I see J6P getting ready for a little crucifixion ceremony down the road, because he was led to believe that
a) the value of his real estate is guaranteed by constitution and
b) not only that, it is growing (aka J6p is getting richer without doing a thing) at, say, 15% a year - if he is smart, he'll move to Silicon valley, where it's 30%
c) not only that, he can keep refinancing at more and more favourable conditions and take out the difference to do the patriotic thing, i.e. shop until they all drop (for instance buy the 2nd or 3d SUV)
In the mean time the long term interest got a different opinion, the credit card limits have been used up, and two of the houses in the generic "American beauty crescent drive" are empty because the owners (MCQ)
a) lost their jobs
b) defaulted on mtg payments
c) got separated and needed money to settle a score or two
d) any combination of the above
Call me a canary in the coal mine. Maybe my beak gets all kind of wrong scents, but that's what I have picked up, oh the last 12 months.
The way out - deficit spending by the government - what's the alternative?... - and weaker dollar. Still, the tunnel before we break out into sunlight and greenery (hopefully of course we do;) is not just half a mile. It took some time to get here, and twill take approximately the same time to unravel.
The mortgage interest cost me last year about 25% of my income. PRE-TAX! - just as a hint or warning at the implicite (and overlooked) differences between (in this case US and German) J6P.
There's a couple of traditional rules of thumb in the mtg industry here in Germany, like "never mortgage more than 70% of the street price at prime (Let the sucker pay if he's needs it)" and "say no, when his cash flow gets hit for 25-30% percents". Whoever does not make it through these (and couple of other) gates, stands no chance in Germany. It's a different story in US: even substandard customers are customers; just incorporate, go get capital out there in the money market, and you are in business.
dj |
