No local bubble, but …

Locally, I do not see a “bubble” per se, but I would really like the National Association of Realtors to either give more credible support or just stop giving it.

Question: “Should we be concerned that home prices are rising faster than family income?”
Answer: “No. There are three components to housing affordability: home prices, income, and financing costs – the latter are historically low.”

I am not an economist, nor do I play one on TV, but this argument seems … precarious. What happens in three (or two) years when those who have unwisely chosen 3 year interest only loans see those 4.5% mortgages jump to 6.5%, or 8.5%? Will they have planned judiciously for that event … or not?

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2 Comments

  1. Shawn November 22, 2005 at 11:00

    Did we plan judiciously for 4.5%? No. It’s free money…take advantage of it.

  2. Jim November 22, 2005 at 12:04

    Right now, it is almost free money. My concern is that in three years or so when those who have the riskiest loans, who have pushed their incomes as far as they can, have not saved or prepared as they should have … their payments go from $1100 to $1500 a month …