The facts:
He bought in 2003 before the really stupid loans(no doc 100%, 100% with no reserves, 100% with low ficos, Option Arm 1st’s with a 100% CLTV, etc) became all the rage. Was he supposed to know that Wall Street would completely lose their mind??
To me, it looks like this guy’s bed was made for him by others(wall street and neighbors).
Not really. House prices and interest rates move in opposite directions. If interest rates go down, house prices go up.. if interest rates go up, house prices go down (in the general term of things). Buyers don’t always look at the actual price of what they are buying.. most look at the monthly payment and say… I can buy that.
He bought when interest rates were at an unusual low.. making house prices at an unusual high. Unfortunately the price lie was not immediately uncovered.. and was postponed by fancy financing.. which has resulted in this mess. Either way, because he bought at an unusual high, the price of the condo was bound to drop anyway, when interest rates went up. It is just happening faster now and will be bound to overshoot.
By the way, with the fancy financing continuing the frenzy resulting in a disaster now.. what does that tell you about the likely result of the bailout? Postponing a problem does not make it go away and does not fix it.. it only gets worse. Eventually there is a reckoning.
