Lessons From Another Bubble
The CNNMoney website thinks the British experience could hold some clues for the US market. "Americans aren't the only ones who've gotten rich off real estate. In fact, home price gains in the United Kingdom dwarf those of the United States."
"'Every week there were stories in the paper about people making more on their property than going into the office,' said Ed Stansfield, property economist. Then, with little warning, the market cooled."
"According to the Council of Mortgage Lenders, between the first and second half of 2004, the number of such investors unable to meet their mortgage payments increased 50 percent."
"When the U.K. market was hot, lenders became increasingly lenient in their credit standards, allowing for higher debt-to-income ratios, smaller down payments and more creative financing. As of February, the number of mortgage repossession actions in the courts was at its highest level in five years, and many expect it to rise."
"What we're seeing now is the first signs of stress," said Stanfield.