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

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To: CalculatedRisk who wrote (24500)	2/27/2005 5:34:30 PM
From: ild	Read Replies (3) of 116555

Yesterday I got a call from a friend's friend. They are less than 10 years in US holding average jobs, over 50 years old, no kids. She asked for my opinion on buying a house. Right now they rent a nice two bedroom apartment for $1,200 per month. It turned out they opened an escrow on Friday. Bargain priced at $520,000 (down from $525,000 asked) for 1,600 sq.ft. 20 years old three bedroom condo in Mission Viejo, CA, former rental (read no upgrades). In the vicinity of the lake with $300 association fees per month. They applied for 5/1 interest only 10% down mortgage. I asked why they chose fixed for only 5 years. She said: we wanted but didn't buy two years ago, we wanted but didn't buy last year, yes, we think RE is expensive but we are sure it will continue going up for 3-4 years, so we'll live there the way we want and will make $$$ by selling in 4 years. I was stunned. It was classic case of "bigger fool will buy from me" game. I spent like 40 minutes talking her out of this endeavor. She called me in an hour and said she cancelled the deal and that she was very relived. I asked her to go out and buy herself an expensive present. -g-

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