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Old 10-19-2005, 03:58 PM   #15
B R
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Default and don't forget interest only loans

banks and mortgage companies have been pushing these interest only loans for years; and with a lot of success. think about it. 5 years ago you could buy on the lake at a somewhat reasonable price and use it as an investment. the people who are buying as investment property want to get as much house as they can afford per month. these interest only loans are good if you're sure you can make money on the property and plan on selling before you have to start paying off the capital. and those that did it 5 years ago probably made out just fine. but now try doing that last year. if you bought a house last year with an interest only loan and the price has decreased, what happens when the bank calls in those loans - foreclosures. anyone remember 1988 - 1992? now think about how much worse 1988 would have been if there were as many interest only loans as there are today.

realtors: you have to expect them to be somewhat blindly optimistic; it's their living. it's like asking your stock broker how the market's doing while the market's in a slide. they all want you to buy and hold long term because they know if some mass selling happens, it'll cause ripple effects throughout the entire market and make what's bad even worse.

real estate, like most everything else, is cyclical. it just can't keep going up and up. at one point, reality has to set in.
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