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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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From: Elroy Jetson	2/10/2005 9:36:33 PM
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In order to put a human face on the real estate bubble, I have enjoyed following the antics of a number of families who are bubble participants. One family in Beverly Hills have hit upon new hardships and once again “the government" is to blame - or so they believe. Having bought a $700k 2 bedroom condo in Beverly Hills in April 2004 using a temporary “bridge loan”, they put their old Hollywood condo on the market in May for close to the previous sale of $525k. After slowly lowering their price and two false sales to buyers who could not close, they finally sold for $410k - which required them to draw on a line of credit to fund the closing costs. They proceeded to obtain permanent financing for their new condo - no down-payment, variable-rate, with negative amortization initially. Suddenly disaster. Unexpected costs have cropped up. Apparently “the government” expected them to send in “estimated tax payments” on the income from their new business! Even more unfair, their accountant has informed them that “the government” won’t let them deduct their Property Tax Payments simply because they were not paid. The total shortfall is $65k, including the unpaid property taxes which they will pay with the proceeds of their refinancing in a year or so. Of course “the county government” wants excessive penalties for failing to pay their property taxes on-time. These events have so distressed this bubble-family that they have booked a get-away for next week to the Mexican Riviera just so they can relax and get away from the government’s unreasonable demands. I've noticed when mental illness proceeds to it's full bloom, the affected no longer blame "the government" but instead come to believe that "the CIA" is to blame. Stay tuned for our next episode of the Climatic Real Estate Bubble.

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