They charge 2.25 points so they aren't starving as brokers and makes up for any benefit gained fromthe low payment. The rate changes after 6 months to a more normal/expected interest rate.
And what's worse, the rate changes every 6 months thereafter (and I dont see any details on the maximum adjustment per change or lifetime cap). Looks like the perfect way for someone to get in over their head by qualifying for a loan they can't afford.
One analyst's view with a quote from a Fed Pres., In the 70s I remember Homebuilders just leaving sites unfinished. Houses just sat that way. When the slump was over, those houses needed extensive rework to complete and sell. It was weird to be driving down the street and see a bunch of unfinished homes, looking weathered, with weeds growing all around. Big Bubbles and Crashes are times you don't forget. I guess it makes life interesting. Not that I'm predicting a crash. It could be just a slump. Who knows.
Try "The Bubble Economy" by Christopher Wood. Japan is not a typical bubble case, because the government responded to the crash with extremely socialist economic policies (mostly their huge program of Keynesian deficit spending on white elephant public works) which turned what would have been a 2-3 year recession into a decade long depression. The only real parallel is the 1930s US Great Depression. In contrast, most crashes are transitory and the economy gets back on foot within 2-3 years if the government lets the market adjustment process work out, and the central bank adjusts interest rates appropriately. Examples include the early 90s property crash and bank crisis in the US, the Taiwan bubble of the late 80s, the Asia crisis in 1997-98, the Hong Kong and Singapore property crash of the late 90s/early 2000s, the Brazilian devaluation and crash of the early 2000s. In all these cases, the governments generally maintained a reasonably hands-off approach, and a seemingly disastrous crisis cured itself within a few years. There are lots of interesting parallels between Japan of the 90s and the USA of the 1930s. For a study of the latter, you might want to try "America's Great Depression" by Murray Rothbard. It doesn't cover all the 1930s period, but gives an idea of what economic policies were adopted, and what effects they had.
Thanks. Wood's book has been sitting in my Amazon wish list for a while now. (Nobody noticed for Xmas!) He is very highly regarded out here ... still does strategy from HK for CLSA.
Was flipping through Kindleberger's "Manias, Panics, and Crashes" this afternoon, Asia time. He mentions at length a book put out in 1933 by Homer Hoyt entitled "One Hundred Years of Land Values in Chicago." In summary, Hoyt linked the boom and crash of the stock market to the same cycle in real estate over that 100 year period. Kindleberger then draws a parallel to the Japan bubble and aftermath. Actually, looking again, he describes at length the relationship between Japan's stock and real estate bubbles. My working assumption at this point is that the stock market bubble we experienced in '95-'00 in fact wasn't allowed to deflate, except for tech. This is quite apparent if we look at a small cap index, DOW, or most other indices. Both the broader indices and RE are still bubblin'. My bet is that a continued rise in raw material prices will continue to push up inflation and interest rates, and that will herald the down turn in both equity and property markets. The canary in the cage may be UK's inverted yield curve and the US rapidly flattening curve. Anyway, that's my guess and I'm stickin' to it, for tonight anyway.
I worked with MDC for awhile in the 80s. It was a RE broker play. I was the infill builder with high end homes. MDC owned the RE company and put a little team together to generate RE sales for their staff. So I got to know the owner and his main man. They had BIG banking friends. MDC made it thru the late 80s, but just barely. I think their stock hit $.39. Look at it today. One might think that they had just started in the '80s and stock was cheap. Nope. They were one of the largest in the country in the early '80s. So their stock plumetted to almost nothing. US Homes went broke. They were the biggest. I'm looking forward to the turn. A KBH can fall a long way. It looks like a roller coaster at the very top of the rail line. I had about 350K of RE equity in the early 70s. Then the slump hit. It was so fast that all I could do was give my 13 properties away before they drug me down. I ended up with just 30K cash in about 6 months. And I felt real lucky to have that and good credit. The rents just plumetted. And the renters that were left were mostly hurting bad. The books are right about being careful. Living thru a real crash is very tough. The early 90s weren't bad, IMO. I built right thru the slump and did fine.
This thread is called housing crash? How do you explain the strength in housing stocks making 52 week highs today?
its called a bubble..... they make no sense. when they pop, it gets messy. are you a buyer at these levels?