I always worry when "experts" start pointing out what's blatantly obvious to the rest of us. "Some" home buyers "may" be overextended?
Experts are concerned that home buyers who have chosen adjustable-rate loans or interest-only mortgages could have financial problems if home prices decline or flatten out. Although nationwide prices, adjusted for inflation, have risen a dizzying 36% since 1995, according to the Center of Economic Policy Research, they are due for an adjustment eventually.
"Although"? Perhaps "because" is a more accurate word there.
Many people I know personally have over-extended to ridiculous proportions to buy the most house they can. ("Can" being a relative term here.) The confidence with which people say, "An interest-only loan is OK because when I have to start paying principal, my income will have gone up." Really? How do you know that ... cause my crystal ball is not quite that good. Particularly scary are adjustable-rate mortgages (or even worse, adjustable-rate interest-only loans) because when interest rates go up increasing these people's housing payments, that's precisely the same time that house prices fall because people can afford less house when rates rise.
And recently, I've even started hearing about an extreme case of the interest-only mortgage: the negative-equity mortgage, where the monthly payment is not sufficient to pay off even the interest due so your mortgage balance goes up. The rationale for taking on such a loan? "My house is going to appreciate more than the additional debt accruing on my mortgage." Yeah, good luck with that. What really upsets me is that if/when the market crashes down around people making idiotic decisions like that, my house price is going to suffer right along with theirs.
Ever heard the word "bubble," people?
[Source of the quoted paragraph was the business section of the Atlanta Journal-Constitution a few days ago. Sorry, no link.]
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment