over again.
OK, I'm done ranting here.
Go check outthis blog if you want more info on what's really happening in the housing market.
Some of you may have notice a slight run-up in the price of housing lately, in fact in some areas along the coast it's downright insane. Lets take Los Angeles as an example. If you're willing to spend $379,000 you can purchase
Of course if you read the LA times or listen to any real-estate agent this is not a bubble but perfectly normal, apparently being able to rent a house for half the price it would cost to purchase it with a conventional mortgage is normal. The reason people are still buying these teardowns is due to the abundance of interest only loans and negative amortization loans, in LA 40% of all new loans are now interest only and the number is rising. Add to this strange belief that somehow owning a house with no equity is better than renting. People apparently believe that the housing market will never go down, if they don't get a foot in the door now they'll never own a home and that by the time their interest only loan or negative amortization loan is due to reset -- their ruckle of a home will have appreciated another $100k so they can just refinance out of it.
I feel a bit sorry for these people, they are about to learn a very expensive lesson. History shows that the housing market goes up and down just like any other market. Anyone who owned a home in LA in the early nineties can attest to this. When the market goes down -- and there's an abundance of signs that it will happen soon -- their homes will be worth less than their mortgage. On top of this their interest only loans will reset and their payments will double with no chance of refinancing. There will soon be a lot of foreclosures on the market.
Oh, and don't get me started on all the speculators who are quitting their jobs to "flip" houses on the market, it's the daytraders of the IT bubble all over again.
OK, I'm done ranting here.
Go check out