Monday, March 06, 2006

Is the Real Estate Market Still Too Hot?

There has been much gnashing of teeth and beating of breast lately as to the extent of the existing housing bubble, or in fact whether one even exists. Aside from the obvious signs of slowing demand as interest rates move up toward more traditional long term levels, as someone formerly involved in the finance industry, I just spotted the sure-fire sign.

I was drawn over to the oft-advertised on-line financier, with this offer: "Finance your Home to 125% of it's current value" . No appraisal needed! It's called (how's this for spin) ... the 125 Freedom Loan.

Having seen the tall-headed gnomes in my own financial field previously lend to extreme ratios in the dying days of a real estate upswing, I thought they'd have figured out that lending like that at the end of a long cycle, isn't very good for the bottom line.

Or maybe they are smarter than me and they're aware that the default ratio for home loans remains relatively low, through all portions of the economic cycle. Still, I wonder what the interest rate would be on that mortgage ... doubtful if it's the headline rate on their site, i.e. 5.875% for a 30 year mortgage.


The Confused Capitalist

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