Greenspan and the Housing Bubble

Quote from onewaypockets:

... I think buying that 1 bedroom, 1 bath fixer upper in S.F. for 700k with an interest only 45 year loan and no money down is a fantastic idea!
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Back a couple of years ago I was shown a 1300 sq ft 1955 bungalow on a postage stamp size lot that needed major renovation on a busy major street in Palo Alto for 1.25 Milliion dollars. The agent made abig deal about the new aplliances - worth about 1000.00 dollars that the seller was throwing into the deal.

I think that manias are readily identifiable: When buyers are scrambling to buy these types of properties without regard for the underlying local economy or demographics that might affect their investment then it is perfectly acceptable to call the situation as it appears ... another indicator - everybody and their brother and sister thinks they are a real estate investor and even poor Carleton Sheets has 10 other competitors to his "no money down" course. A mania - in certain markets - if ever there was one ......
 
thank you for the post high-school repsonses this time round. There is nothing as frustrating as trying to retort to a retort that is so stupid that one simply cannot touche'. My appraiser exams are finished. I am beginning my sales agent exams on friday.

NUVO, my stock pick, is fine; I just took her out for tea and coffee with lots of sugar. She seems to have about 44 million shares, which are being manipulated by a few worthy gentlemen. These gents are going to dramatize sweet little non-profit-pure-speculation NUVO until her tits burst and they all go tumbling down. You see, she's expecting.

45 year loan, fixer upper, interest only payments, stable neighborhoods, what else? Rookie or not, all markets are infalted, that's what PE ratios are for. Sounding the alarm about an inflated real estate market has been going on since I was born. The theory of FA is somewhat illogical, though I know that we must find some sort of value to rave about, I would. And I know many of you pick stocks accordingly, I've and will.

I calulated my risks and have concluded that I will make my money in real esate if I am to make it at all.

You sould acknowlegde London's real property inflation situation.
 
in the US "if" the RE bubble bursts it will be nothing compared to the carnage in the rest of the world, UK in particular. At least in the US most home owners have taken advantage of the long term fixed rates (I think I read that something like 90% of US mortgages are fixed rate) so even if prices slump for a decade and rates jump few will feel any pain. In the UK it is the reverse, as there is no equivalent of Fannie Mae or Freddie mac fixed rate long term mortgages are very expensive realtive to short term arms and there fore the majority (over 75%) are on short term arm mort.s Even worse people are doing interest only or (I forget the technical term) back loaded interest only mortgages (where you don't even pay full interest only per month up front but rather partial interest with the rest being added to the principle to be repaid later on in the mortgage.

There is a similar crisis looming in NZ.

 
thank you for clarifying. What is your perception of interest only payments here in the US? Why pay that extra amount.

A down payment and paying off a loan is a waste of money and 10 or 20% down won't really help a person against a bubble burst.

It seems that the best method would be:

acquire an investment residential property in a steady growth stage,
a property in area known for easliy liquidated
a property with a good break even ratio,
make improvements so that the price intially substantially increases,
no money down,
interest payments only,
complete insurance.

 
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