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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Les H who wrote (119140)9/1/2001 3:40:11 PM
From: Tommaso  Read Replies (2) of 436258
 
RE: housing bubble

I know two couples entering or on the edge of middle age who are currently saddling themselves with absolutely enormous mortgages, afraid that if they don't get a house now they never will. Because of the Fed's outrageous easy-money policies, they can get several times as much as their annual (pre-tax) incomes as a loan.

Now if the Fed continues on their course, these folks are doing the right thing, because we will eventually have a South-American-style inflation. But if the housing market starts to go soft and interest rates go up (maybe in reverse order), they will find themselves owing several times their equity if they should wish to sell the house. And if they have made the mistake of taking variable-rate mortgages--well, I need not spell that out. Most of us know, however, that there is such a thing as a 13% mortgage--and an extra 7% on $300,000 is a huge burden on child-bearing middle-class couples.
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