Saturday, May 21, 2005

"Outdoing The 1920's Boom" In Miami

The Miami Herald reports on what may be the highest level of speculation in the world. "More than 114 major projects, most of them high-rise condos, are under construction or in the planning stages in the urban core along Biscayne Bay. Citywide, developers are proposing more than 61,000 new condominium units, eight times the number built during the past decade."

"'You have a wave of development underway here in Miami that is unprecedented, bigger than anything, bigger than Hong Kong in the boom years of development,' said Charles Hales, a transportation consultant."

"'We are building an instant city; what should take 15 years will take three,' said Michael Cannon, a Miami real-estate analyst. It all amounts to a multibillion-dollar gamble, outdoing in risk and bravado the 1920s boom that made Miami a modern city"

"'As much as 85 percent of all condominium sales in [downtown Miami] are accounted for by investors and speculators,' housing analysts at Raymond James warned in a March report. Philip Spiegelman sold the condo units in the Marina Blue condo going up on Biscayne Boulevard. 'One hundred percent of the buyers were investors and speculators,' he said. 'Anyone who tells you their projects are different are deluding themselves.'"

52 Comments:

At 1:52 PM, Anonymous Anonymous said...

So in a few years there should be some reat deals on condos in the Miami area.

On a tangent matter, today John Mauldin has an excellent, thorough analysis of the financial services sector, and he forecasts pretty low growth therein, in his May 20 newsletter titled, “Kicks Just Keep Getting Harder to Find.” His website is www.frontlinethoughts.com

And Bill Bonner has an impressive, fairly scary piece on why Japan bought so many U.S. dollars in recent years, titled “Where Does All the Money Come From?”

http://www.lewrockwell.com/bonner/bonner100.html

I do not see how Greenspan can prevent housing price deflation. The Japanese couldn’t do it and they are very smart and exceptionally disciplined. The eye opener is that it appears you could buy a home there with virtually 0% interest rate on the mortgage, whether the paper is held by the seller or a factor or other. Once you money is interest-free, the government has lost all leverage to prop up prices, I’d think. Prices in Japan have been dropping for ten years – very hard to imagine how you house-hunt in such a climate.
Chip

 
At 1:57 PM, Blogger Ben Jones said...

Thanks for the link Chip.

If anyone who wants to view the MH piece, but doesn't have a subscription, you can paste the link into your google search bar and access it.

 
At 2:11 PM, Anonymous LV_realprop said...

What a sad state of affairs. 100% purchase by investors and speculators. Greed runs rampant but we all know that in the end it results in ruin. Hopefully it won't drag down the rest of us in its whirlwind of demise. On the street still hear waiters talking up the price appreciation of their newly purchased condos. On the job less than 200 lots have recorded this month (avg. since 2004 ~850). Still time left in the month though.

 
At 2:20 PM, Anonymous Anonymous said...

Prices in Japan have been dropping for ten years – very hard to imagine how you house-hunt in such a climate.

Not only that but in Japan you have negative population growth and an aging population. http://www.overpopulation.org/older.html
Japan also in not open to the idea of immigration.

Spain has negative population growth as well and has one of the biggest RE bubbles.

At least in the US we do not have Negative
Population growth.

 
At 2:20 PM, Anonymous Anonymous said...

I guess, on the flip side, there is some solace that such freedom to take risks is truly what made this coutry great. Now if only the government can refrain from bailing out those who gambled and lost, things might eventually work out with some sadder and wiser former flippers holding two jobs.

 
At 2:22 PM, Blogger John Law said...

how bad was the hong knog bust?

 
At 2:40 PM, Anonymous Anonymous said...

it's funny the hong kong situation in the late 90's has come up. i've been using it as an example to my yawning bay area friends for some time. i lived there from 97-2000 and i can tell you the dive was impressive. when my wife and i arrived in 97 most of the previous industrial base had moved across the border. two industries remained:

1) a professional service sector (mostly expats) that did business over SE Asia
2) the buying and exchanging of flats (condos). middle class folks saw the income of the second flat as necessary.

if you think the stories today in the usa of people sleeping over for a chance to buy a condo are funny i have a whole stack somewhere in the memory bank.

prices? they dived 40-50% overnight. this had to due with a bunch of converging economic issues (including hedge funds going after the currancy) a very good friend bought a USD$1.2 million two bedroom which immediately dropped 40 %. he had no choice but to try to hang on. it took six years to get back to what he paid. i can attest to the strain on his health and marriage.

e-

 
At 3:21 PM, Anonymous Anonymous said...

The Bonner piece really ties it all together- I had better get out of Architecture ASAP. Anyone for bankruptcy evaluation?

 
At 4:05 PM, Anonymous Anonymous said...

Anon 2:20 PM said:
Anonymous said...
Prices in Japan have been dropping for ten years – very hard to imagine how you house-hunt in such a climate.

Not only that but in Japan you have negative population growth and an aging population. http://www.overpopulation.org/older.html
Japan also in not open to the idea of immigration.

Spain has negative population growth as well and has one of the biggest RE bubbles.

At least in the US we do not have Negative
Population growth.


US population growth is unimpressive compared to India, especially the upcoming urban areas like Bangalore and Noida.

Also the Indian population is much younger than US population (median age is about 10 years younger).

However, despite uninterrupted rapid economic growth since the IMF-induced reforms of the early 90s, Indian prime urban RE has been through boom and bust cycles. For example, from 1997 to 2002, the price of prime residential RE in Gurgaon dropped over 50%, but it has more than doubled from 2003 to 2005.

FYI, Gurgaon was the fastest growing city in the world in 2004 - it makes growth in Phoenix or LV look anemic and surpasses anything in China.

The message - youthful populations and rapid population growth is not sufficient to prevent the collapse of hyperinflated RE markets.

 
At 4:10 PM, Blogger Ben Jones said...

lv prop,
Thanks for the update. Please let us know how the month turns out.

 
At 4:30 PM, Blogger Travis said...

Interesting potential side effect of a long-term housing bust... as baby boomers approach retirement age, many are counting on their real estate to pull them through along with their social security checks. Without the ability to pull out a million or two in equity, many of them may choose to work for a few more years. The side effect could possibly help the social security situation. Am I stretching this too far?

 
At 4:36 PM, Anonymous Anonymous said...

No, they will all die fliping burgers in poverty. No SS either-it will be bankrupt.

Come on old fart.... Grill my burger. Faster, faster LOL.

I am buying ammunition and canned food. Soup lines here we come. Real estate and stocks will be down 90% on average.

 
At 4:41 PM, Anonymous Anonymous said...

What a glut looks like (Denver).

I've been searching the Denver multilist this afternoon for 2 bedroom/2 bath condos, 1050 sq ft or bigger. Denver only, no suburbs.

I found this listing, thought you all would like to see what it gets like when there are way too many units on the market for the demand.

---------

Seller Will Pay 20k For Quick Sale-Wow! Penthouse Unit With Huge Party Deck Includes All Appliances-Cable,Gas,Electric Great Location-Near Highline Canal,Shoppingcherry Creek,Downtown & I-225. Great Unit!

Asking Price $79,950
2 bedroom/2 bath
1138 Sq Ft.
----------------

there are hundreds of 2/2 condos on the market in Denver under $150k.

Once the supply/demand equation tips over in these hot areas the speculators are going to get a very rude surprise. I suspect those who can will just walk away from still unfinished units, and all of sudden there will be thousands of unsold units on the market.

..DenverKen

 
At 4:43 PM, Anonymous Anonymous said...


Travis said...
Interesting potential side effect of a long-term housing bust... as baby boomers approach retirement age, many are counting on their real estate to pull them through along with their social security checks. Without the ability to pull out a million or two in equity, many of them may choose to work for a few more years. The side effect could possibly help the social security situation. Am I stretching this too far?


Don't US citizens over the age of 65 automatically receive social security retirement benefits?

Are you saying that their income will be earned and so they will have to pay social security contributions and that this will improve its solvency?

 
At 4:53 PM, Anonymous puck said...

^^^

I say build 'em. Build 1,000 100-story condo towers in Miami. Go crazy. Create 100 years worth of supply. Downtown Miami is already essentially a concrete ghetto surrounded by a real ghetto on the inland side and bunkered nouveau riche on the ocean side.

The real clue to how insane this is? The name of the building that the guy hopes will be the tallest condo in the world: Empire World Tower or World Empire Tower or something like that. There's your sign...

This isn't about demand. This isn't even about real estate. This is about ego and EZ financing. I say let 'er rip and devil take the hindmost...

 
At 4:55 PM, Anonymous jebA said...

(Prices in Japan have been dropping for ten years – very hard to imagine how you house-hunt in such a climate.)

Actually it's very easy. You can evaluate property without dozens of bozos trying to outbid you. And you buy what you can afford. Simple as that. You don't buy something unaffordable and hope that asset inflation will bail you out. You buy something that makes sense for your monthly budget. End of story.

 
At 4:59 PM, Anonymous Anonymous said...

"This isn't about demand. This isn't even about real estate. This is about ego"

...and one of the top TV shows these days? The *REALITY* show staring none other than the all-time KING OF EGO himself, real estate tycoon (and bankrupted how many times now?) THE Donald Trump.

It's almost hilarious..if it wasn't so sad.

 
At 5:01 PM, Blogger realist said...

units in tokyo still cost more than units in n.y.c., and mortgages there are not easy to get at any rate. (denver ken) i just sold my condo conversion, 850 sq.ft. unit in a class c building in denver for $195,000 without putting it on the market. the market is over-built, but if you have a real loft instead of a condo, it will still run $500+ a foot.

people will continue to invest in real estate until there is another asset class to in which to invest. the only smart investments, now, are shorts.

 
At 5:15 PM, Anonymous Anonymous said...

For those not living in Miami.

Imagine a four-laned street (Ponce de Leon) that stretches for three miles from Point A(US1) to Point B(Eight Street). Now consider that on every block is an empty lot announcing a high-rise condo development.
It's hard to grasp the enormity of what the Latin Builder's Association and its influence has planned to inflict on this city. Now take this image and multiply it one hundred times.
No one has addressed yet the social services, infrastructure or environmental impact of this massive urban onslaught.
This is NOT a bubble. This is somthing that we have NOT seen in any historical context.

 
At 5:28 PM, Anonymous Anonymous said...

4:59 anon -- I wasn't clear enough in making my point about "how do you house-hunt in Japan during deflation." The point was, if prices are in decline and you know they will continue to decline after you buy, how do you decide on a home and what price to offer? The selling part is easy -- price it a bit lower than the competition, but I can't imagine buying a property that is predicted to lose even more value.

 
At 5:30 PM, Anonymous Anonymous said...

Whoops -- my reply was for 4:55 Jeba, re Japan deflation.

 
At 6:01 PM, Anonymous Anonymous said...

I've been extremely mismerized by the spiralling high costs of homes in my area, north of San Francisco, California, USA. Homes costing $600K USD and above are being sold in a week by people in their thirties with young children! How are they affording these homes?

 
At 6:03 PM, Anonymous Anonymous said...

Sorry, I mean people in their thirties are BUYING homes costing $600K and more.

 
At 6:17 PM, Anonymous Anonymous said...

I think that baffles most of us. It might well be a version of "a wing and a prayer."

 
At 6:17 PM, Anonymous Anonymous said...


Anonymous 6:01 PM said...
I've been extremely mismerized by the spiralling high costs of homes in my area, north of San Francisco, California, USA. Homes costing $600K USD and above are being sold in a week by people in their thirties with young children! How are they affording these homes?

Anonymous said...
Sorry, I mean people in their thirties are BUYING homes costing $600K and more.


Most of them CAN'T afford these homes but aggressive lending practices (zero down IO etc.) are allowing them to buy anyway ... it'll all end in tears, bankruptcies, bank failures etc....

 
At 6:25 PM, Blogger goleta said...

Like Jay Butler said in the housing bubble debate, keeping a home is like keeping a living animal that you need to spend time and money taking care of it. How will Californians take care of their second and 3rd home all over the west coast, NV, AZ, CO, UT, TX, or Miami? Even if the market doesn't crash, most of the investors will not be able to find buyers and they will have to keep the investment for many years to come, unless they are willing to sell at any price. Properties not occupied are easy targets of gangsters. If crime rate rises in the neighborhood, the whole area's RE value goes down the drain.

 
At 6:45 PM, Blogger Thomas said...

I was looking at some interest-only mortgages with 6-month "teaser" rates in the 3.5% range, which changed to 5.5%, adjustable, thereafter. Doing the math, a 4.5% interest rate on $600,000 results in a monthly payment of $2250/month -- well within the ability of a household making $80,000 annually to afford, and not much higher than such a property would rent for (at least in SoCal). If the property appreciates even at 10% a year, that's enough to pay the costs of selling and still pick up a significant gain.

Until it's clear that interest rates are going up or that appreciation of under 8% a year can be expected, or lending standards are tightened, I'm afraid the fundamentals may actually justify prices staying at their present level.

 
At 7:24 PM, Anonymous G said...

What I'm wondering is when prices crash, how low can they go when so many Florida condos are "luxury" - with 3000+ SF, Italian marble, mahogany, Corian, SubZero appliances, etc. At least they're equipped like that in North Florida...are they like that in Miami?

 
At 7:50 PM, Blogger ajh said...

Denverken; from here that penthouse sounds like a pretty good deal. If I was renting in Denver (and planning to stay a few years) I would be strongly tempted to buy that as a CYA against an INFLATIONARY resolution to this bubble.

Ben, it may amuse you to know that about 18 months ago there was a newspaper article showing how CHEAP beachfront condos were in the Miami area then compared to Sydney (even allowing for the dollar difference). The article was arguing that Sydney was bubbling then; well it wasn't wrong!!

 
At 9:14 PM, Anonymous historybugg said...

(If the property appreciates even at 10% a year, that's enough to pay the costs of selling and still pick up a significant gain)

The operative word in your sentence is "if". Here in California, we've had more boom years than any other state. Yet there have only been 10 years out of the past 50 where median home prices rose 10% or more. The other 40 years saw much smaller gains or outright depreciation. And nearly half of those "boom" years were 2001,2002, 2003, 2004.

Most markets in the US have NEVER seen 10% annual gains until the past two years.

Don't kid yourself. What we are seeing here is a once-in-a-lifetime occurrence. Much as the stock bubble of the late '90s was an anomaly.

Buying an overpriced home and assuming that once-in-a-lifetime conditions will persist year after year after year is very risky thinking.

 
At 10:39 PM, Anonymous Anonymous said...

if prices are in decline..., how do you decide on a home and what price to offer? ...The selling part is easy -- price it a bit lower than the competition, but I can't imagine buying a property that is predicted to lose even more value.

No one can, that's what makes the prices drop in a decline. You offer as little as you think you can get them to take and hope that they're scared enough to take it.

 
At 11:42 PM, Anonymous Anonymous said...

"(Prices in Japan have been dropping for ten years – very hard to imagine how you house-hunt in such a climate.)

Actually it's very easy. You can evaluate property without dozens of bozos trying to outbid you. And you buy what you can afford. Simple as that. You don't buy something unaffordable and hope that asset inflation will bail you out. You buy something that makes sense for your monthly budget. End of story."

I've got native Japanese in-laws.

The Japanese "dream" is for a couple to build their own home--older places are tear downs. This seemingly relates to traditional construction from light wood, paper walls, and grass based tatami mats. Buildings are more sturdy today (no paper walls, often just 1 traditional room), but the dream remains. The wish is for a fresh, clean, non-worn place to live.

I've spoken about the price differences between Japan and the Bay Area, and the Bay Area compares with only the most expensive urban/resort areas of Tokyo. The rest of the country is cheaper than the BA even though it's got vastly more people.

 
At 12:34 AM, Anonymous Anonymous said...

We can start writing the next edition of American Economic History, replacing the 1920 boom with the present one.

Looks like the Miami bubble is the king of all housing bubbles. It is amazing that market participants are completely blindfolded by euphoria and greed. Soon, fear will reign and history will be made. Again.

 
At 2:46 AM, Anonymous American in Japan said...

"The Japanese "dream" is for a couple to build their own home--older places are tear downs"

Quite true. Buying an old place and tearing it down is quite normal. In fact, it is becoming quite popular to buy a home that has been manufactured in the US or Canada, and then have it shipped here and assembled on your now-vacant lot.

As for the comment regarding Bay Area v. Japan RE prices - also quite true. When I first moved here in '95, it was much more expensive to buy a home than in the Bay Area (which is where I am originally from). Now, it's much cheaper - I can get a beautiful, spacious new home built to my specs in a really nice neighborhood for 650K - and a fixed rate mortgage at 2.5%. Can't get even close to that in the Bay Area.

 
At 2:49 AM, Blogger ajh said...

Thomas,

If you look down the list of threads, you will find one created Monday 16th titled 'Mortgage Originations down 44% at ETrade'.

In that thread there is a post full of SoCal figures indicating 'that appreciation under 8% a year can be expected' by June in some counties.

 
At 4:38 AM, Anonymous Anonymous said...

Anon 4:05 PM said

US population growth is unimpressive compared to India, especially the upcoming urban areas like Bangalore and Noida.

Also the Indian population is much younger than US population (median age is about 10 years younger).

However, despite uninterrupted rapid economic growth since the IMF-induced reforms of the early 90s, Indian prime urban RE has been through boom and bust cycles. For example, from 1997 to 2002, the price of prime residential RE in Gurgaon dropped over 50%, but it has more than doubled from 2003 to 2005.

FYI, Gurgaon was the fastest growing city in the world in 2004 - it makes growth in Phoenix or LV look anemic and surpasses anything in China.

The message - youthful populations and rapid population growth is not sufficient to prevent the collapse of hyperinflated RE markets.


Gurgaon like other Indian RE markets is dominated by NRIs (Non-Resident Indians) hedging their foreign currency holdings (e.g. USD or GBP) against devaluation vs. the Indian rupee, and speculation and money-laundering by tax-evading local businessmen.

US RE market is not a favorite target for money-laundering and the community of US citizen expats (Americans abroad) is not big and rich enough to create distortions in the market back home. But admittedly, speculation is rife in the US right now.

 
At 7:24 AM, Anonymous Anonymous said...

Thomas,

a $600,000 mortgages at 4.5% doesn't even come close to the $2250 that you mentioned... it's actually $2,700 per month... and that doesn't even include property taxes, homeowner's insurance, heat and water bill, etc... you must be a realtor... who else would provide doubious financial information and say that your home is going to at least appreciate by 10% a year...

 
At 7:40 AM, Anonymous Anonymous said...

7:24 AM Anon,

Also, only a realtor would base affordibility on a monthly payment... a person who makes $80,000 is not qualified for a $600,000 mortgage... the mortgage should be in the ball park of $240,000... and this is exactly why this housing bubble is going to crash...

 
At 7:58 AM, Blogger deb said...

Thomas, 7:24 & 7:40 Anons,

Of course $2250 on $600k would be the INTEREST ONLY!!! How far we have fallen that someone would assume to use an interest only payment without even stating so.

The payment on $600k fully amortized for 30 years (5.5%) is actually $3402. Taxes would be in the range of $700/mo. Insurance including earthquake (which you should have in SoCal) would be at least $150/mo. PITI= $4252/mo. $4252 x 12 = $51,024. Plus maintanence, HOA fees, etc, etc.

That seems quite impossible on $80k/yr.

 
At 10:01 AM, Blogger goleta said...

Thomas and Deb,

If that $600K house has some back yard, the water bill can be a shocker too. My officemate complained about his $300 a month water bill that was necessary to keep the trees in his backyard alive. He bought his Ventura home 3 or 4 years ago for $850K and sold it last month for $1.8M. A year into that home, he paid off the mortgage with company stock options and yet he still had to pay $2,500 a month property tax, fees, and utilities. Keeping a fully owned home can be very expensive, and that's why I don't think flippers stand a good chance to survive when the appreciation is gone.

 
At 10:40 AM, Anonymous pippin said...

($4252 x 12 = $51,024. Plus maintanence, HOA fees, etc, etc. That seems quite impossible on $80k/yr.)

It looks doable to me. Let's figure $80K a year nets $56K. If you figure the home costs to be 51K plus maintenance and HOA, etc., total annual housing expense would be about $54K.

So you are left with $2K extra.

I understand that $2K a year is not a lot to pay for food, transportation, healthcare, utilities, entertainment, travel, clothing, etc. It just means you'd have to be very frugal.

High housing prices just force all of us to be a little more creative!

 
At 11:06 AM, Blogger goleta said...

$2K a year for food, transportation, healthcare, utilities, entertainment, travel, clothing, etc?


Most people drive around 15,000 miles a year in So Cal ( an AAA statistics I read some time ago), so the gas alone would be at least $1K for a super efficient 40MPG car.

 
At 11:12 AM, Anonymous Anonymous said...

Hi Pippin,

so... lets see 2k per year... why that's about $6.00 a day to spend... looks like it's mac and cheese for everyone! wooohooo!

 
At 11:12 AM, Blogger desi dude said...

any consideration for emergencies like a sick child, loss of job or major car repair or an accident?

I'm not even considering little luxuries like eating out once a month or movies or trips to see friends and family etc.

 
At 11:43 AM, Blogger goleta said...

Just gas, auto insurance, and basic maintenance like oil and tire change would cost an average driver $2k a year. The more people buy homes 6+ times their gross income, the sooner we'll see a great depression. Consumer spending will come to a halt when people hardly have money left for food. If the bubble pops, we'll see a recession, but if it doesn't, we'll have a global great depression.

 
At 4:24 PM, Blogger Thomas said...

7:24 anon:

I keep multiplying $600,000 by .045 and dividing by 12, and I keep getting $2250, not $2700.

Don't get me wrong; home prices were unsustainable LAST year, let alone going forwards. I was 90% convinced in early 2004 that the correction would start by June of that year. (Instead, things plateaued, and then have ticked up a bit in the last couple of months, which is probably going to lose me a bet with a co-worker that the OC year-over-year appreciation for July 2005 would be down.)

Instead of renting, as I did, I theoretically could have afforded the scenario I mentioned (I make somewhat more than $80,000), and under my calculations would have broken pretty much even on the monthly payment (the interest deduction would have pretty much offset the taxes/insurance/maintenance costs) and I'd have scored at least 10% worth of appreciation.

I know there's no point in that kind of retrospective exercise; people ought to make their decisions based on their best estimates of the future, which I did. I'm just a little annoyed that theoretically, I could have wiped out my student loans.

One other thought about my scenario: How significant is the prepayment penalty on a loan with a teaser rate? I would think it would probably be pretty high, in order to prevent people from arbitraging the below-market teaser rate.

 
At 4:46 PM, Anonymous Anonymous said...

" How significant is the prepayment penalty on a loan with a teaser rate?"

The one iread in last two days said $14000, not sure what percent of the loan amt

 
At 6:00 PM, Blogger deb said...

"I keep multiplying $600,000 by .045 and dividing by 12, and I keep getting $2250, not $2700"

That would be for and IO ARM at 4.5%. Can you afford the property if prices don't rise or actually decline? Your payments will adjust (upward) and you are not paying down any principle.

If you had to pay on that 600k balance at 8%, your payment would be $4632 to amortize that loan over 25 years. Ouch!

 
At 6:00 PM, Blogger deb said...

"I keep multiplying $600,000 by .045 and dividing by 12, and I keep getting $2250, not $2700"

That would be for and IO ARM at 4.5%. Can you afford the property if prices don't rise or actually decline? Your payments will adjust (upward) and you are not paying down any principle.

If you had to pay on that 600k balance at 8%, your payment would be $4632 to amortize that loan over 25 years. Ouch!

 
At 7:05 AM, Anonymous Anonymous said...

I bought a condo in London just after a crazy boom. I was hunting during the tail-end of it, and I used to travel to the center of London to get the first newspaper coming out of the printers so I could be the first one to phone up the seller. On one house I was number one on a 23 name list. I had the house inspected and it was practically falling apart. It was a terrible terrace house also 30 miles from where I worked as a self-employed consultant in a totally undesirable neighbourhood. When I declined to buy the owner was incredulous, "there are 23 on the list" he said. When the end came, it was over very swiftly, in a matter of days. Suddenly, you found plenty of places for sale and you would be the only buyer. Along the way I discovered how greedy and callous the average person really is. The 'best friend' of my wife's cousin was selling us her very nice condo in Ealing (a very nice London area), but chose to accept slightly more from someone else. Even so, I sold my condo at a loss five years later when I left England. The best thing buyers could do is to not buy at ridiculous prices. I plan to leave the US because of this boom, and find a country to live in that still requires a down payment since that at least ensures some sense to the market. Why should I throw cash down the chute competing with idiots who can get $600,000 financing with nothing down.

 
At 8:26 AM, Anonymous Anonymous said...

If I read you correctly, you want to calculate the monthly P&I on a 4.5% 30y fixed loan. Actually, the $2,250 you came up with is just the numerator of the calculation you should be doing. In full, your monthly payment looks something like:

Prt
A = ------------
[1-(1+rt)^(-N)]

(Sorry about the formatting)

P = $600,000; r = 0.045; t = 1/12; and N = number of payments = 12*30 = 360.

The numerator is $2,250, but the denominator is 0.7401 ... bringing your grand monthly total to $3,040.11. I checked it against:

http://mortgages.interest.com/content/
calculators/monthly-payment.asp

And that's just P&I! Enjoy!

 
At 8:31 AM, Anonymous Anonymous said...

Sorry, I just realized that you might have been referring to the ridiculous 40y loans for which FNM has been pushing recently. Then, indeed, your P&I is $2,700/mo. My apologies.

 

Post a Comment

<< Home