September 23, 2007

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The Writing was on the Wall The Writing was on the Wall Addendum to Part 1 of a 2 part series--"Which End is Up" or Understanding Our Housing Market" Historically low interest rates, low cost housing availability across the country, investors hungry to reap a return after the dot com crash all set the stage for an overactive interest in housing as an investment. There are really three distinct factors which played into the current market conditions across the county. The first is the sub-prime market. Essentially, these are loans which are made to folks who otherwise could not qualify for an "A" paper loan-usually that means low credit scores. Anyone with even the foggiest crystal ball could foresee that giving loans to people with bad credit is risky. The second major players were investors. Aggressively seeking any new vehicle to safely invest thousands turned to real estate. The availability of innovative interest only and negatively amortizing loans fueled the investment fire. Investors were able to put little or no money down on a new housing development in Las Vegas and before the project was completed for occupancy could re-sell at a huge profit. As with any scheme is better to get in early rather than later. Not only did the country as a whole have more sub-prime loans it had more investors with less emotional ties to their homes. Both of these relied on one thing-low interest rates. As the "fixed for five year adjustable loans" came due, for many investors it no longer made...

Drew Morgan

Sponsored by Drew & Christine Morgan"Helping People Make Good Decisions"smReal Estate Sales and ConsultingCarlmont Associates

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