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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Skeeter Bug who wrote (97132)	8/1/2002 4:24:10 PM
From: Ahda	Respond to of 132070

rents are going up astronomically where i live - socal. I live here too but LA county does have limits on rent and the cost of new development is very high at present. There is some aid from the state for developing but the state I do not feel can come close to aiding the cost to build here unless they increase the debt load on an budget that is already fractured. Taxes here are high higher is not going to promote business for this state.

To: Skeeter Bug who wrote (97132)	8/1/2002 4:54:39 PM
From: Tommaso	Respond to of 132070

Just wait till the Fed (as it will have to, sooner or later) taps interest rates up just a little. A lot of these properties are being bought with super-low variable interest rate mortgages and little equity. A one percent increase in interest rates would mean an increase of 20% or more in monthly payments. Someone with a $250,000 mortgage and a 4.5% introductory rate would be paying--what--$937 a month just in interest. Taxes and insurance would bring that up to perhaps $1300 a month. With utilities (heat/cooling, water, electricity, garbage collection) it could be up over $1500 a month for housing expense. Now for people with $100,000 after-tax and deductions income, that's manageable. But with take-home pay of $3500 a month, that only leaves $500 a week for all other living expenses. Every 1% increase in mortgage rates whittles away 10% from that $500 a week. All this assumes no credit-card debt and no automobile debt. The truth is that a lot of the people in this fix will typically owe $20,000 or more on which they are paying $200 a month interest or more. I know these amounts of money seem astronomically generous to most of the six billion people in the world, but this is the situation in the United States, and to try to support more than one person on a net income of $300 a week or less means cutting out a lot of expenses considered normal. At the moment housing seems to a lot of people a more solid form of wealth than stocks, but it would take only a slight decline in real estate prices to make many "home-owners" in a negative equity situation. Usually there is more intertia in the real estate market than in the stock market. It would be remarkable to see it cracking as fast as tech stocks, but I now think it could happen.