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  1. Anonymous
    June 23, 2006 @ 9:29 AM

    I think you have left out
    I think you have left out two major contributors to the demand equation that have had a greater impact than rates: no money down financing and no principal payments required. In fact, one of the big production builders told me recently that 100% of the new homes they sold last year had these types of mortgages.

    Of course the use of these risky financing products was supported by sentiment, but without them sentiment alone wouldn’t have driven the prices as high.

    • Anonymous
      June 27, 2006 @ 2:22 PM

      I completely agree. It’s
      I completely agree. It’s been the exotic mortgages, more than the low rates, that have inflated this balloon.

      I would also argue that we have seen a nationwide bubble. All throughout coastal/central/urban/rural California, P/E ratios have skyrocketed. The same is true on the East Coast, AZ, etc. This national price rise requires a national explanation, and I think exotic mortgages fit the bill. It will be interesting to see how much lending standards change.

  2. Anonymous
    June 23, 2006 @ 11:01 AM

    Thanks Rich for bringing
    Thanks Rich for bringing data and logic to the discussion of the housing market. I find it really surprising how many well-educated people I know fall apart when we get into the discussion of the housing market. It really underscores how emotionally charged this topic is.

    For example, I got into a debate with a friend who is in corporate finance. His MBA degree is from a top-10 program, but when it comes to San Diego housing, I hear the same ill-researched explanations:

    • People pay more for weather
    • Coastal cities work differently
    • Places like Del Mar and high-end markets will keep the San Diego market propped up
    • San Diego is one of those places where the rents are never in alignment with housing prices

    I’ve given up on trying to convince people in recent years. I’ve sold my properties, taken the chips off the table and now rent.

    • masayako
      June 24, 2006 @ 3:59 PM

      I have also cashed in and
      I have also cashed in and preparing to rent.
      Just sold my condo and making a low 6 figure for the next down payment. By putting all the cash in CD, I can already pay 1/2 the rent for a nice condo in a good neighborhood. ^_^

      Thanks to Rich’s advice as well as my own reearch, I don’t have to worry about the crazy mortgage. Simply wait for the next house to come down to me.

      The recent Nokia/Sanyo will send 1,100 employees out of work. I’m one of them. But, no sweat now. I got no burden and I can find another job nationwide with no mortgage attached.

      Unfortunately, 3 of my co-workers (Indians) have to sell at a loss (assuming $30k – $35k) because they can’t stay in U.S. for work due to H1 visa issues. They own 4S ranch Garden walk depreciated homes and they are the ones got impacted the most… I’m sure there are more sad stories out there. I wish the best for them. Hope they can get another well paid job. They are very decent workers and I think it’s extremely unfortunate how the timing and company decision have affected them so greatly.

      • powayseller
        June 24, 2006 @ 9:38 PM

        What’s going on with Nokia?

        What’s going on with Nokia?

      • Anonymous
        June 25, 2006 @ 1:11 AM

        Why would they sell at a
        Why would they sell at a loss? If they’re heading home anyway — why not just walk away. Not like their credit here matters when they’re back in India. Unless, of course, they intend to come back here..

  3. pencilneck
    June 24, 2006 @ 6:07 PM

    Am I the only one who thinks
    Am I the only one who thinks it wacky that people in the US on temporary visas thought it wise to purchase a home? Not to mention the lenders willing to go along with this…

    I know, I know, this is all old news…

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