Saturday, April 23, 2005

Price Boom Making For Bad Decisions

The emotions swirling around the housing market are strong and result in distorted decision making. Take this AZCentral piece. "As prices continue to climb there, the Ahillens say they are forced to look at smaller homes and act more quickly. 'You find if you don't act now, you're going to get priced out of the market.'The Ahillens said they want to keep the home they now own in Tempe as an investment for their 3 1/2-month-old son's college education, which means they need to finance 100 percent of the purchase price in Gilbert."

"Joi Belinda said an adjustable-rate mortgage, with its lower interest rate initially, could help her get into a house. The 35-year-old, who is renting a townhouse, says lowering interest by as little as half a point would make a big difference. 'That half a point is money I can save.' Still, she said that although buying a house is 'definitely a hot thing to do, I feel kind of nervous about the market.'"

It's not just buyers that have lost their heads. "Erik Lutz, president of Great Southwest Mortgage, said that six years ago, few of his company's customers took interest-only mortgages because they would have had to buy points or pay down the interest rate. That isn't the case anymore. About 70 percent of the mortgages his company did then were fixed rate. That figure has dropped to about 30 percent today."

Listen to the same guy, "People spend 45 to 50 percent of their earnings on housing. This is very dangerous, because it doesn't provide a financial cushion. Lutz agrees. 'People are counting on housing appreciation to be their savings," Lutz said. "The homes need to appreciate, otherwise there is no savings.'"

"Not only are homeowners counting on appreciation, Lutz said in many cases people are taking the money they would have been forced to save and using it to buy a bigger house."

14 Comments:

At 9:17 AM, Blogger desi dude said...

any having trouble in opening this website in firefox. mine reirects me to blogger.com starter page, when i open this web site.
it works fine if i open in mozilla or ie.

just wondering, why.

this started happening in last two days.
other websites that i frequent (financialsense, housingbubble.blogspot.com for ex) , i dont have problems.

 
At 9:44 AM, Anonymous Anonymous said...

It was happening to me too. Clear your browser cache and any blogger.com cookies.

 
At 10:12 AM, Blogger Ben Jones said...

I have gotten lots of similar emails. Sorry, sometimes I wish I hadn't started with blogger. I use Opera and it seems to work OK. But I get denied access to post all the time. Very frustrating.

Last, anon. Thanks for the suggestion.

 
At 10:23 AM, Anonymous Anonymous said...

I use Avant and it works fine. I have found that when I can't open a page it's because I have the cookie blocked, so you may have to go into internet options and allow the cookie.

 
At 10:26 AM, Blogger John Law said...

('You find if you don't act now, you're going to get priced out of the market.)
classic bubble scenario. the mortgage paper may as well say Qualcomm on it.

 
At 11:37 AM, Anonymous Anonymous said...

(I'm not the same anon that posted above)

I'm also having problems with Firefox. It's new in the past few days or so. This same firefox installation worked a week ago.

I cleaned out all my cookies, including specific cookies from www.blogger.com and blogger.com. That didn't fix the issue.

The problem is specific to Firefox. I also use Opera and IE, and they both work fine.

Ben, your blog rules.

Your provider sucks!

 
At 11:54 AM, Anonymous Anonymous said...

"Ben, your blog rules.

Your provider sucks"

That's funny.

 
At 2:00 PM, Blogger Ben Jones said...

I won't use blogger for any future blogs. Sorry about the prob.s and I will send the firefox issue in to the tech guys.

 
At 2:03 PM, Anonymous Anonymous said...

You've gotta clean your cache out too. Not just cookies. That solved the problem for me, and it's what the blogger guys recommend.

 
At 3:36 PM, Anonymous Anonymous said...

Matt and Marnie Ahillen want to finance 100% of the purchase price, and get an interest-only loan.

In other words, they will have zero equity in the house when they move in, and will accumulate zero equity with each house payment.

They are totally dependent on price appreciation. If housing price stagnate or drop, they are screwed.

If interest rates rise, they will be screwed.

How can these loan officers sleep at night?

 
At 3:51 PM, Anonymous djb said...

Firefox users, try using this URL:

http://thehousingbubble.blogspot.com/index.html

I was having problems with the bare .com address too. After adding "index.html" to the URL my problems ceased.

 
At 5:12 PM, Blogger Ben Jones said...

djb,
Thanks for that.

 
At 5:13 PM, Blogger desi dude said...

Mine (first poster) problem was resolved with clearing the cache.

 
At 5:51 PM, Blogger Ben Jones said...

Thanks Desi,
I made a post out of your suggestions.

 

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